loans to improve credit scoring

I am just starting to improve my credit report and get back on a plan to re-establish credit and get my scores out of the tank.

I have a question on what would be the best route to getting my scores up after I clean up my report.

I have student loans now that are being reported as "paid as agreed." I'm hoping this will help me to re-establish credit. I think I read somewhere on this forum that student loans are treated differently. Does anyone know exactly HOW differently they are treated?

Also, I am looking at getting a secured credit card or two and charging VERY small amounts and paying them off every month. Can a person with horrible credit get a secured card as long as they put down the deposit?

Or, alternatively, I'm thinking of opening a savings account with a credit union and then borrowing against the money. I'm not sure how long you have to have your money in before you can make a small loan, because I've never dealt with a credit union before. Does anyone know, and could anyone tell me which route is better or should I try to get a couple of cards AND a loan against a savings account?

Also, how long would it take having these to affect my scores? 2 years? I think I cannot buy a house for at least 2 years because I have moved and will have to establish employment for that long here in order to do so. If this is not correct, I'd appreciate someone letting me know.

I believe I remember reading that applying for new loans will hurt your scores, but if you already have low scores, getting these types of loans as quickly as you can is a good thing, since you will have to have a couple years of good paying history anyway.

Credit scoring and looking at my report is a new thing for me. My exhusband handled all that stuff and I had not even looked at my credit report for almost 20 years until recently. :(

Thanks in advance.

Susan

People keep posting about the getting a loan secured by a savings account. I have NEVER seen that reported. That doesn't mean it doesn't exist, but why bother when ANYONE can get secured cards.

American Online Bank has been recommended:

http://www.bayhouse.com/order-credit.shtml

And of course TARGET is still the way to go. All you need is a Visa or M/C with your name on it and you need to go to the STORE to apply, not online.

For the student loans I'm almost sure that they don't particularly help your score if the current balance is higher than the original amount - i.e. loans in deferment.

But I think it helps to have them especially as they get older.

Wished I knew anything for sure, am really only guessing. I tried to find out:

http://forum.creditcourt.com/discus/messages/803/1035.html

The most important thing is to get at least a couple open accounts REPORTED to the bureaus.

Christine,

Thanks for your reply. The reason I asked about a small loan secured by a savings account is that I thought the credit unions might report them as an installment loan. Wasn't really sure on if they would report them nationally or not.


Susan

That's something you have to ask them about. It would be nice if it worked and if we could put some names out of CUs doing that.

... it's done here all the time. the bank loans you an amount of money up to a percentage of the balance in a savings account, freezes it, and lets you pay it back in installments similiar to an unsecured personal loan. if you default, they take the money in your acount to cover the debt-- if you pay on time, the will post a positive entry on your credit profile each month. it's cheaper than credit secured cards, but ties up your money in the same way [it's a cash loan secured by cash.] most banks charge little or nothing to open the line, and make their profit on the differential between what you earn on your savings and what they charge on their loan, rates are about the same as unsecured loans, 15% or so, but if you're getting 3% on your passbook, the effective rate is 12. that's not great, but is a good way to get started or restarted in credit. you're more likely to see this offered by smaller, local savings banks rather than with the big commercial banks-- it isn't a particularly popular approach today, so ask if you want to consider it. you need not necessarily have any previous credit to qualify-- you're borrowing your own money, so there's no FICO score tie-up. the secured credit card lenders do the same thing, but hit you with stiff set-up, annual, and/or monthly fees and ungodly interest, sometimes effectively over 30%. check out bailey brothers savings & loan in bedford falls, NY--:)

Thanks, Doug,

That's exactly what I was thinking of. I've done it in the past with a CD, but I never knew if it was reported to the credit bureaus or not.

And yes, the fees, etc are what I would like to avoid if I can accomplish the same thing with a passbook loan. Thing is, sometimes the small banks don't report unless you DON'T pay on time. I'll call around and ask if they do report to the big 3, and I'll post results here.

Is there REALLY a Bailey Brothers Savings and Loan in Bedford Falls? That's my favorite holiday film :)

.. and if they don't you can request it. i'm not sure about the legal requirement there.

i grew up in vermont 16 miles from the new york upstate border, not even sure if there's a bedford falls out there, much less bailey brothers savings & loan. pretty sure there's no pottersville--:)*
hugggs

Oh, Doug,

Pottersville really DOES exist, but not only in upstate New York. I think it exists in the financial and credit industries right now, all over the USA. :)

Loans secured by savings accounts or cd's are done all the time by banks. I am a bank auditor and I see these types of loans all the time. In most cases, the bank doesn't even run a credit report.

Thanks, Sam,

Do you know if they report to the credit bureaus as unsecured installment loans?

Also, do you know how long one would have to have a savings account or a CD in order to get a secured loan against it?

I do not know if they report as unsecured but it is possible. I don't think it would have any effect on scores though. As far as how long an account needs to be open, it would be a good idea to apply for the loan where you presently bank. If you haven't yet opened an account, I would call some local neighborhood banks and ask if they make loans secured by deposit accounts.

I'll quickly sum up my experience with cd secured loans. There is a whole lot of variance in policies for reporting and hard pull in cd secured loans. Most of the banks I've talked to pull hard inquiries,but there are exceptions. USAA is one national bank that doesn't pull (however they have I think its a $4000 dollar minimum cd secured loan). All of the places I've dealt with reported the loans. Some report secured, some report unsecured, and some report secured on on report and unsecured on another. It seems like sometimes a bank cd secured is better than a cu, but I'm not completely sure. The length of time the acount is for doesn't seem to matter, but the amount of money it is for does seem to help. Lastly the cd secured loan doesn't seem to drop your score when it first reports unlike credit cards. They definately can help quite a bit. I had my scores jump 40 points the day my 10k cd secured loan from usaa reported (all of a sudden I owed more money and that made me a better credit risk??). A friend of mine had a 708 FICO with a two immediately paid off 1 year old cd secured loans. Hope this helps.

I don't think that a secured INSTALLMENT loan will lower your scores, but revolving credit might - not sure though.

Any new loan can increase the scores, it all depends on WHAT ELSE is on the report.