Does mortgage debt affect debt-to-credit ratio negatively, and thus FICO score negatively?

[Anonymous]

My question generally says it all:

Does mortgage debt affect debt-to-credit ratio negatively, and thus FICO score negatively?

I thought debt-to-credit ratio, was for things like credit cards, and that the idea was to keep debt below 10% of total available credit, on the same revolving accounts.

However, I got an Experian annual credit report and it seemed to imply my debt-to-credit ratio was insanely high due to my mortgage debt-to-credit-card credit availability.

Thoughts?

[GregB]

I think you will find that there is a debt to credit limit ratio for REVOLVING accounts, which are normally CC but sometimes include home equity loans. So if you have $20,000 total of all your CC limits and you owe $10,000 on all your CC, your utilization is 50%.

There is also a debt to original loan balance on installment loans. Buy a car with a loan of $20,000 and pay it down to $10,000 you still owe 50%.

There is also debt to original loan balance on mortgage. That takes around 22 years to pay off half the balance with a 30 year amortized loan.

Anything you got from Experian, unless you applied for a mortgage and received your reports, is not a "real" FICO. Those other "scores" are usually referred to as a FAKO since they are a "fake" FICO. My experian is a Plus Score. These don't relate to FICO since they are based upon different algorithms. You can get some strange positives and negatives with a FICO. The FAKO scoring reasons are usually even more strange. The reports from EX are fine, it is the scores that are a waste of money.

[haulingthescoreup]

There's revolving util (utilization), which is credit cards and lines of credit, and installment util, which is installment loans, including mortgage.

So no, your mortgage util isn't part of your revolving util. Installment util is considered separately, and it doesn't carry much oomph for your FICO scores.

The report you got from Experian is based on their FAKO score system, not FICO. Their reports are fine, but the scores that you can get and the advice that comes along with it is pretty worthless. (Experian stopped allowing consumers to buy our own EX FICO's back in February 2009.)

A lender will certainly consider things like your mortgage when they're decided whether to extend you credit, but it's not hurting your FICO scores.

eta: Ah, GregB out-typed me!

[GregB]

Hauling,

Are we typing the same thing at the same time?

[RobertEG]

I totally agree with both GregB and HTSU.

Just a little additional math speculation, for what it might be worth in trying to predict score impacts.   We all want numbers, so here is my personal shot.

The relevant category of credit scoring is current util of credit, which is 30% of your FICO score.  That includes utilization of both installment and revolving credit.

No one can tell you for sure just how much installment vs. revolving current util affects their own portion of this 30%, but I think it is safe to say, from everything I have read and seen from experiences of others over the years, is that revolving % util counts far, far more that installment % util.  Probably at least a 90/10% split. Just a guess, but I think that is pretty close.  Close enough to give you some general numbers to consider.

So, that would leave the impact of revolbing util at around 27% of your total FICO score, and installment % util at around 3%. 

Then, in a further breadown of scoring of your util, FICO has said, openly, that when scoring revolving % util, approx half (which would be approx 13.5% of total score) is based on overall revolving % util, and the other half (13.5% cumul) is based on the combined scoring of current utiil on each indiv card, and also on the number of cards reporting zero balance. 

Just a guess at the math, but again valuable in showing overall impacts, assume you have three credit cards.  That gives you four factors for evaluating you scoring of the 13.5% overall impact of indiv card util.  Those factors being the level of % util on each of the three indiv cards, and then the factor of the % of indiv cards showing any balance.  If you divide 13.5% by 4, you arrive at a guesstimate of the impact of each indiv card factor of being only just over 3% of your total score.

I, once again,dont assert that my numbers accurately reflect the actual FICO algorithm, for only Fair Isaac knows that.  But I think it is based on the most current information availbable to us, as consumers.

Anyway you cut it, overall % util of revolving credit is, by far,the most significant factor.  Util of installment credit is near, or at the bottom, of FICO impact.