Experian credit report is penalizing me for outstanding student loans?

[danny4l]

I just pulled my official FICO and in the Experian report, one of the negative remarks was that I have a high outstanding "non-mortgage" installment loan balance.  My total student loan balance is $151000.

I have been under the impression that as long as you are current on an installment loan, then the outstanding balance should not affect your score.  Why is the file saying that the "amount outstanding" is factoring into my score?

The exact words listed are:  "The remaining balance on your non-mortgage installment loans is too high."  "Your FICO Score weighs the balance of your non-mortgage installment loans (such as auto loan or student loans) against the original loan amounts.  In general, when you first obtain an installment loan your balance is high, and as you pay this loan down the balance decreases..."

There is no way in the near future I will be paying a significant amount of that amount off.

Please explain this to me.

Thanks

[guiness56]

This is what FICO says about installment loans:

How much of the installment loan amounts is still owed, compared with the original loan amount

For example, if you borrowed $10,000 to buy a car and you have paid back $2,000, you still owe (with interest) more than 80% of the original loan. Paying down installment loans is a good sign that you're able and willing to manage and repay debt.

[danny4l]

Revolving accounts are factored into the score via percentage used.

What criteria are they using for installment loans then?  This is very vague to me.

The installment loan cannot be factored into the 30% criteria so where is it falling within the scoring criteria?

With 150,000 in outstanding student loans, are you saying I will be in bad shape forever?

[guiness56]

Not exactly what sure how they score it but I think it is safe to say the % is probably less than 10 of your score.

[Anonymous]

I'm am choking on the amount of student loans. How can a person go to school, graduate and ever figure on starting a regular life? Consider myself lucky. I have done some reading and the amount of student loans outstanding is scaring me. GADS! No wonder people are evaluating future earning capacity against the amount of dollars to obtain a college education.

[danny4l]

So, lets say you hypothetically have $500,000 in outstanding student loans but you are current on the payments, will the outstanding amount prevent you from getting a car or a house, or a credit card?

Lets assume you make $120000 at the moment.

I always thought that with installment loans, all that mattered was that you were paying them on time...I didn't think the balance was an issue like revolving accounts.

[almost_there]

*sigh* I have over 300,000 in student loan debt and just applied for the income sensitive repayment program courtesy of the Obama administration. Thank you! My estimated payments will be $360 a month if I'm approved instead of over $2000 a month. Hoping having a large sum that I will certainly be paying off slowly doesn't still screw me in the end. Sheesh!

[Shogun]

It does factor in, but installments are a minor factor. Give it some time and it will improve.