Help me understand my FICO 9 Score Please

[Anonymous]

TT- I mean in the FICO 8's scoring I believe the collection is ALREADY dragging me down 40+ points to the 670 area. Which is why I just am not seeing a reason for the additional 50+ point drop in FICO 9. Also, public records are much much more harsh than having a collection IMO.

To reply to this, "I gather from you posts that you currently have 5 loans with balances but had 12 to 14 a couple years ago - is that correct? "

No, the 5 loans are the ones within the last 2 years I have a total of 12 to 14 student loans open each with about a $2,000 balance. For some reason when creating them the Fedloan system does that (splits them into microloans).

Other than that I'm squeaky clean. No lates, some CC debt and no other balances reporting.

[Thomas_Thumb]

---

@Anonymous wrote:
TT- I mean in the FICO 8's scoring I believe the collection is ALREADY dragging me down 40+ points to the 670 area. Which is why I just am not seeing a reason for the additional 50+ point drop in FICO 9. Also, public records are much much more harsh than having a collection IMO.

To reply to this, "I gather from you posts that you currently have 5 loans with balances but had 12 to 14 a couple years ago - is that correct? "

No, the 5 loans are the ones within the last 2 years I have a total of 12 to 14 student loans open each with about a $2,000 balance. For some reason when creating them the Fedloan system does that (splits them into microloans).

Other than that I'm squeaky clean. No lates, some CC debt and no other balances reporting.

---

That is an impressive number of micro loans. Down the road when most are paid off all those accounts will help preserve AAoA when you open new accounts and provide some score stability. Right now, they are no doubt impacting your score. I would not want to manage that many loans myself.

[Anonymous]

TT- Well they're all from from one servicer so they're all managed through one login which makes it much much easier compared to if I had them through 3-4 servicers. When I pay them I think I'll be doing the snowball method paying them off one by one.

[Anonymous]

---

@Anonymous wrote:
When I pay them I think I'll be doing the snowball method paying them off one by one.

---

You will get more FICO scoring points if you pay the loans down to a small balance and keep them open for as long as the loan servicer will let you.  Also, in the long term (10+ years down the road) you'll benefit from having many old tradelines -- but if they close and eventually fall off you'll lose that.  And it won't cost you hardly anything to do this either.

Let us know if you want someone to explain why you get a good deal of scoring benefit from having open loans that are mostly but not entirely paid off.

That said, your idea of paying them off is OK -- it's just that keeping them open is a little better.

[Anonymous]

CGID - Hmm that's really odd because I have a SS loan that I paid down to about 5% of the original amount and it actually dropped my score by 4 points. I checked and that was the only change in my profile, I'd had the SS loan for about a year then 2 months ago it got down to 5% and after the next update it dropped me.

So I'm curious how paying all loans mostly down would be beneficial?

[Anonymous]

I am guessing that the SS loan was very small compared to how much you owed total (counting all of your open loans together).  Therefore paying down one specific individual loan did not help you.

The scoring factor involved here is often called "installment utilization."  It is a lot like credit card utilization, but it applies solely to installment debt, rather than revolving debt.

This factor measures how much of your existing open installment debt you have paid off.  Here's how it works.  You take all your current open installment loans (only the open ones -- ignoring all closed loans).  You then add up all the amount you currently owe.  Call that CURRENT.  Then you add up the amounts that the loans were originally for.  Call that ORIGINAL.  Then you divide CURRENT by ORIGINAL and you get a percent.  (Do you see how that is a lot like the credit card utilization calculation?) 

When that % is close to 100, or if you don't have any open loans at all, then you get no FICO points from this factor.  But when the % is very low (say 1-9%) then you get most or all of the points from this factor.

Right now your total installment utilization (TIU) is very high.  Probably over 90%.  If you use the snowball method, your TIU will remain very high, since you will simply be removing loans from that calculation.  What you want is to keep them open (so that they count) but have them mostly paid off.

With a TIU that is < 9% you will get all the scoring points you can from this category.  That's roughly 30 points for most people.  Depending on the loan type you might get the full benefit sooner.  But < 9% is a confirmed certainty.