has anyone heard of using the funds from personal loans to pay for itself to increase your credit score?

Deal Score0

If u receive a 5,000 personal loan, put it in your checking account and make 6 monthly using the proceeds from said loan and paying it off before the interest kicks in, will it increase your creit score and is it legal?

6 Comments
  1. Reply
    hottotrot1_usa
    July 17, 2011 at 7:10 pm

    I don’t think that there is any good reason to do that. You would have to pay interest on the loan. The interest expense far outweighs the benefit you would get from a higher credit score, assuming the score was even changed by the deal.

    P.S. Its not illegal. But it doesn’t make sense as far as personal financial management.

  2. Reply
    Groomer Jan
    July 17, 2011 at 7:49 pm

    I went thru bankruptcy 2 yrs ago. A car salesman told me to put $ 2000 into a bank savings account, then borrow against it. I did this for 12 months. Then I did the same thing at the same bank 2 more times, each time 6 months apart. If you take out loans closer than 6 months apart it can hurt your credit score. They are all paid off now and I have a score over 700!

  3. Reply
    low_on_ram
    July 17, 2011 at 8:31 pm

    Yes, I initially many moons ago took out a $ 1000 secured loan where the $ 1000 was kept in a interest bearing savings account at the bank. I had a loan for 24 months & paid it off in 20 to establish a decent amount of time.

    At the time I was pretty annoyed that making as much as I was, I needed a secured credit card. Especially considering that most my age that were offered credit cards had no means of paying them off because they were in college. I had the last laugh. I had the means to enter college & pay it off after delaying entry & earning first so no giant exiting debts for me. I also had excellent credit for the experience because I had to earn it. Credit was not just given to me.

    I also enjoyed that being “poor” I was given student loans that I could reinvest in higher interest vehicles. I don’t recommend this unless you have the cash to cover the money if the investment loses money. I was able to cash in on low student loan rates. Right now they aren’t so low, so finding a safe investment with a higher return is sooooo much more difficult.

    6 months won’t really do much to establish a “history”. As they say “Rome wasn’t built in a day…” neither is a credit history. Most experts recommend over 12 months for establishing a history. They also recommend leaving accounts open for showing stability.

    For instance I have had the same credit card for over 10 yrs, savings & checking over 10yrs… they aren’t my main accounts… just open for history.

    I’ve also opened & paid off multiple accounts.

    I hope I gave you some ideas. Money can be fun. Just never play with more than you can afford to lose.

  4. Reply
    peilthetraveler
    July 17, 2011 at 9:14 pm

    actually that was an old trick back before credit scores when you did that to establish relationships with banks. My wife just got her social security number in april 07 and using another trick, she now has an almost 800 fico score. What i did was put her on 2 of my credit cards a few months ago that had perfect payment historys and she was able to piggy back on my credit. When we checked her score it said that she has 6 years of good payment history (even though we only met 3 years ago! lol) Actually her score is higher than mine now and up until a few months ago she had never even had a bank account let alone a credit card!

  5. Reply
    Sgt Big Red
    July 17, 2011 at 9:56 pm

    You will be paying the interest on the very first payment. They load in the interest up front, to keep people from doing this. Most of those first 6 payments will be used for the interest, not the principle.
    Example: Payment is $ 200, they would take $ 120 and apply the rest to the loan balance. (this all depends upon interest rate, length of loan, etc.)

    So in essence, you don’t make any money unless you put it in a high yield CD, then you might. It will however be a positive influence on your credit score.

  6. Reply
    engineer50
    July 17, 2011 at 10:23 pm

    …”before the interest kicks in …” ????

    Leave a reply

    Register New Account
    Reset Password