Installment tradeline utilization thread

[bdhu2001]

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@jamie123 wrote:

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@CH-7-Mission-Accomplished wrote:

This technique of opening and then paying down by 90% a share secured loan has me perplexed.  

I worked in lending for a decade makiing mortgage and auto loans.  This was way back in time.

With an installment loan, normally when you make a payment larger than the regularly scheduled payment, the excess is applied to the principal balance, but it has no effect on the next payment amount and due date.  So your payment next month would still be required for the scheduled amount even if you paid off 90% of the loan this month.  The net effect of making this massive principal payment is that it will simply cause the loan to payoff in the very near future.  So your five year loan is now a one year loan.

That giant payment made early can either go to principal balance right now, in which case it would reduce the reported balance, or it would be considered prepaying the next 48 months worth of payments or whatever it is.  That "prepayment" includes the interest due plus the scheduled principal due, so it is really held in a suspense account and applied each month, but does not reduce the principal balance.

I don't understand how you can get the benefit of making the next 48 monthly payment today (example) and still get the benefit of a principal balance reporting at just 10% of what it was.

Can someone help me understand this?

I have a share secured loan with BECU.  If you make a payment 12 days or more before the due date, it will be applied to principal only.  However, your next payment is due next month for the regularly scheduled amount.

This is the way the world normally works.  If you make a massive payment on your mortgage, your regular payment is due next month for the regular amount and if you don't pay it you will be delinquent and reported this way.

Help me understand how you can have it both ways, please.

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The way that extra loan payments are treated varies by lenders. It is the lender that determines the rules for the application of extra funds paid to a loan. (This is in the fine print of the loan documents.) Some lenders even give you a choice, apply it just to principal or apply it to principal and interest or apply it to principal and just push the next payment out and recalculate interest.

That's why if you see a recommendation to get a shared secuired loan from a frequent contributor to these forums, they will also recommend getting the loan either from Alliant Federal Credit Union, Chicago or from the State Department Federal Credit Union (SDFCU). We know that you can get the $500 share secured loan from these two lenders without a hard pull and can pay the balance down early while mantaining the length of the loan. Not all lenders will operate this way. Some might HP and some might shorten the lenght of the loan after you make early payments. It depends on the lender.

Alliant and SDFCU are excellent lenders. They seem to really have their customers best interests at heart in the way they operate their businesses.

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I have a lease and they treat leases different or so it seems.  My previous VW lease I paid off early, but it showed as open with $0 due and next payment the turn in date.  My current lease is with Ally & I paid the amount due, not the pay-off.  It shows that my next payment will be due 9/20/16 which is when I turn in the vehicle.  I owed 34% prior to payment and now owe 3%.  My TU FICO score went up 22 points.

[Anonymous]

I should soon have an interesting data point in the opposite direction. Right now I have a $5K loan reporting paid and closed, and a $2050 loan reporting a balance of $22. My other loan, taken out in Sept, is still not reporting. Just paid off the last $22, so I'll have no open loans. It'll be interesting to see how many points I lose.

Current scores, (TU and EQ 1.29.16, EX today):

TU: 815

EX: 799

EQ: 742

The only one I'll be able to get immediate results on is EX since I get daily pulls.

[SouthJamaica]

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@Anonymous wrote:

I should soon have an interesting data point in the opposite direction. Right now I have a $5K loan reporting paid and closed, and a $2050 loan reporting a balance of $22. My other loan, taken out in Sept, is still not reporting. Just paid off the last $22, so I'll have no open loans. It'll be interesting to see how many points I lose.

Current scores, (TU and EQ 1.29.16, EX today):

TU: 815

EX: 799

EQ: 742

The only one I'll be able to get immediate results on is EX since I get daily pulls.

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I recently lost 29 points by paying off a $78 balance

[CreditMagic7]

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@SouthJamaica wrote:

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@Anonymous wrote:

I should soon have an interesting data point in the opposite direction. Right now I have a $5K loan reporting paid and closed, and a $2050 loan reporting a balance of $22. My other loan, taken out in Sept, is still not reporting. Just paid off the last $22, so I'll have no open loans. It'll be interesting to see how many points I lose.

Current scores, (TU and EQ 1.29.16, EX today):

TU: 815

EX: 799

EQ: 742

The only one I'll be able to get immediate results on is EX since I get daily pulls.

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I recently lost 29 points by paying off a $78 balance

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I had a different experience with my Mix. When one of the pair of mine was paid, closed, and reported, i barely lost any points. I only monitored TU and it went down only -1. However when the new Alliant CU IL reported that changed. EQ dropped -11 points and TU lost -5.

[bdhu2001]

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@CreditMagic7 wrote:

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@SouthJamaica wrote:

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@Anonymous wrote:

I should soon have an interesting data point in the opposite direction. Right now I have a $5K loan reporting paid and closed, and a $2050 loan reporting a balance of $22. My other loan, taken out in Sept, is still not reporting. Just paid off the last $22, so I'll have no open loans. It'll be interesting to see how many points I lose.

Current scores, (TU and EQ 1.29.16, EX today):

TU: 815

EX: 799

EQ: 742

The only one I'll be able to get immediate results on is EX since I get daily pulls.

---

I recently lost 29 points by paying off a $78 balance

---

I had a different experience with my Mix. When one of the pair of mine was paid, closed, and reported, i barely lost any points. I only monitored TU and it went down only -1. However when the new Alliant CU IL reported that changed. EQ dropped -11 points and TU lost -5.

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You usually loose points when a new loan first reports because your util is so high.  That's why people pay down to 10% util after the loan hits.  Based on the reports, people have been seeing a net gain of approx 20 pts if they have no installments prior to the loan.

[CreditMagic7]

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@bdhu2001 wrote:

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@CreditMagic7 wrote:

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@SouthJamaica wrote:

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@Anonymous wrote:

I should soon have an interesting data point in the opposite direction. Right now I have a $5K loan reporting paid and closed, and a $2050 loan reporting a balance of $22. My other loan, taken out in Sept, is still not reporting. Just paid off the last $22, so I'll have no open loans. It'll be interesting to see how many points I lose.

Current scores, (TU and EQ 1.29.16, EX today):

TU: 815

EX: 799

EQ: 742

The only one I'll be able to get immediate results on is EX since I get daily pulls.

---

I recently lost 29 points by paying off a $78 balance

---

I had a different experience with my Mix. When one of the pair of mine was paid, closed, and reported, i barely lost any points. I only monitored TU and it went down only -1. However when the new Alliant CU IL reported that changed. EQ dropped -11 points and TU lost -5.

---

You usually loose points when a new loan first reports because your util is so high.  That's why people pay down to 10% util after the loan hits.  Based on the reports, people have been seeing a net gain of approx 20 pts if they have no installments prior to the loan.

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Well understood on that.

But what is the opinion if like myself (and many others) that you DO have at least (1) installment loan prior to a new loan. Would the difference show higher or lower deduction of your FICO score (notwithstanding the usual everyone's profile being diff. which we are aware of) in comparison to having none prior.

[bdhu2001]

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@CreditMagic7 wrote:

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@bdhu2001 wrote:

---

@CreditMagic7 wrote:

---

@SouthJamaica wrote:

---

@Anonymous wrote:

I should soon have an interesting data point in the opposite direction. Right now I have a $5K loan reporting paid and closed, and a $2050 loan reporting a balance of $22. My other loan, taken out in Sept, is still not reporting. Just paid off the last $22, so I'll have no open loans. It'll be interesting to see how many points I lose.

Current scores, (TU and EQ 1.29.16, EX today):

TU: 815

EX: 799

EQ: 742

The only one I'll be able to get immediate results on is EX since I get daily pulls.

---

I recently lost 29 points by paying off a $78 balance

---

I had a different experience with my Mix. When one of the pair of mine was paid, closed, and reported, i barely lost any points. I only monitored TU and it went down only -1. However when the new Alliant CU IL reported that changed. EQ dropped -11 points and TU lost -5.

---

You usually loose points when a new loan first reports because your util is so high.  That's why people pay down to 10% util after the loan hits.  Based on the reports, people have been seeing a net gain of approx 20 pts if they have no installments prior to the loan.

---

Well understood on that.

But what is the opinion if like myself (and many others) that you DO have at least (1) installment loan prior to a new loan. Would the difference show higher or lower deduction of your FICO score (notwithstanding the usual everyone's profile being diff. which we are aware of) in comparison to having none prior.

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I'm one of the people who believes that FICO is set up for two installment loans.  They expect one to be a house and the other to be your car.  When I refinanced my house, the old loan was paid off and I went down to one open installment loan.  My credit took a drop of 4 to 8 pts, before the new loan finally hit.  It wasn't based on utilization, because the house was a new 30 year loan and I refinanced to a 15 year loan.

When the new loan reported, my score didn't change.  However, I paid down my car and received an increase in score of 22 to 27 pts on all CBA.  My overall utilization for installments is still high, 97.5^%,.  The house is 99.5% and car is 3%

[CreditMagic7]

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@bdhu2001 wrote:

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@CreditMagic7 wrote:

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@bdhu2001 wrote:

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@CreditMagic7 wrote:

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@SouthJamaica wrote:

---

@Anonymous wrote:

I should soon have an interesting data point in the opposite direction. Right now I have a $5K loan reporting paid and closed, and a $2050 loan reporting a balance of $22. My other loan, taken out in Sept, is still not reporting. Just paid off the last $22, so I'll have no open loans. It'll be interesting to see how many points I lose.

Current scores, (TU and EQ 1.29.16, EX today):

TU: 815

EX: 799

EQ: 742

The only one I'll be able to get immediate results on is EX since I get daily pulls.

---

I recently lost 29 points by paying off a $78 balance

---

I had a different experience with my Mix. When one of the pair of mine was paid, closed, and reported, i barely lost any points. I only monitored TU and it went down only -1. However when the new Alliant CU IL reported that changed. EQ dropped -11 points and TU lost -5.

---

You usually loose points when a new loan first reports because your util is so high.  That's why people pay down to 10% util after the loan hits.  Based on the reports, people have been seeing a net gain of approx 20 pts if they have no installments prior to the loan.

---

Well understood on that.

But what is the opinion if like myself (and many others) that you DO have at least (1) installment loan prior to a new loan. Would the difference show higher or lower deduction of your FICO score (notwithstanding the usual everyone's profile being diff. which we are aware of) in comparison to having none prior.

---

I'm one of the people who believes that FICO is set up for two installment loans.  They expect one to be a house and the other to be your car.  When I refinanced my house, the old loan was paid off and I went down to one open installment loan.  My credit took a drop of 4 to 8 pts, before the new loan finally hit.  It wasn't based on utilization, because the house was a new 30 year loan and I refinanced to a 15 year loan.

When the new loan reported, my score didn't change.  However, I paid down my car and received an increase in score of 22 to 27 pts on all CBA.  My overall utilization for installments is still high, 97.5^%,.  The house is 99.5% and car is 3%

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My scores like many others similar are on average maintain a 700 jump rope range.

Some months it drops below while on other months it's on the higher end.

I've actually only been at this for going on year 3 now so it's been a matter of accumalating cards almost every 4 months and/or every other month or so up until only just recently so i totally understand that the FICO algorithm definitely isn't going to cut any slack until my AAOA shows the most improvement which is where i'm at now finally.

The plan is no more cards period and ride out this year with only SP CLI's and card usage/history etc. while the IL runs it's first 12 month period.

I'm actually rather relaxed at the prospect of no interest in cards as before and concentrating on making sure it stays that way.

[Anonymous]

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I'm one of the people who believes that FICO is set up for two installment loans.  They expect one to be a house and the other to be your car.  When I refinanced my house, the old loan was paid off and I went down to one open installment loan.  My credit took a drop of 4 to 8 pts, before the new loan finally hit.  It wasn't based on utilization, because the house was a new 30 year loan and I refinanced to a 15 year loan.

When the new loan reported, my score didn't change.  However, I paid down my car and received an increase in score of 22 to 27 pts on all CBA.  My overall utilization for installments is still high, 97.5^%,.  The house is 99.5% and car is 3%

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That is interesting, I have also read about this a well (Two active installment loans to maximize). I am not sure FICO makes a distinction between mortgage and auto loans. I have read it both ways. My plan was to do another shared secured loan once my current SSL is past the two year mark. If those options are available when the time comes. Getting it right now would effect my AAoA more than I am willing to experience. Especially for a mere 4 to 8 points. Another loan right now would drop me from 7yrs to 6yrs AAoA.

[bdhu2001]

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@Anonymous wrote:

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I'm one of the people who believes that FICO is set up for two installment loans.  They expect one to be a house and the other to be your car.  When I refinanced my house, the old loan was paid off and I went down to one open installment loan.  My credit took a drop of 4 to 8 pts, before the new loan finally hit.  It wasn't based on utilization, because the house was a new 30 year loan and I refinanced to a 15 year loan.

When the new loan reported, my score didn't change.  However, I paid down my car and received an increase in score of 22 to 27 pts on all CBA.  My overall utilization for installments is still high, 97.5^%,.  The house is 99.5% and car is 3%

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That is interesting, I have also read about this a well (Two active installment loans to maximize). I am not sure FICO makes a distinction between mortgage and auto loans. I have read it both ways. My plan was to do another shared secured loan once my current SSL is past the two year mark. If those options are available when the time comes. Getting it right now would effect my AAoA more than I am willing to experience. Especially for a mere 4 to 8 points. Another loan right now would drop me from 7yrs to 6yrs AAoA.

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I don't think that it matters whether or not it's mortgage & car.  I think it simply takes into account people will traditionally make two large purchase, via installment, and has set up an algorithm that allows and gives preferential treatment for those purchases.  Thus, it allows access to more points for having two instalment loans.