Do I need an installment loan?

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Do I need an installment loan?

Postby Mochi » Tue Apr 02, 2013 10:01 am

Current Status:

- ~694 Credit score
- want to buy a house at end of year
- no installment loans currently (just paid off car)

Need to buy an engagement ring soon, but I can afford it cash. Was wondering if i should get an installment loan for some of it and finish paying it off within a couple of months. Besides the initial inquiry costing me some points and losing money in interest, wouldn't it help my credit score when i finish paying it off? I'm going to buy the ring anyways, but if I can help my score along the way even better. Any ideas are welcome, thanks.

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Postby sosabe77 » Thu Apr 04, 2013 9:26 am

Yes, a mix of credit would help your score in the long run. Your score would most likely drop in the short term based on the inquiry, the decrease in average age of accounts, and just the fact you have a new credit account.

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Postby DavidNY » Thu Apr 04, 2013 10:06 am


Once an installment loan has been paid, it lasts for seven years on the credit report and is then removed.

If you're looking to improve your credit score for the long term, I would recommend getting a credit card that will stay on the credit report until you close it.

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Postby Sevenfeet » Thu Apr 04, 2013 11:42 am

My grandfather used to take out personal loans in the 1950s that he didn't need, and pay them back in a few months just to get a good relationship with a bank for the times he might actually need the money (important when you were a black doctor in rural Alabama). So yes, applying for the loan, using it for a bit a paying it off early can't hurt you at all.
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