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Proportion Of Loan Balances To Loan Amounts Is Too High

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Eric_E
Member

Proportion Of Loan Balances To Loan Amounts Is Too High

What does this mean?  I got this on a FICO score pull (807).  I have a $324/$25k balance on one credit card and a $998/$20k balance on another, and I pay them off almost every month.  I keep well below 9% utilization and I have no student or auto loans.  I do have a mortgage that's $168,552/$171,375 due to a recent refinance, could that be limiting my score?  What proportion are they looking for?  In "Understanding Your FICO Score" on this site, it discusses various factors, including one that seems relevant: "How much of installment loan accounts is still owed, compared with the original loan amounts. For example, if you borrowed $10,000 to buy a car and you have paid back $2,000, you owe (with interest) more than 80% of the original loan. Paying down installment loans is a good sign that you are able and  willing to manage and repay debt."  But this is a mortgage account and not an installment loan (I have no installment loans); could the same thing still apply?  It would be ironic if refinancing could lower your score, but my score was 809 before the refinance and there are other factors which have lowered my score since so I'm not sure the timing is right for that.

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4 REPLIES 4
user5387
Valued Contributor

Re: Proportion Of Loan Balances To Loan Amounts Is Too High

The statement may not mean much.

 

However, one angle you could look at is the proportion of CCs reporting balances.  This is taken into account for FICO scoring.

 

Message 2 of 5
Eric_E
Member

Re: Proportion Of Loan Balances To Loan Amounts Is Too High

I think that's a different message, which I've also got before: "You have too many credit accounts with balances."  But I agree, it may not mean much, at my scoring level they tend to come up with lame excuses for not giving you a higher score.

Message 3 of 5
AeroKrix
Frequent Contributor

Re: Proportion Of Loan Balances To Loan Amounts Is Too High


@Eric_E wrote:

What does this mean?  I got this on a FICO score pull (807).  I have a $324/$25k balance on one credit card and a $998/$20k balance on another, and I pay them off almost every month.  I keep well below 9% utilization and I have no student or auto loans.  I do have a mortgage that's $168,552/$171,375 due to a recent refinance, could that be limiting my score?  What proportion are they looking for?  In "Understanding Your FICO Score" on this site, it discusses various factors, including one that seems relevant: "How much of installment loan accounts is still owed, compared with the original loan amounts. For example, if you borrowed $10,000 to buy a car and you have paid back $2,000, you owe (with interest) more than 80% of the original loan. Paying down installment loans is a good sign that you are able and  willing to manage and repay debt."  But this is a mortgage account and not an installment loan (I have no installment loans); could the same thing still apply?  It would be ironic if refinancing could lower your score, but my score was 809 before the refinance and there are other factors which have lowered my score since so I'm not sure the timing is right for that.


It's exactly what it means. You have a loan that has not had a long history of payment, therefore, it's balance is still high. This can easily be explained through recon, since your first mortgage will still appear on your report and thus an UW can draw a conclusion that the new loan is a refi. However, the message you received is most likely a computer generated response, and thus cannot draw a relative connection to the new loan.

 

but in general, new loans will always draw up that response, whether it's a reason for decline or not, in regards to a new application for credit. This can be a negative impact towards you since it will appear that you have taken on new debt. But for people who do not refi, but rather, take out a new loan for a car or home usually see a drop in their scores because of multiple factors...AAoA, inquiry, etc... But also in regards to exactly what the post is about...balance too high in relation to loan amount, in other words, they want to see payment history on that account. But don't be discouraged, recon recon recon

Current 09/01/2021 EQ - 515 FAKO ; EX - 591 FICO ; TU - 598 FICO

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Message 4 of 5
AndySoCal
Valued Contributor

Re: Proportion Of Loan Balances To Loan Amounts Is Too High

Here is a link to FICO score reasons explanation

 

http://www.scoreinfo.org/FICO-Scores/Pages/Score-Factors.aspx

 

Hope this helps

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