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Thread: taking out a loan to build credit

  1. sassypants
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    #1

    taking out a loan to build credit

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    So, I need a new computer

    BUT I want to build my credit. Currently I only have CCs that I pay off every month (giving me a Credit score 740+) but one of the limits I have from going higher is diversity of types of credit. Apple has a deal right now where they have a loan option at 11%, I am fairly sure I can qualify for on my own, and I have my mother to back me up if I need a cosigner. The thing is, I have almost enough money to pay off the loan completly now, but the whole goal is to use the loan to build credit, or else I am going to wait 1 or 2 more paychecks and just buy the computer out right


    so, is it bad for using it to build credit if I pay off the whole loan out right?there is no intrest until 90 days, so could I pay off say a grand and then pay the rest over 2 years, would that be better? or would it just be best to follow the loan payment scheme?


    Any advice would be helpful
    rocket_liz is my wifey
  2. "If you don't like my attitude, quit talking to me"
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    #2
    I was always told that if you are going to use a loan to build credit it would need to be for a year or more, and not over 8%.

    *I* wouldn't do it. Especially since that percentage rate is higher than my CCs. That's an awfully high rate for a loan.

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  3. sassypants
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    #3
    Quote Originally Posted by TrishAFSpouse View Post
    I was always told that if you are going to use a loan to build credit it would need to be for a year or more, and not over 8%.

    *I* wouldn't do it. Especially since that percentage rate is higher than my CCs. That's an awfully high rate for a loan.
    so, if the loan is higher then an 8% rate, it is not worth it?
    rocket_liz is my wifey
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    #4
    My DB just did this. Although he told me he has the money to pay the loan right off, he told me it's best that he pays it off no earlier than six months to a year. And I wouldn't be comfortable with that interest rate either. I think his was like 4% or 6%.
  5. "If you don't like my attitude, quit talking to me"
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    #5
    Quote Originally Posted by WiggleWiggle~ View Post
    so, if the loan is higher then an 8% rate, it is not worth it?
    I would say if its more than 6% it isn't worth it.
    11% is just a crap rate for a loan. Tells me its a line of credit, not a loan.. which is big difference when it comes to a credit score and report.

    A loan should not be more than 6% if its a good loan, and one you want to build credit with.

    There are 10 types of people in the world, those that understand binary and those that don't
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    #6
    No!
    11% is too much. You're basically paying to "build" credit which you don't need to do.
    The other problem is that Apple is going to treat it like a credit card also which won't help, and may actually hurt. One of the items that credit is based on is debt to credit ratio. Meaning, how much are you able to borrow against how much have you borrowed. But even there, you deal with an unknown upper and lower limits. If the ratio is too low, that hurts, but if it is too high, that hurts, and if you can borrow too much, based on your income that is bad.
    Then there is the myth of the credit score. Except for comparing your score from quarter to quarter, using the same credit reporting agency, your number is completely meaningless.
    The Big Three credit reporting agencies each use their own weighted formula for coming up with a score. But they each do not have just one score. A bank looking at your credit for a mortgage will have a different formula used, and hence a different "score" than a lender for a car, and yet a third score for getting a credit card.And a fourth for renting an apartment. And the list goes on. Do NOT worry about your number. Do not do anything that costs money to "build" up your score.
    Raising your credit take three main items. Using your credit. (IE, spending money on credit, and making payments), avoid BAD credit issues, (nothing over 30 days late, no defaults, etc) and third, and the most important, TIME.
    If you do nothing other than what you are doing now, your credit will improve by next year. and the year after, it will get even better. Why? You are showing that you have a longer and longer history of paying off your debts. And that is what good credit is all about. The likely hood of you paying your debts as promised v. the likely hood of you NOT paying them off.

    Oh, and one more item. minor, but misunderstood. Paying off your credit card every month is NOT helpful. It won't lower your credit too much, if as all, but here are the banks logic:
    They lend you money, with interest, but no monthly fee. They only charge you interest if you carry a balance from month to month. Therefore, if you never have to pay any interest, they are losing money on you. They don't want you as a customer. They make some money from the merchant, but they would rather have customers who pay the interest. A few years ago, one bank started cancelling cards of millions of people who paid off every month, and went years spending, but never having to pay interest. Except American Express. They are a charge card, not a credit card.

    Also, though it doesn't apply to you, "credit repair" is usually a scam. Unless the item on your report is in error, or fraudulent, or time barred, the only way to repair the credit is time. letting the older bad items lapse off after the time limits expire.

    I know this is more information than you asked for, but I tend to spew off at the mouth on certain topics, and hopefully, it will help someone.
    If you want my opinion on your relationship or life issues, just ask Villanelle!
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  7. sassypants
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    #7
    Quote Originally Posted by Guynavywife View Post
    No!
    11% is too much. You're basically paying to "build" credit which you don't need to do.
    The other problem is that Apple is going to treat it like a credit card also which won't help, and may actually hurt. One of the items that credit is based on is debt to credit ratio. Meaning, how much are you able to borrow against how much have you borrowed. But even there, you deal with an unknown upper and lower limits. If the ratio is too low, that hurts, but if it is too high, that hurts, and if you can borrow too much, based on your income that is bad.
    Then there is the myth of the credit score. Except for comparing your score from quarter to quarter, using the same credit reporting agency, your number is completely meaningless.
    The Big Three credit reporting agencies each use their own weighted formula for coming up with a score. But they each do not have just one score. A bank looking at your credit for a mortgage will have a different formula used, and hence a different "score" than a lender for a car, and yet a third score for getting a credit card.And a fourth for renting an apartment. And the list goes on. Do NOT worry about your number. Do not do anything that costs money to "build" up your score.
    Raising your credit take three main items. Using your credit. (IE, spending money on credit, and making payments), avoid BAD credit issues, (nothing over 30 days late, no defaults, etc) and third, and the most important, TIME.
    If you do nothing other than what you are doing now, your credit will improve by next year. and the year after, it will get even better. Why? You are showing that you have a longer and longer history of paying off your debts. And that is what good credit is all about. The likely hood of you paying your debts as promised v. the likely hood of you NOT paying them off.

    Oh, and one more item. minor, but misunderstood. Paying off your credit card every month is NOT helpful. It won't lower your credit too much, if as all, but here are the banks logic:
    They lend you money, with interest, but no monthly fee. They only charge you interest if you carry a balance from month to month. Therefore, if you never have to pay any interest, they are losing money on you. They don't want you as a customer. They make some money from the merchant, but they would rather have customers who pay the interest. A few years ago, one bank started cancelling cards of millions of people who paid off every month, and went years spending, but never having to pay interest. Except American Express. They are a charge card, not a credit card.

    Also, though it doesn't apply to you, "credit repair" is usually a scam. Unless the item on your report is in error, or fraudulent, or time barred, the only way to repair the credit is time. letting the older bad items lapse off after the time limits expire.

    I know this is more information than you asked for, but I tend to spew off at the mouth on certain topics, and hopefully, it will help someone.
    to the bolded" the normal deal they have is for a CC, but they have a special deal for students that is a loan

    thanks for all the advice, I am currently looking at my Credit union for a better loan option
    rocket_liz is my wifey
  8. "If you don't like my attitude, quit talking to me"
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    #8
    ITA with guy on all counts.

    Paying off CC every month is not good, it can hurt a score.
    Carrying a loan to 'build' credit when you already have it is not wise either.

    You don't need a loan, so why get one?

    There are 10 types of people in the world, those that understand binary and those that don't
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    #9
    Here is a great free PDF book which explains credit and credit building and repair in simple language.

    http://creditrepairsolutionsnow.com/....165164521.pdf

    It is from a credit repair company, but gives you enough information to do it on your own.
    If you want my opinion on your relationship or life issues, just ask Villanelle!
    Quote Originally Posted by LittleMsSunshine View Post
    I think it's really funny when people come on here, and automatically assume that everyone here is a gung-ho, hoo-rah, i-bleed-red-white-and-blue, kiss-my-military-ass, people-in-uniform-can-do-no-wrong, and i'm-entitled-to-everything bitch.
    "RIP Blackie, and Whitey, New Whitey. Goodbye Poopers and Momma Beige and Lady Grey. New Blackie and the Whitey Sisters rule the roost now!"
  10. Dancing Backwards in High Heels
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    #10
    Quote Originally Posted by WiggleWiggle~ View Post
    to the bolded" the normal deal they have is for a CC, but they have a special deal for students that is a loan

    thanks for all the advice, I am currently looking at my Credit union for a better loan option
    While local credit unions are wonderful, if you are using them to build up credit, be sure it is something they report. DH had a line of credit at a local credit union, paid on dutifully, never reported, so it had no effect on his credit.
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