Does the type of installment loan matter?

[nomadicpixie]

Working on my post-BK plan and a question has come up - Does it matter the type of installment loan in the FICO arena?

I have 7 student loans that will continue to report. 5 FedLoan, 2 Sallie Mae, all near 100% d/t lots of deferment history. I have 20ish closed student loans that still show after being consolidated and closed. I never have listed an auto, personal, or mortgage loan, as they have always been under my husband's name only. In the rebuild threads Share Secure Loans are frequently mentioned in the rebuild process. I have assumed that opening one wouldn't help d/t the SLs. But I got to thinking...

Would a diversification within installment loans help, or be a moot point? Having at least one open installment the only thing needed, regardless of the type? Would a Share Secure Loan, that I immediately pay the majority off, help since the others are all near 100%? Does utilization factor in on installment loans similarly to credit cards?

I know with a fresh BK I have much bigger fish to fry. But I want to optimize everything I can and attempt to do this recovery right. Any info would be helpful, thank you!

[Anonymous]

The type of installment loan really doesn't matter.  The question I would have is whether or not your student loans "count" as installment loans.  I've heard in some instances they do while in others they don't.  I'm not really sure how to tell, though, but I'm sure others can answer this.

Installment loan utilization is a factor just like credit card utilization and is calculated the same way.  With installment loans though, it's not as volatile to being high.  What I mean by that is that if your installment loan utilization is at 70% for example, in many cases this is considered by FICO to be "substantially paid down" and a scoring benefit can be realized... where if this were aggregate revolver utilization 70% would be considered a "bad" number and would negatively be impacting score. 

[Anonymous]

Hi BBS.  I think you are likely to be right.  But there were two cases reported last year (I can't remember the details) that were hard to explain except by the hypothesis that the person's loans (which were all student loans) were being scored separately from other kinds of installment debt.

I am working with a guy right now who is testing this with his profile (he has only student loans and he is adding an SS loan in the next week or two).

I encourage our OP to stay in touch with me and I will let the OP know what this guy is able to discover once his SS loan reports.  There's another person who will also be duplicating the test in June.

[Anonymous]

Sounds good!  I mean, there would be absolutely no downside to the OP employing the SSL technique to see what happens as well if they're willing to.  If they get a score bump, that's great.  If not, no harm no foul as it won't hurt anything either.

[nomadicpixie]

Thank you so much both of you! I'm glad that my thinking wasn't way in left field. I will definitely put the SSL on my list of plans and set one up in June after my discharge. I just got in with NFCU so I'll look into their SSL along with their secured card. As you said, it's not going to hurt and it may help. I can post the results, though they won't be clear cut as multiple changes will occur around the same time. 

[Anonymous]

Because multiple changes (some of them ginormous like the BK) will be happening at the same time, the SS results won't mean anything.  My own advice is just relax.  Do the things that are known to help.  By mid-May and again by mid-June we should have two different people who have tried this with very carefully prepared profiles (almost all confounding factors eliminated).  If you still want to do it after you see their results, you can do it in July or August when your profile is far more stable.

Just my thoughts.

[Anonymous]

FWIW, my Navient student loan counts as an installment loan on all three major CRA's. And now that I have a car loan from Penfed, I have a diversified portfolio of installment loans (insofar as two installment loans can really be called "diversified" or a "portfolio").

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