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Regular Contributor
Posts: 146
Registered: ‎10-31-2015
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Over the limit affect credit score?

So if you have some installment loans that are over the limit, for example the original loan was $10,000 but no payments were made and interest accrued and now the balance is $11,000. The payments were deferred, none were to be made (so no missed payments). Lets just go off the facts that you owe more than the original amount. Does that cause your score to go down? If so how much do you think it does? There have been lots of discussions about installment loans being over 50% and always hurt your score. But I haven't found a thread discussing over the original loan amount how much it hurts. Thank you guys for your input.

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Posts: 4,754
Registered: ‎07-17-2014
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Re: Over the limit affect credit score?

Funny you should ask that.  Contributor iHeartWings had the experience last fall of being over 100% on his open loans, and one hypothesis was that he was experiencing some score damage because of that.

 

He writes back today and says that he experienced some relief when he got his total loan utilization below 99.9%:

 

http://ficoforums.myfico.com/t5/Understanding-FICO-Scoring/Paid-off-Closed-Loan-not-dropping-credit-...

 

(He created this thread a couple hours ago.)

 

I suggest you hop on over there and ask him further what his experience was.

 

CC utilization is far better tested because there are hundreds of people on this forum changing their CC balances every day.  For example, we know about the 8.99% breakpoint for total CC util because it is so easy for people to repeatedly bring their CC util to 9.2% and then back to 8.8% and then back again to 9.2%.  That kind of thing is almost impossible to do with installment loans -- you can't fiddle with the util, bringing it up and down and up and down on the same account.

 

There is, however, some anecdotal evidence (e.g. iHeartWings) that going from > 100% to < 99% helps.  But how much that is true for any person on any scorecard is much harder to gauge, much less the scoring benefit you get for going below 99.

 

As a practical matter, would it be a financial hardship to bring all your loans to < 98.99%?

Regular Contributor
Posts: 146
Registered: ‎10-31-2015
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Re: Over the limit affect credit score?

Thanks for the info! I'll catch up on the thread and post a couple questions there.  I totally agree is way easier to do it with credit cards. I have 5 accounts that are over the limits. A total of about $15,000 over. If I had the extra money, I could pay the $15,00 and see if my scores drop. But I don't. But when I do get the money, or refinance a loan, i'll let everyone know my experience! Thanks again!

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