The Secured Loan Trick

How I boosted my FICO score by 39 points

UPDATE: Alliant no longer offers the loan I used but a secured loan from another institution will work. See the MyFICO link below for a status update.

Part of your credit score calculation is “credit mix” which basically means that a bank wants to see different types of credit in your history, not just credit cards.

This will only work for you if you do not have an installment loan like an auto loan, student loan or mortgage.

If you are like me, and your credit report is full of credit cards and nothing else, you’re in luck and the secured loan trick will boost your FICO score.

Getting started

• Join Alliant Credit Union or another credit union that offers secured loans
• Take out a $500 secured loan for 60 months and disable autopay
• Pay off $455 of the loan, leaving $45 or 9% of the principle
  (keeping your utilization under 10% improves your credit score)
• Manually schedule $0.75 monthly payments
  ($45/60 months = $0.75/month)
• Wait a few months for it to show on your credit report

I applied for my secured loan on 12/8/17 and it didn’t show on my credit report until 2/19/18. Be patient and you will see results.

Why Secured Loans?

Secured loans are backed up by money in a savings account at the same bank. So, you need to have $500 you can park in the savings account for a while. Also, as you pay down the loan, your savings account becomes available again. These loans are used to build or repair credit. Or in my case, to inflate your credit score in the hopes of getting better credit card offers and the free trips that come with them.

Further Reading

• The above was an extreme simplification. The MyFICO forum invented this trick and all credit goes to them. For an exhaustive walk through, visit their forum.
• Doctor of Credit’s post.

Update: One year in and my FICO score is still going up.