Do closed accounts help credit mix at all?

[CH-7-Mission-Accomplished]

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@Revelate wrote:

One can call it either way with FICO 8 unfortunately.

Closed accounts absolutely do count mix of credit FICO 04; seen that in my own data.

The problem is FICO 8 confused the hell out of it because it wants open accounts and it also counts utilization metrics (revolving and installment both have calculations associated with them).

End of the day if you want to maximize one's score, you need to have both types of accounts open, and want them reporting pretty balances.  Unfortunately on the installment side if you have non-trivial obligations like a mortgage, that may be impossible to do other than letting time take it's course.  4 years from now on my 15 year mortgage I might see 6-10 points, oh yay.

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Always enjoy learning from your experience, Revelate!

Curious, would FICO 04 score you the same if you only had closed credit cards and closed mortgage and installment accounts?  FICO 08 would kill you of course.  So people with no open credit at all could have great scores in FICO 04?

[Thomas_Thumb]

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@CH-7-Mission-Accomplished wrote:

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@Revelate wrote:

One can call it either way with FICO 8 unfortunately.

Closed accounts absolutely do count mix of credit FICO 04; seen that in my own data.

The problem is FICO 8 confused the hell out of it because it wants open accounts and it also counts utilization metrics (revolving and installment both have calculations associated with them).

End of the day if you want to maximize one's score, you need to have both types of accounts open, and want them reporting pretty balances.  Unfortunately on the installment side if you have non-trivial obligations like a mortgage, that may be impossible to do other than letting time take it's course.  4 years from now on my 15 year mortgage I might see 6-10 points, oh yay.

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Always enjoy learning from your experience, Revelate!

Curious, would FICO 04 score you the same if you only had closed credit cards and closed mortgage and installment accounts?  FICO 08 would kill you of course.  So people with no open credit at all could have great scores in FICO 04?

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You need to have open credit for great Fico 04 or Fico 08 scores.

Regarding Fico 08 you absolutely can be above 800 with only closed installment loans - as long as one or more shows on file. I know a few debt free people with such scores.

[Anonymous]

Forgive my ignorance, but would student loans count as installment loans?

[Anonymous]

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@Anonymous wrote:

Forgive my ignorance, but would student loans count as installment loans?

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They are indeed installment loans and are counted as such.  Mortgages, student loans, auto loans, unsecured personal, share secure... all are installment loans and all are scored in a somewhat similar manner.  The exact fine details of each algorithm (remember that there are many flavors) are hidden by FICO   People like Revelate and others have done a lot of work trying to test exactly how the algorithms work (for which we are very thankful!) but the big ideas are things that are intuitive and well known and are things you can count on.  Things like:

(1)  Developing an extended pattern of perfect on-time payments on each installment loan helps a huge amount.  Failing to make a payment on time is by contrast bad.

(2)  FICO looks at the total amount you currently owe against the total amount that all the (open) loans were taken out for -- in a way that's a bit like your "total utilization" on credit cards.  (A totally separate factor but one that is analagous to it.)  So keeping loans open while paying them down helps you a lot.

(3) Paying off installment loans (like car loans) can also help you too as long as you bear in mind the previous two principles.  So if you pay off a loan and that payoff makes your "utilization" (see #2) go way up, then you will experience some score hit.  But that does not mean that FICO completely disregards the presence of closed loans with extended perfect payment history.  Honestly, the folks at FICO are at least moderately bright -- their job is to as accurately as possible predict risk, and obviously if you have a mortgage or car loan that was paid perfectly for several years, that's going to increase the chance that you will pay your next mortgage or car loan well.  Thus (for example) the auto favors of FICO love seeing closed car loans with perfect histories -- I can attest to that.

Two final thoughts:

While scoring benefit is an important consideration, doing the wise thing for yourself financially is even more important.  So sure, if somebody can see that his loan is costing him very little interest, then sure no-brainer keep it open.  But any time you can see that you will save yourself a lot of interest on an installment loan, and you want to pay it off early, then go for it.  Wise financial decisions in the long run will always benefit your score, regardless of short-term blips.

Lenders do not ONLY look at your score.  For important credit decisions, it is very common for there to be a manual review of your report.  And I promise you, that regardless of what impact a closed mortgage has on your score, if you want to buy another house your underwriter will be very pleased to see that you managed and paid one off successfully before.

[Revelate]

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@CH-7-Mission-Accomplished wrote:

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@Revelate wrote:

One can call it either way with FICO 8 unfortunately.

Closed accounts absolutely do count mix of credit FICO 04; seen that in my own data.

The problem is FICO 8 confused the hell out of it because it wants open accounts and it also counts utilization metrics (revolving and installment both have calculations associated with them).

End of the day if you want to maximize one's score, you need to have both types of accounts open, and want them reporting pretty balances.  Unfortunately on the installment side if you have non-trivial obligations like a mortgage, that may be impossible to do other than letting time take it's course.  4 years from now on my 15 year mortgage I might see 6-10 points, oh yay.

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Always enjoy learning from your experience, Revelate!

Curious, would FICO 04 score you the same if you only had closed credit cards and closed mortgage and installment accounts?  FICO 08 would kill you of course.  So people with no open credit at all could have great scores in FICO 04?

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When MF transitioned to FICO 8 on Scorewatch we had a number of people screaming bloody murder as they'd closed their CC's and only had installment lines open at that point... their scores dropped 60+ points.

Admittedly you have to have an account open and active within the last six months to generate a FICO score at all, but having only a single random installment loan but closed CC history is just fine on FICO 04 (or at least nowhere near as bad, entirely possible they could've been higher with open CC's but it's a minor point value from what we saw on installment loans back in those days is my guess), but whacks you FICO 8.

[CH-7-Mission-Accomplished]

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@Revelate wrote:

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@CH-7-Mission-Accomplished wrote:

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@Revelate wrote:

One can call it either way with FICO 8 unfortunately.

Closed accounts absolutely do count mix of credit FICO 04; seen that in my own data.

The problem is FICO 8 confused the hell out of it because it wants open accounts and it also counts utilization metrics (revolving and installment both have calculations associated with them).

End of the day if you want to maximize one's score, you need to have both types of accounts open, and want them reporting pretty balances.  Unfortunately on the installment side if you have non-trivial obligations like a mortgage, that may be impossible to do other than letting time take it's course.  4 years from now on my 15 year mortgage I might see 6-10 points, oh yay.

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Always enjoy learning from your experience, Revelate!

Curious, would FICO 04 score you the same if you only had closed credit cards and closed mortgage and installment accounts?  FICO 08 would kill you of course.  So people with no open credit at all could have great scores in FICO 04?

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When MF transitioned to FICO 8 on Scorewatch we had a number of people screaming bloody murder as they'd closed their CC's and only had installment lines open at that point... their scores dropped 60+ points.

Admittedly you have to have an account open and active within the last six months to generate a FICO score at all, but having only a single random installment loan but closed CC history is just fine on FICO 04 (or at least nowhere near as bad, entirely possible they could've been higher with open CC's but it's a minor point value from what we saw on installment loans back in those days is my guess), but whacks you FICO 8.

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I guess the takeaway is that open accounts with lower balances are optimum to protect scores in both FICO 08 and FICO 04.

[Revelate]

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@CH-7-Mission-Accomplished wrote:

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@Revelate wrote:

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@CH-7-Mission-Accomplished wrote:

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@Revelate wrote:

One can call it either way with FICO 8 unfortunately.

Closed accounts absolutely do count mix of credit FICO 04; seen that in my own data.

The problem is FICO 8 confused the hell out of it because it wants open accounts and it also counts utilization metrics (revolving and installment both have calculations associated with them).

End of the day if you want to maximize one's score, you need to have both types of accounts open, and want them reporting pretty balances.  Unfortunately on the installment side if you have non-trivial obligations like a mortgage, that may be impossible to do other than letting time take it's course.  4 years from now on my 15 year mortgage I might see 6-10 points, oh yay.

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Always enjoy learning from your experience, Revelate!

Curious, would FICO 04 score you the same if you only had closed credit cards and closed mortgage and installment accounts?  FICO 08 would kill you of course.  So people with no open credit at all could have great scores in FICO 04?

---

When MF transitioned to FICO 8 on Scorewatch we had a number of people screaming bloody murder as they'd closed their CC's and only had installment lines open at that point... their scores dropped 60+ points.

Admittedly you have to have an account open and active within the last six months to generate a FICO score at all, but having only a single random installment loan but closed CC history is just fine on FICO 04 (or at least nowhere near as bad, entirely possible they could've been higher with open CC's but it's a minor point value from what we saw on installment loans back in those days is my guess), but whacks you FICO 8.

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I guess the takeaway is that open accounts with lower balances are optimum to protect scores in both FICO 08 and FICO 04.

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Pretty much; given that we have no control over what a lender will pull (with the exception of the mortgage industry) it's best to choose a path which optimizes all versions of the FICO algorithm from FICO 98 to FICO 08 and this works for all of them.

Uncertain how FICO 9 is going to play at this point but I can't ever see in the future where we'd be penalized for having both credit cards and installment loans open and with pretty balances so...