FICO scoring on installment loans is anal

[Thomas_Thumb]

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@vanillabean wrote:

I don’t see installment utilization being applied much to my mortgage. There’s 95% left on it (is that what B/L means, balance to loan?), and my scores are normally 850. Recently, they have been dropping up to 35 points from the mortgage temporarily falling off due to a change of servicer (that was with no credit card balances, likely to be less with one card balance).

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Yes - balance to loan ratio (B/L) is what Fico looks at. Really not utilization per se as defined for revolving accounts.

My contention is that mortgages are indeed treated differently than other installment loans - in that you get full credit for a mortgage at a very high B/L - perhaps 70% or even higher. However, for car loans or SSL loans, you need to be at a much higher pay down (lower B/L) to realize full benefit.

It is generally seen that if you have no open installment loan on file then adding one and optimizing it relative to age and B/L is often worth 30 to 40 points. Based on your 35 point drop when the loan stops showing up, it appears you are receiving near full credit for the mortgage when it shows up in its current state.

Thanks for the data point.

[Anonymous]

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@vanillabean wrote:

I don’t see installment utilization being applied much to my mortgage. There’s 95% left on it (is that what B/L means, balance to loan?), and my scores are normally 850. Recently, they have been dropping up to 35 points from the mortgage temporarily falling off due to a change of servicer (that was with no credit card balances, likely to be less with one card balance).

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Hello Vanilla!  Installment Utilization and B/L ratio are just different terms used for the same thing. 

IU is used by some people because it is analagous to Revolving Utilization.  With both RU and IU you are compaing what you actually owe with the very maximum you could owe, based on either the revolving or installment accounts in your report (ignoring closed accounts).  The idea is the same for both.

TT likes using the term B/L ratio.  That's also very clear.

I am surprised that you would get ALL of the IU points available to you if your IU is 95%.  I agree with TT that mortgages might well have far higher thresholds, but nobody thus far has imagined that the threshold for getting all available IU points could be as high as 95%.  With other loans it is far lower: around 9%.  Even folks in the "mortgages are different camp" have so far guessed that you still needed to get the mortgage down to 70% or so.

It's possible that something peculiar is going on in your case, possibly owing to your 850 score.  That can sometimes result in atypical test results.

[Thomas_Thumb]

JLK93 has been rather adamant that there is a mortgage threshold at 90% or 95%. In fact, my recollection is that he felt that might be the big (or only) threshold for mortgages. So, this data point supports his viewpoint for a mortgage only profile.

That is not to say there are not other thresholds for "aged" installment loans X mortgage or aggregated installment loans that include a mortgage. CAPTOOL, Inverse and other posts suggest a threshold around 70%.

[Anonymous]

It's also possible that his 850 has a little buffer built into it, such that when an event lowers his score it appears to lower it less points than someone that's not capped at 850 yet.

[Thomas_Thumb]

vanillabean's data point is almost text book perfect.

BBS - As you say, Vanillabean's profile may have a slight built in buffer from being at 850 - but it can't be much.

The beautiful thing here is a buffer would mute what would otherwise be a larger drop. From prior posts I think Vanillabean looked to confirm other factors weren't in play before posting the impact of the disappearing mortgage.

As for long term loans with a positive pay down history - "time is on my side":

https://www.youtube.com/watch?v=6istBsZxABo

[Revelate]

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@Thomas_Thumb wrote:

FICO 8:

The remaining balance on your mortgage or non-mortgage installment loans is too high.

FICO 9:

The remaining balance on your mortgage or non-mortgage installment loans is too high.

The break out of mortgage from non-mortgage for installment loans suggests differentiation to me in the above statements. Frankly, there is quite a bit of poster data for clean files with mortgages that points to B/L thresholds above 50%. This, either with mortgages only or in combination with other installment loans. I really have not seen any data that contradicts this. What I see supports mortgage differentiation.

Pasted below is what Experian shows at the top of the reason code article. No mention of specific model other than Fico Open Access. However, looking at other articles I do see Open Access and Fico NextGen mentioned together. So if Open Access = Fico NextGen, then as you suggest, these must be Fico NextGen.

As an FYI, here is a paste of TU Fico 98/Fico 04 as presented by Credco.

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Hrm good list.

That said FICO 8 / FICO 9: there's an installment breakpoint certainly on FICO 8 north of 50%; that was what was triggered in my initial post, and I was on a very dirty scorecard.  The fact it hasn't been precisely nailed down doesn't mean it doesn't exist for others.

Regarding my experience and that reason code:

I got that reason code with two random installment loans, and when I got my aggregate balance paid down to the 10% line that reason code went away.

As soon as my mortgage reported, I lost all those points I had gained and that precise reason code came back and it's still on my file having been on 3 different scorecards in the past month it's the same on all.  I will see on a 4th scorecard on a file without any negative marks on it in a couple of months too, but I suspect it'll still be there.

The "or" statement suggests conflation, and my documented testing during my mortgage process seems to be pretty solid proof of that though I will admit my files were too busy for fantastic gold-standard (by my definition) testing for that point.  I'm also not convinced necessarily that VB's 850 can't buffer full installment utilization, I still maintain that's the absolute worst case scenario for any algorithm tester when it comes to magnitude of score shift, and probably no reason codes either, makes it very difficult to do any concrete analysis.  We're pretty confident a buffer exists from a number of anecdotal points, we have no idea what that range is, we can't handwave that away... or perhaps on his scorecard it's not a valid reason code; my own recent TU adventure likewise shows reason codes are not 1:1 between scorecards, not even close as that new accounts penalty has never ever been on my file previously and going from 3 reason codes to 4, and major rewrite of order, the importance of factors between scorecards varying or even not existing I suspect is proven.

To my knowledge, and I know there aren't a lot of people posting reason codes with their analysis, but I haven't seen any seperation of Alliant loan vs. mortgage loan when it comes to FICO 8 anyway, I'll look more carefully at EX v2 but I think it's the same there too though your link suggests it isn't and Credco documentation should be accurate.

[Anonymous]

It's not FICO 08 and may be severely outdated but this PDF also shows no "positive" reason codes on this particular FICO version (whatever it is): https://www.figfcu.com/documents/fico/FICO%C2%AE%20Score%20Factors%20Guide%20-%20Experian.pdf

I'd guess it's FICO 04 there, or even FICO-v2 (EX98)?

Either way, it does appear that at least some FICO scoring factors avoided including positive reason codes.