It's a Fico thing and how they judge your credit worthiness. Your payment history accounts for a percentage of your credit. Within that percentage, you get the maximum total score points by having a mixture of revolving and installment loans.
To the point you made, if you pay all of your cards off with 0% reporting, you will actually lose points. The same can be said for an installment loan being paid off if it's the only one you have.
What this gets at is they want to see how you manage current credit that is open, and a mixture of it. I know in theory, you pay something off it should be seen as good. This is just the way they do their scoring.
To the point you made, if you pay all of your cards off with 0% reporting, you will actually lose points. The same can be said for an installment loan being paid off if it's the only one you have.
What this gets at is they want to see how you manage current credit that is open, and a mixture of it. I know in theory, you pay something off it should be seen as good. This is just the way they do their scoring.
@Anonymous wrote:
Okay, so by keeping the student loan open, should I expect a huge decrease in score, or does that only happen when you have 0 installment loans?
I know about the cresit cards all reporting 0 balances....that was a nice fico update scare. Another card reported a balance a few days later and got it back though.
It's installment utilization not credit mix in this case. Credit mix factors both open and closed accounts; however FICO 8 wants not only open accounts but also having pretty utilization metrics for optimal scoring on both the revolving and installment calculations.
The ratios are 10% and ~70% on the installment side, aggregate current balance / original balance. Having a loan still open doesn't hurt, but it may not help... vis a vis when I got my mortgage and took my installment utilization from 7% to 99.99%, 24 point drop. If you cross a threshold when the auto loan no longer counts when closed, then you'll see a drop; if you don't, you won't.
Anyway the plus side of all of this is 2/3 of the mortgage trifecta couldn't care less about installment utilization as it simply isn't a factor in FICO 04; however, it is for Experian on FICO 98. Beats me why they skipped a generation of scores but FICO is as FICO does.
