I have a challenging decision to make... one I've been putting off.
I need to improve my credit score. It's in the 600s, but could easily be better.
One method is to take out an installment loan and pay it regularly for 1-2 years, thus improving my credit score.
I'm thinking I could take out a secured loan from a local bank and pay 2.5% extra interest above what they will pay me on my secured deposit.
If I put $5,000 in, I will be able to borrow $4500 and would effective pay $303.75 in interest each year (assuming a 6.75% interest rate). The net payment would be $212.81. The proceeds from the loan would be invested to so I would in effect be paying myself back, but hte money wouldn't truely be mine for 2 years.
So, the fundamental quesiton is do I want to spend $607.50 over two years to improve my credit rating?
At this time I think it's not the greatest and I might have trouble getting a credit card, I'm not sure since I haven't tried in a while.
The blemish on my record is due to a period of unemployment that had wiped out much of my savings and created havic on my debt obligations. Although I came through it and rebuilt my savings, it hurt my credit rating.
Your advice would be well appreciated.