cancel
Showing results for 
Search instead for 
Did you mean: 

2 Popular Pieces of Advice that may be Myths

tag
SouthJamaica
Mega Contributor

Re: 2 Popular Pieces of Advice that may be Myths


@newhis wrote:

@SouthJamaica wrote:

@Thomas_Thumb wrote:

From what I have observed paydown is dependent on loan type. From a lowest threshold level for scoring I think it is 70% if you have a mortgage in the mix, 10% for a SSL only and perhaps Auto loan (waiting for update from SJ on Auto loan - SSL combo below 10% aggregate B/L)


Once the car loan was paid down sufficiently to bring the aggregate B/L to 9%, my FICO 8 got a big bounce across all 3 bureaus, basically regaining for me all the points I'd lost when the car loan first reported.

 

Next update coming out in December, which will be my final update in that thread, will be what happens when the car loan has been paid off (which has happened already) and the only open installment loan left is the SSL paid down to 7.5%. The mystery is whether the little SSL can carry the installment loan "credit mix" burden all by itself, with its $37 balance.

 

 


My DW score jumped almost 40 points when the auto loan changed from over 80% or so to under.

If I understand you correctly, then the car loan had little to do with that? She will get a bigger jump when the loan is under 10%?

 


I got a miniscule 2-point gain when I crossed 80%.

Here's the whole story from 87.7% down to 9%:

http://ficoforums.myfico.com/t5/Understanding-FICO-Scoring/Update-11-5-Car-loan-amp-installment-loan...

 

 


Total revolving limits 741200 (620700 reporting) FICO 8: EQ 701 TU 704 EX 685

Message 11 of 45
newhis
Valued Contributor

Re: 2 Popular Pieces of Advice that may be Myths


@SouthJamaica wrote:

I got a miniscule 2-point gain when I crossed 80%.

Here's the whole story from 87.7% down to 9%:

http://ficoforums.myfico.com/t5/Understanding-FICO-Scoring/Update-11-5-Car-loan-amp-installment-loan...

 


Thank you for the link.

 

So I think my DW is in a different bucket/profile. I just checked my notes and was only 21 points jump when the car loan crossed the 1 year mark. So maybe it was a HP drop/old. She was at 755 before loan, 758 after loan (1.5 years ago), down to 743 after BT and new card (1 year ago), then 763 before the loan's 1 year mark, 21 jump to 784 after 1 year mark (maybe a HP was 1 year old too). Now 800 with AAoA over 2 years, AoOA less than 3 years, no new cards/HP in almost 12 months. 3 years more until she is at 9% with the car loan.

 

I guess a new file with no open loan, do change different than other profiles score wise when you get your first car loan.

Message 12 of 45
Anonymous
Not applicable

Re: 2 Popular Pieces of Advice that may be Myths


@driftless wrote:

Of course, I was referring only to a mortgage. We will find out, we anticipate paying down our mortgage that we took out in May by 50% in 2017.

 

In terms of point number 2, I was suggesting that a mix of credit is better for scores, etc., than just collecting cards.


If you have heard from anyone on here that just having credit cards is better for your scores than a mix of credit (credit cards + installment loans) they are (a) mistaken and (b) in a tiny minority.  It's really well known that having a mix of credit is better for your score (other things being equal) than only one type of account (e.g. credit cards only).  But I am very glad to hear that you know this too.

 

As far as point #1 goes, you will sometimes hear that as a simple rule to help people optimize their score before a crucial credit pull.  It's still true even for FICO 8, in the sense that there isn't a better (more optimal) configuation than that, and thus if a person follows that rule his score will be as high as it can be, as far as CC balances go.  A lot of people visiting here just need a really simple rule to help them prep for a mortgage (say).

 

But I agree with you that I am following with interest the possibility that FICO 8 might not care whether a person has all five of his cards showing a positive balance vs. exactly 1 with a balance and the other four showing $0.  I'd love to hear that this is true.

Message 13 of 45
Thomas_Thumb
Senior Contributor

Re: 2 Popular Pieces of Advice that may be Myths


@newhis wrote:

@SouthJamaica wrote:

I got a miniscule 2-point gain when I crossed 80%.

Here's the whole story from 87.7% down to 9%:

http://ficoforums.myfico.com/t5/Understanding-FICO-Scoring/Update-11-5-Car-loan-amp-installment-loan...

 


Thank you for the link.

 

So I think my DW is in a different bucket/profile. I just checked my notes and was only 21 points jump when the car loan crossed the 1 year mark. So maybe it was a HP drop/old. She was at 755 before loan, 758 after loan (1.5 years ago), down to 743 after BT and new card (1 year ago), then 763 before the loan's 1 year mark, 21 jump to 784 after 1 year mark (maybe a HP was 1 year old too). Now 800 with AAoA over 2 years, AoOA less than 3 years, no new cards/HP in almost 12 months. 3 years more until she is at 9% with the car loan.

 

I guess a new file with no open loan, do change different than other profiles score wise when you get your first car loan.


I continue to believe length of loan may come into play regarding blance to loan thresholds.

 

In SJ's case I believe his loan is "short duration - under 12 months age". Do SSL and Auto loans under 12 months only have the 10% threshold? Most everyone pays down their SSL to under 10% to get the desired score boost within 30 days - so its hard to say if other thresholds would be in play for long term SSLs.

 

However, many people have 5 year or 6 year Auto loans and follow a standard paydown schedule. Could these higher thresholds garnish more of the available points if time since loan opened exceeds 12 months? Could points be "awarded" when paid as agreed loans cross age boundries - leaving less points available for B/L thresholds?  Interestingly, you do mention a score bump crossing the one year mark.

 

I'd be interested in what others think about the impact of loan age vs B/L thresholds.

 

Note: If you don't have an open installment loan and then get one score often does not improve much - because the "point potential" associated with the loan is offset by the penalty for a high B/L ratio

Fico 9: .......EQ 850 TU 850 EX 850
Fico 8: .......EQ 850 TU 850 EX 850
Fico 4 .....:. EQ 809 TU 823 EX 830 EX Fico 98: 842
Fico 8 BC:. EQ 892 TU 900 EX 900
Fico 8 AU:. EQ 887 TU 897 EX 899
Fico 4 BC:. EQ 826 TU 858, EX Fico 98 BC: 870
Fico 4 AU:. EQ 831 TU 872, EX Fico 98 AU: 861
VS 3.0:...... EQ 835 TU 835 EX 835
CBIS: ........EQ LN Auto 940 EQ LN Home 870 TU Auto 902 TU Home 950
Message 14 of 45
SouthJamaica
Mega Contributor

Re: 2 Popular Pieces of Advice that may be Myths


@Thomas_Thumb wrote:

@newhis wrote:

@SouthJamaica wrote:

I got a miniscule 2-point gain when I crossed 80%.

Here's the whole story from 87.7% down to 9%:

http://ficoforums.myfico.com/t5/Understanding-FICO-Scoring/Update-11-5-Car-loan-amp-installment-loan...

 


Thank you for the link.

 

So I think my DW is in a different bucket/profile. I just checked my notes and was only 21 points jump when the car loan crossed the 1 year mark. So maybe it was a HP drop/old. She was at 755 before loan, 758 after loan (1.5 years ago), down to 743 after BT and new card (1 year ago), then 763 before the loan's 1 year mark, 21 jump to 784 after 1 year mark (maybe a HP was 1 year old too). Now 800 with AAoA over 2 years, AoOA less than 3 years, no new cards/HP in almost 12 months. 3 years more until she is at 9% with the car loan.

 

I guess a new file with no open loan, do change different than other profiles score wise when you get your first car loan.


I continue to believe length of loan may come into play regarding blance to loan thresholds.

 

In SJ's case I believe his loan is "short duration - under 12 months age". Do SSL and Auto loans under 12 months only have the 10% threshold? Most everyone pays down their SSL to under 10% to get the desired score boost within 30 days - so its hard to say if other thresholds would be in play for long term SSLs.

 

However, many people have 5 year or 6 year Auto loans and follow a standard paydown schedule. Could these higher thresholds garnish more of the available points if time since loan opened exceeds 12 months? Could points be "awarded" when paid as agreed loans cross age boundries - leaving less points available for B/L thresholds?  Interestingly, you do mention a score bump crossing the one year mark.

 

I'd be interested in what others think about the impact of loan age vs B/L thresholds.

 

Note: If you don't have an open installment loan and then get one score often does not improve much - because the "point potential" associated with the loan is offset by the penalty for a high B/L ratio


I don't know if it makes a difference, but the car loan was, on paper, a 60-month loan. I just decided to pay it down rapidly.

 

 


Total revolving limits 741200 (620700 reporting) FICO 8: EQ 701 TU 704 EX 685

Message 15 of 45
Thomas_Thumb
Senior Contributor

Re: 2 Popular Pieces of Advice that may be Myths

No - I mean the time the loan has been in existance with regular payments, I believe the SSL loans also are multi-year term.

 

Wonder if anyone has an SSL over 12 months that has not been paid down to below 10%? If so, it too may receive points for payment history leaving fewer points awardable for a B/L pat down to under 10%.

 

 

Fico 9: .......EQ 850 TU 850 EX 850
Fico 8: .......EQ 850 TU 850 EX 850
Fico 4 .....:. EQ 809 TU 823 EX 830 EX Fico 98: 842
Fico 8 BC:. EQ 892 TU 900 EX 900
Fico 8 AU:. EQ 887 TU 897 EX 899
Fico 4 BC:. EQ 826 TU 858, EX Fico 98 BC: 870
Fico 4 AU:. EQ 831 TU 872, EX Fico 98 AU: 861
VS 3.0:...... EQ 835 TU 835 EX 835
CBIS: ........EQ LN Auto 940 EQ LN Home 870 TU Auto 902 TU Home 950
Message 16 of 45
Anonymous
Not applicable

Re: 2 Popular Pieces of Advice that may be Myths

Does anyone know if having just 1 installment loan (in addition to multiple revolvers) is ideal for "mix" and will yield maximum FICO points?  This of course is assuming a small balance on the installment loan.  Is there any scoring benefit at all [with respect to credit mix] to having anything else in addition to a single installment loan coupled with several revolvers?

Message 17 of 45
Thomas_Thumb
Senior Contributor

Re: 2 Popular Pieces of Advice that may be Myths

I have come across articles suggesting ratio of revolvers to installment loans may have some importance. A preferred ratio was mentioned of 3 revolvers to each installment loan. Does ratio really matter - I haven't a clue but, I've read about it more than once.

 

My current ratio for open accounts is 5:1 excluding AMEX which, as a charge card, is classified differently. I have also read that for mix 3 or more types of accounts is optimal. I have exactly three: mortgage, revolvers and charge. [Note: mortgages are viewed as a different type compared to an SSL or auto loan. So, if you have a mortgage, SSL, credit cards and a true charge card - you would have 4 types of accounts]

 

This was discussed last year when Inverse was asking about types of accounts and Mix category rating.

Fico 9: .......EQ 850 TU 850 EX 850
Fico 8: .......EQ 850 TU 850 EX 850
Fico 4 .....:. EQ 809 TU 823 EX 830 EX Fico 98: 842
Fico 8 BC:. EQ 892 TU 900 EX 900
Fico 8 AU:. EQ 887 TU 897 EX 899
Fico 4 BC:. EQ 826 TU 858, EX Fico 98 BC: 870
Fico 4 AU:. EQ 831 TU 872, EX Fico 98 AU: 861
VS 3.0:...... EQ 835 TU 835 EX 835
CBIS: ........EQ LN Auto 940 EQ LN Home 870 TU Auto 902 TU Home 950
Message 18 of 45
Anonymous
Not applicable

Re: 2 Popular Pieces of Advice that may be Myths

There was some recent evidence that student loans might behave differently (in terms of scoring impact) than other installment loans.

 

But that evidence was based on student loans in which the borrower still owed a lot on the loan.  In those cases there was evidence that suggested the chance that a Share Secure loan would benefit such a person, even though his total installment utilization would still be > 91%.  It suggested that as a possibility -- we haven't yet persuaded anyone yet to actually test it.

 

Your question, however, is whether a single installment loan which has been mostly paid off (< 9% debt) is sufficient.  And the student loan case study recently didn't speak to that.  Perhaps a student loan that was mostly paid off would be fine.

 

I will tell you this.  I would be very surprised if the Auto Enhanced flavor of FICO did not look especially for the presence of auto loans.  Thus, for that model, an SS loan paid down to under 9% would not be enough to give you the maximum mix for that model.  I can't prove that based on test data, but it would really REALLY surprise me if that was not the case.  I can't imagine what the Auto Enhanced model looks for if it doesn't specifically look for how well you handled auto loans -- weighting that substantially more heavily than one's performance with other kinds of credit.

Message 19 of 45
Thomas_Thumb
Senior Contributor

Re: 2 Popular Pieces of Advice that may be Myths


@Anonymous wrote:

There was some recent evidence that student loans might behave differently (in terms of scoring impact) than other installment loans.

 

But that evidence was based on student loans in which the borrower still owed a lot on the loan.  In those cases there was evidence that suggested the chance that a Share Secure loan would benefit such a person, even though his total installment utilization would still be > 91%.  It suggested that as a possibility -- we haven't yet persuaded anyone yet to actually test it.

 

Your question, however, is whether a single installment loan which has been mostly paid off (< 9% debt) is sufficient.  And the student loan case study recently didn't speak to that.  Perhaps a student loan that was mostly paid off would be fine.

 

I will tell you this.  I would be very surprised if the Auto Enhanced flavor of FICO did not look especially for the presence of auto loans.  Thus, for that model, an SS loan paid down to under 9% would not be enough to give you the maximum mix for that model.  I can't prove that based on test data, but it would really REALLY surprise me if that was not the case.  I can't imagine what the Auto Enhanced model looks for if it doesn't specifically look for how well you handled auto loans -- weighting that substantially more heavily than one's performance with other kinds of credit.


CGID - I don't have any auto loans on file (either open or closed). My Auto Fico 08 scores are marginally lower than my Bankcard Fico 08 scores but, really nothing to suggest an auto loan is a major factor for Auto Fico 08 scoring. I think Revelate saw something similar in his data and commented on it a few months back.

 

I think the Auto algorithm may add weight to installment loans in general - without specific preference to an auto loan. It is worth noting that Fico has limited ability to differentiate between installment loan types.

 

Summarized below are scores from a couple 3B reports for illustration

 

Fico Model (date)EQTUEX
Auto 08 (7/23/16)884884894
BC 08 (7/23/16)881889900
Auto 08 (12/3/15)884897884
BC 08 (12/3/15)886900900
Fico 9: .......EQ 850 TU 850 EX 850
Fico 8: .......EQ 850 TU 850 EX 850
Fico 4 .....:. EQ 809 TU 823 EX 830 EX Fico 98: 842
Fico 8 BC:. EQ 892 TU 900 EX 900
Fico 8 AU:. EQ 887 TU 897 EX 899
Fico 4 BC:. EQ 826 TU 858, EX Fico 98 BC: 870
Fico 4 AU:. EQ 831 TU 872, EX Fico 98 AU: 861
VS 3.0:...... EQ 835 TU 835 EX 835
CBIS: ........EQ LN Auto 940 EQ LN Home 870 TU Auto 902 TU Home 950
Message 20 of 45
Advertiser Disclosure: The offers that appear on this site are from third party advertisers from whom FICO receives compensation.