Student Loan & "proportion of loan balances..."

[Anonymous]

Anyone know what percentage of the original student loan balance a person needs to reach before this factor drops off? Or if that is unknown, I'd be happy for relevant data points that might help to deduce it. Thanks!

[Anonymous]

You'll probably be penalized to some extent until the debt gets to < 9% of the original loan amount.

The best way to look at it is to consider all your open installment loans together, rather than just looking at a single loan or just a single loan type.

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.

It's quite possible (likely IMO) that you get some relief in the middle, but I don't anybody knows where that is for sure.

[Anonymous]

Thanks. My student loan is my only installment loan, and I've read that revolving utilization is treated differently from installment "utilization," so I figure it's possible that student loans could be treated differently from other installment loans. I take it there's no evidence of that?

[Anonymous]

Somebody did a test of that not long ago.  It was a real possibility.

Our contributor had student loans that were on his report, in deferment, and over 95% utilization.   (Also a big chunk of money.)  He had no other loans.

He then implemented the SSL technique (read the first two posts here if you don't know what that is):

http://ficoforums.myfico.com/t5/Understanding-FICO-Scoring/Adding-an-installment-loan-the-Share-Secu...

The hypothesis was that FICO might be scoring the SLs very differently, especially since they were in deferment..  Perhaps FICO was even ignoring them!  If true, then by adding the tiny $500 SS loan and paying almost all of it off, it should have raised his score a substantial bit.

As it turned out, he got zero benefit: his FICO 8 did not go up at any of the three bureaus.  Not even by one point.

As with anything in science, I think it is always good to see important experiments replicated by other people.  If you think you might enjoy taking a swing for the sake of the rest of us and adding an SSL, send me a private messge and I'll walk you through how to prepare your profile so that we get accurate and meaningful test results.

[Anonymous]

As another data point, I think that percentage you are looking for for that factor to fall of is around 61%, more or less. I paid mine down to very low amounts and have them there still open, helping car loans, etc. This was my experience with it.

[RobertEG]

Fair Isaac, in their series of online webinars that they regularly conducted several years ago, clearly stated that % utilization of revolving is weighted much higher than % remaining of installment loan balances.  While no specific relative weigithing was disclosed, % remaining balance on installment loans is nowhere near the significance of % util on revolving.