Credit Card Center Advertiser Disclosure

Reply
New Contributor
Posts: 117
Registered: ‎04-18-2017
0

Is 1% UTIL too low a starting place for the SSL technique?

[ Edited ]

My husband has a thin report and no installment loans.  His current score is 740 w/EX, and I'm still waiting for EQ and TU to show up.  We are working towards getting his credit mortgage-ready, so the higher I can make that score, the higher his chances for an approval and a lower rate should be in about 6 months' time.   He also has some big ticket spends he wants to make after the house closes (new truck, motorcycle, dental work ...).  He's typically a 'big spender' type, though, he's mostly been a cash spender, so with the house purchase planned, we're working on fixing this.

 

Stats:

His current report includes one BoA credit card (10% util), 1 JCP store card (0% util), AAoA = 1 y 4 mo, AoOA (the BoA card) = 2 y, and total inquiries is 2 (one to fall off in just under 4 months, and the other acquired one month ago.  

(Note: The BOA was more an issue of pending/posted not going as he planned.  He typically PIFs each month, but he's just learning the value in PIFing before the statement closes and getting the timing right re: his spending/pending/posted transactions.  I'm not sure if there'd be a huge score difference for bringing the UTIL lower than 10%.  Perhaps to satisfy curiosity, I'll have him pay it down to only 10% again to try and determine how much the SSL impacts the score.  We'll see.)  

 

Plan: Open a $30k SSL w/Alliant before the end of this month, pay it down to $300, then send about $5/mo so that the final payment coincides with the final month due date. (Negating interest: $30k/60 months = $500 final month's payment ... $300 balance/60 months = $5/mo).

 

Question: Do you think that 1% util is too low a starting place?

 

My concern is that after several payments, the balance won't round up to 1% when reported.  Thoughts?  Is there anything I'm overlooking that I should be considering?  TIA!

Our Journey Click to read our storyOur Cards: Me:   Him:   Our Future Cards: USAA Limitless | AmEx BP | BJs Perks Elite | Chase Freedom | Sam's MC | Costco
05/17 - Me: 595EX 570EQ 602TU  Him: 740EX ???EQ ???TU  4/17 - Me:  558EX 546EQ 602TU 671TU surprisedHim: No CR/Score!
Short Term Goals: Me: All 640+, Refi Auto Loan | Him: All 650+, Mortgage-Approved | US: New house before April 2018
Long Term Goals: Me: All 850, 2 low util HELOCs, 2 new cars | Him: All 800+, new truck & mtrcl, dental work | US: 1 low util HELOC

Moderator
Posts: 17,377
Registered: ‎12-30-2011

Re: Is 1% UTIL too low a starting place for the SSL technique?

[ Edited ]

Any non-zero balance on revolvers is fine, I would assume the same would be the case with installment loans.

 

I've never found any evidence on the 1% line anywhere in FICO personally, that may have been old common wisdom but it's been debunked in a number of places including here.

 

The question I would ask though is why do a 30K SSL line if there's no other installment history on there at all anyway?  There's no benefit FICO wise (since the mortgage will still dwarf it) and the reported payment is calculated into your DTI, and the reported payment on a 30K loan will be substantially higher than on a $500.  Since FICO just looks at percentages for utilization, the larger amount gets you nothing but possible trouble with the mortgage, and any lender is going to look extremely skeptically at a large secured account like that.

 

I wouldn't go with anything beyond the minimum $500 honestly.

Starting Score: EQ 5 561, TU 98 567, EX 2 599 (12/30/11)
Current Score: EQ 5 688, TU 4 758, EX 2 703, EQ 8 728, TU 8 762, EX 8 739 (6/12/17)
Goal Score:    EQ 5 750, TU 4 750, EX 2 750, EQ 8 800, TU 8 Blah, EX 8 800 (01/01/18)


Take the myFICO Fitness Challenge
New Contributor
Posts: 117
Registered: ‎04-18-2017
0

Re: Is 1% UTIL too low a starting place for the SSL technique?

[ Edited ]

Revelate,  thank you for sharing your insight!  

 

The thought was to have him apply for the Alliant 3%/2.5% card after his score improved to round out his card count to 3 with something more useful than the JCP, which now only serves to help age his account.  Ideally, the $29.7k sitting in the savings account post paying down the SSL, his income, and his post SSL improved score should all factor in towards an approval (fingers still crossed!). Would I rather the USAA Limitless for him (and me!)?  Yes, but I think that his chances may be better with the Alliant card, since he'll also have the SSL with them (and funds in their savings account) at the time of the app.  With USAA he'd only have a newly-established free checking with maybe $5 in it that would just be used to transfer funds between our accounts, etc., so I'm not sure that he'd have as good a chance to be approved with them for the Limitless card (sigh), and I only want to add one pull between now and the mortgage process to his report, since it'll be aged to 6 months about that time.  

 

The other thought was that the $30k wouldn't actually impact DTI, since they can see that the overall balance would be <$300.  In all likelihood, they would have it paid off as part of the mortgage process if it really bothered them, however, I think a manual review of the report would lead them to negate it in the DTI (or at least all but about $5/mo).  I didn't imagine it would be reviewed with skepticism in any way by an LO.  Would you  please elaborate more as to why?  

 

Many years ago, I did a similar technique with 10k-25k limit SSLs and after a few of them paid off (typically in less than a year), the bank started approving them as unsecured.  The FICO increase is a driving factor for the SSL for DH's particular situation, but establishing a future relationship and demonstrating credit worthiness for future larger loans is another goal for him.  

 

Based on this would you still lean towards only $500?

Our Journey Click to read our storyOur Cards: Me:   Him:   Our Future Cards: USAA Limitless | AmEx BP | BJs Perks Elite | Chase Freedom | Sam's MC | Costco
05/17 - Me: 595EX 570EQ 602TU  Him: 740EX ???EQ ???TU  4/17 - Me:  558EX 546EQ 602TU 671TU surprisedHim: No CR/Score!
Short Term Goals: Me: All 640+, Refi Auto Loan | Him: All 650+, Mortgage-Approved | US: New house before April 2018
Long Term Goals: Me: All 850, 2 low util HELOCs, 2 new cars | Him: All 800+, new truck & mtrcl, dental work | US: 1 low util HELOC

Moderator
Posts: 17,377
Registered: ‎12-30-2011

Re: Is 1% UTIL too low a starting place for the SSL technique?


laFenix wrote:

Revelate,  thank you for sharing your insight!  

 

The thought was to have him apply for the Alliant 3%/2.5% card after his score improved to round out his card count to 3 with something more useful than the JCP, which now only serves to help age his account.  Ideally, the $29.7k sitting in the savings account post paying down the SSL, his income, and his post SSL improved score should all factor in towards an approval (fingers still crossed!). Would I rather the USAA Limitless for him (and me!)?  Yes, but I think that his chances may be better with the Alliant card, since he'll also have the SSL with them (and funds in their savings account) at the time of the app.  With USAA he'd only have a newly-established free checking with maybe $5 in it that would just be used to transfer funds between our accounts, etc., so I'm not sure that he'd have as good a chance to be approved with them for the Limitless card (sigh), and I only want to add one pull between now and the mortgage process to his report, since it'll be aged to 6 months about that time.  

 

The other thought was that the $30k wouldn't actually impact DTI, since they can see that the overall balance would be <$300.  In all likelihood, they would have it paid off as part of the mortgage process if it really bothered them, however, I think a manual review of the report would lead them to negate it in the DTI (or at least all but about $5/mo).  I didn't imagine it would be reviewed with skepticism in any way by an LO.  Would you  please elaborate more as to why?  

 

Many years ago, I did a similar technique with 10k-25k limit SSLs and after a few of them paid off (typically in less than a year), the bank started approving them as unsecured.  The FICO increase is a driving factor for the SSL for DH's particular situation, but establishing a future relationship and demonstrating credit worthiness for future larger loans is another goal for him.  

 

Based on this would you still lean towards only $500?


Yes; I'm not convinced that a 30K deposit in a short time horizon is going to get you more likely approved for the Alliant card.  When we're talking mortgage UW, any 3 tradelines will do the same really.

 

As for DTI calc, the lender may or may not count it (it varies now); it used to be if you were within the last 10 months of payments it would get ignored, however, around a year or perhaps more ago lenders started calculating it if there was anything left on it.  I don't know why the change only that a bunch of them do it now... I wouldn't bet on the exclusion based on the small amount left, and the reported payment amount on the credit file (which will reflect 30K over 5 years) will be used.  

 

The question with any secured loan is "why?"  While Alliant hasn't been picky to my knowledge, it's a longer conversation at 30K than it is for 500 almost assuredly; larger transactions do get more scrutiny (since nobody launders small amounts of money just sayin) and it's something to be mindful of.  

 

In short I think it gains you little, and it may cost you a bunch... and heck you can just dump the 30K into a savings account at Alliant anyway, just do a $500 loan, and get your full relationship possible benefit if any, and still not potentially damage your DTI calc.  There's enough data out there to suggest that some old wisdom I heard on FICO scoring caring about size of installment loan is absolutely mythical: might matter on a manual UW, but you're going to sort that on a mortgage anyway, so don't try to fiddle with it now on a secured loan when that might impact your mortgage qualification.

 

My thoughts anyway mortgages > anything else credit wise.

Starting Score: EQ 5 561, TU 98 567, EX 2 599 (12/30/11)
Current Score: EQ 5 688, TU 4 758, EX 2 703, EQ 8 728, TU 8 762, EX 8 739 (6/12/17)
Goal Score:    EQ 5 750, TU 4 750, EX 2 750, EQ 8 800, TU 8 Blah, EX 8 800 (01/01/18)


Take the myFICO Fitness Challenge
New Contributor
Posts: 117
Registered: ‎04-18-2017
0

Re: Is 1% UTIL too low a starting place for the SSL technique?

Revelate, thank you so much for taking the time to share.  Your perspective does make me think more about the approach in a way I hadn't previously.  I'll dig more deeply into it before deciding how to proceed.  Thanks, again!

Our Journey Click to read our storyOur Cards: Me:   Him:   Our Future Cards: USAA Limitless | AmEx BP | BJs Perks Elite | Chase Freedom | Sam's MC | Costco
05/17 - Me: 595EX 570EQ 602TU  Him: 740EX ???EQ ???TU  4/17 - Me:  558EX 546EQ 602TU 671TU surprisedHim: No CR/Score!
Short Term Goals: Me: All 640+, Refi Auto Loan | Him: All 650+, Mortgage-Approved | US: New house before April 2018
Long Term Goals: Me: All 850, 2 low util HELOCs, 2 new cars | Him: All 800+, new truck & mtrcl, dental work | US: 1 low util HELOC

Super Contributor
Posts: 5,968
Registered: ‎02-24-2015
0

Re: Is 1% UTIL too low a starting place for the SSL technique?


laFenix wrote:

My husband has a thin report and no installment loans.  His current score is 740 w/EX, and I'm still waiting for EQ and TU to show up.  We are working towards getting his credit mortgage-ready, so the higher I can make that score, the higher his chances for an approval and a lower rate should be in about 6 months' time.   He also has some big ticket spends he wants to make after the house closes (new truck, motorcycle, dental work ...).  He's typically a 'big spender' type, though, he's mostly been a cash spender, so with the house purchase planned, we're working on fixing this.

 

Stats:

His current report includes one BoA credit card (10% util), 1 JCP store card (0% util), AAoA = 1 y 4 mo, AoOA (the BoA card) = 2 y, and total inquiries is 2 (one to fall off in just under 4 months, and the other acquired one month ago.  

(Note: The BOA was more an issue of pending/posted not going as he planned.  He typically PIFs each month, but he's just learning the value in PIFing before the statement closes and getting the timing right re: his spending/pending/posted transactions.  I'm not sure if there'd be a huge score difference for bringing the UTIL lower than 10%.  Perhaps to satisfy curiosity, I'll have him pay it down to only 10% again to try and determine how much the SSL impacts the score.  We'll see.)  

 

Plan: Open a $30k SSL w/Alliant before the end of this month, pay it down to $300, then send about $5/mo so that the final payment coincides with the final month due date. (Negating interest: $30k/60 months = $500 final month's payment ... $300 balance/60 months = $5/mo).

 

Question: Do you think that 1% util is too low a starting place?

 

My concern is that after several payments, the balance won't round up to 1% when reported.  Thoughts?  Is there anything I'm overlooking that I should be considering?  TIA!


There's no reason to do $30k; you get the same result from doing it for $500.

 

The key is to then pay it down to 9%. The sweet spot is in the 1% to 9% range.

 

 

 

 


FICO8 EQ 767 TU 803 EX 773 FICO5 EQ 722 Total revolving 419500
Super Contributor
Posts: 5,968
Registered: ‎02-24-2015
0

Re: Is 1% UTIL too low a starting place for the SSL technique?

[ Edited ]

laFenix wrote:

My husband has a thin report and no installment loans.  His current score is 740 w/EX, and I'm still waiting for EQ and TU to show up.  We are working towards getting his credit mortgage-ready, so the higher I can make that score, the higher his chances for an approval and a lower rate should be in about 6 months' time.   He also has some big ticket spends he wants to make after the house closes (new truck, motorcycle, dental work ...).  He's typically a 'big spender' type, though, he's mostly been a cash spender, so with the house purchase planned, we're working on fixing this.

 

Stats:

His current report includes one BoA credit card (10% util), 1 JCP store card (0% util), AAoA = 1 y 4 mo, AoOA (the BoA card) = 2 y, and total inquiries is 2 (one to fall off in just under 4 months, and the other acquired one month ago.  

(Note: The BOA was more an issue of pending/posted not going as he planned.  He typically PIFs each month, but he's just learning the value in PIFing before the statement closes and getting the timing right re: his spending/pending/posted transactions.  I'm not sure if there'd be a huge score difference for bringing the UTIL lower than 10%.  Perhaps to satisfy curiosity, I'll have him pay it down to only 10% again to try and determine how much the SSL impacts the score.  We'll see.)  

 

Plan: Open a $30k SSL w/Alliant before the end of this month, pay it down to $300, then send about $5/mo so that the final payment coincides with the final month due date. (Negating interest: $30k/60 months = $500 final month's payment ... $300 balance/60 months = $5/mo).

 

Question: Do you think that 1% util is too low a starting place?

 

My concern is that after several payments, the balance won't round up to 1% when reported.  Thoughts?  Is there anything I'm overlooking that I should be considering?  TIA!


I've been coming to the conclusion, based on my own experience, that the most important factors for good mortgage scores (as opposed to FICO 8), are the various measures of recent acquisition of credit: average age of accounts, age of oldest account, age of most recent account, inquiries.

 

So if you want to start looking at mortgages 6 months from now, I think the thing is for him not to apply for anything in the next 6 months, then pull his 3B report and see what his mortgage scores (EQ FICO 5, TU FICO 4, and EX FICO 2) look like.

 

And as Revelate pointed out, putting the money in a savings account at Alliant is not a bad idea.  Although rates are in general quite low, Alliant happens to have one of the best savings rates around. But I would guess that the best bank or credit union in which to deposit the money is the one from which you are planning to apply for the mortgage.


FICO8 EQ 767 TU 803 EX 773 FICO5 EQ 722 Total revolving 419500
New Contributor
Posts: 117
Registered: ‎04-18-2017
0

Re: Is 1% UTIL too low a starting place for the SSL technique?

[ Edited ]

SouthJamaica, thank you.  Are you suggesting that he not even get the SSL because it will not be aged to 1y by the time he tries to move forward with the mortgage?

 

Also, I have found a free provider of the EQ5.  Does anyone know if TU4 and EX2 are available anywhere for free?  TIA!

Our Journey Click to read our storyOur Cards: Me:   Him:   Our Future Cards: USAA Limitless | AmEx BP | BJs Perks Elite | Chase Freedom | Sam's MC | Costco
05/17 - Me: 595EX 570EQ 602TU  Him: 740EX ???EQ ???TU  4/17 - Me:  558EX 546EQ 602TU 671TU surprisedHim: No CR/Score!
Short Term Goals: Me: All 640+, Refi Auto Loan | Him: All 650+, Mortgage-Approved | US: New house before April 2018
Long Term Goals: Me: All 850, 2 low util HELOCs, 2 new cars | Him: All 800+, new truck & mtrcl, dental work | US: 1 low util HELOC

Super Contributor
Posts: 5,968
Registered: ‎02-24-2015
0

Re: Is 1% UTIL too low a starting place for the SSL technique?

[ Edited ]

laFenix wrote:

SouthJamaica, thank you.  Are you suggesting that he not even get the SSL because it will not be aged to 1y by the time he tries to move forward with the mortgage?

 

 

Yes. Because it will show up as a new account. And because the mortgage score models don't seem to care as much about open installment loan utilization percentage as they do about recent inquiries and new accounts. (But Revelate and Tom_Thumb are the experts on that issue). I know exactly how the SSL game affects FICO 8, which is completely irrelevant to how it affects the mortgage models. In fact, there are even differences among the several mortgage models in whether and how much they react to open installment loan utilization percentage. But again, Revelate and Tom_Thumb are the experts.

 

Also, I have found a free provider of the EQ5.  Does anyone know if TU4 and EX2 are available anywhere for free?  TIA!

 

No I don't. The only free provider of EQ 5 I know of is DCU. And I have never heard of any free provider of the others. But all free providers are too slow.

 

I don't want to sound like a shill for MyFICO, but the amount of money involved in mortgage interest rates is so huge, I think anyone planning on applying for a mortgage would find it worthwhile to get the Ultimate 3B or Premier 3B package.  One needs to know all 3 rates, because the mortgage lenders pull all 3. (Supposedly they 'go by' the middle one, but who's to say they're not looking at all 3?)


FICO8 EQ 767 TU 803 EX 773 FICO5 EQ 722 Total revolving 419500
New Contributor
Posts: 117
Registered: ‎04-18-2017
0

Re: Is 1% UTIL too low a starting place for the SSL technique?

SouthJamaica - uuf.  Thank you.  I will definitely be pulling with myfico for him to get a real picture of what's going on.  Revelate wrote that any 3 TLs will do re: mortgage, however, DH only has 2 at the moment, and they're piddly, really (another reason to show a larger installment loan to demonstrate capability during a manual review).  Based on this, would you agree that it's almost necessary to get the SSL, so that it at least ages 6mo come credit pull time?  We're hoping to go with NFCU.  In our past conversations with them, they pretty much said that we have a lot of flexibility with our goal of 40% down (to avoid jumbo).  Without derogs on his file, his great DTI, the down, and his income, they seemed quite willing to work with DH on a very nice rate conventional loan (the mortgage amount wouldn't qualify for FHA).  The 3 TL thing is what's driving me towards the SSL asap.  I'm just questioning now the value of 3 TL vs the new TL impact.  Thoughts, anyone?  As always, thanks to all for helping with brainstorming all of this!

Our Journey Click to read our storyOur Cards: Me:   Him:   Our Future Cards: USAA Limitless | AmEx BP | BJs Perks Elite | Chase Freedom | Sam's MC | Costco
05/17 - Me: 595EX 570EQ 602TU  Him: 740EX ???EQ ???TU  4/17 - Me:  558EX 546EQ 602TU 671TU surprisedHim: No CR/Score!
Short Term Goals: Me: All 640+, Refi Auto Loan | Him: All 650+, Mortgage-Approved | US: New house before April 2018
Long Term Goals: Me: All 850, 2 low util HELOCs, 2 new cars | Him: All 800+, new truck & mtrcl, dental work | US: 1 low util HELOC

Forums posts are not provided or commissioned by FICO. Forums posts have not been reviewed, approved or otherwise endorsed by FICO. It is not FICO's responsibility to ensure all posts and/or questions are answered.

† Advertiser Disclosure: The listings that appear on myFICO are from companies from which myFICO receives compensation, which may impact how and where products appear on myFICO (including, for example, the order in which they appear). myFICO does not review or include all companies or all available products.
‡ Credit cards for FICO Score ranges: The score ranges are guidelines based on internal myFICO analysis of actual applicant approvals, and having a FICO Score in a particular range does not guarantee you will be approved for credit cards recommended in that range. These ranges were not provided by any card issuer.

* For complete information, see the terms and conditions on the credit card issuer’s website. Once you click apply for this card, you will be directed to the issuer’s website where you may review the terms and conditions of the card before applying. While myFICO always strives to present the most accurate information, we show a summary to help you choose a product, not the full legal terms - and before applying you should understand the full terms of products as stated by the issuer itself.

Copyright ©2001-2015 Fair Isaac Corporation. All rights reserved.   | Terms of Use | Privacy Policy | Sitemap

IMPORTANT INFORMATION: All FICO® Score products made available on myFICO.com include a FICO® Score 8, along with additional FICO® Score versions. Your lender or insurer may use a different FICO® Score than the versions you receive from myFICO, or another type of credit score altogether. Learn more

FICO, myFICO, Score Watch, The score lenders use, and The Score That Matters are trademarks or registered trademarks of Fair Isaac Corporation. Equifax Credit Report is a trademark of Equifax, Inc. and its affiliated companies. Many factors affect your FICO Score and the interest rates you may receive. Fair Isaac is not a credit repair organization as defined under federal or state law, including the Credit Repair Organizations Act. Fair Isaac does not provide "credit repair" services or advice or assistance regarding "rebuilding" or "improving" your credit record, credit history or credit rating. FTC's website on credit.