Utilization and AAoA Thresholds?

[SouthJamaica]

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@tlavery wrote:

What about utilization on installment loans such as student loans?  I read somewhere that once an installment loan drops below 95% that you should see an increase.  Is that true?  I am also interested to know if there is a hit for anything over 100% such as a student loan in deferment (accumulating interest) or on income based payment program where the payment is less than accumulating interest.

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My experience in the overall installment loan utilization area has been that the changes are small until I got it down to 9% when I got a big big boost.

[Anonymous]

One last thought about Installment Utilization:

If a person has no open loans at al, or if he thinks he might be easily paying his loans off in the near future, then it makes sense to think about IU and how to play games with it for extra scoring points..  The first three posts in this thread explain how to do that:

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

Otherwise, it means you have some substantial loans.  And in  that case forget about playing tricks with IU.  Because you can't.  You took those big loans out for a reason.  Continue to make payments on them and let what makes financial sense drive all your decisions and forget about scoring.  The only caveat is to be sure to circle back here and learn how IU works before you make a decision to pay off a big loan entirely.

[Anonymous]

CGID and BBS, I wanted to get your expertise on this....

I've been trying to teach my friend about the CC utilization and how it works. Here's her current scenario: 

Card #1: Limit $2,500 - was increased to $5,500 AFTER July payment was made. On last statement had a balance of $1,300, card now has a balance of $914. Utilization is now at 16%. Her plan is to pay this down to $550 to show 10% utilization with the August payment. 

Card #2: Limit $1000 - current balance $987 - last statement showed $814 balance. She's paid it down to $200 basically going from a maxed out status to 20% utilization. 

Card #3: Limit $500 - current balance $0. 

Her aggregate utilization is going to go from 52% down to 15%. Individual utilization on card one will go from 52% to 16%, card two will go from 81% to 20%. What kind of impact do you think that will have on her scoring? 

[Anonymous]

Thanks for being such a good mentor to your friend.

Your friend was experiencing two kinds of penalties: individual util and total util.

The individual util penalties were almost certain to be eliminated by bringing each card from a very high util to a util < 29%.

The total util penalties will also go down a great deal.  There's some strong evidence that a util breakpoint exists at 49%, 29%, and 9%.  By going from 52% to 15% your friend is crossing two important breakpoints.  This will also help.

So much is changing on your friends profile that the full benefits may take 60 days to materialize.

PS.  See if you can help your friend to work toward the goal of paying off ALL credit card debt.  Then your friend can use cards as needed but always pay them in full.  (A key idea in this will be lowering spending, so that eventually a big chunk of every paycheck after that is being funneled into savings.)

[Anonymous]

Thanks!

I'm definitely encouraging the AZEO method, but I understand she's taking it one step at a time and that was a huge chunk of money for her to pay off at one time. I'm trying to get her to see the effect it can have on her score by paying it off and a significant amount. 

Why do you say it may take 60 days to see the full benefit?

[Anonymous]

I am erring on the side of caution.  It's just that she has all kinds of stuff changing.  Credit limits are going up, balances are going down, and all of that has to get reported to the bureaus.  Then (depending on how you are monitoring scores) there's an additional amount of time to be alerted of the score change.

40 days is probably enough.

[Anonymous]

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@SouthJamaica wrote:

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@atarvuzdar wrote:

Hoping someone can help. I've searched the site front and back and can't seem to find anything about the different thresholds for utilization (both overall and individual CC) and AAoA.

Apologies for asking a question which has probably been asked a million times. Anyone have any info on this or could point me to where that info may be?

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Although the conventional wisdom on overall utilization is that it doesn't affect your score adversely so long as it's 9% or less, I have not found that to be the case. I find that as my revolving utilization moves around from below 1% to more than 4%, my FICO 8 score moves with it. I don't know what a "breakpoint" or "threshold" would be in that region, because I find it to be quite fluid.

On individual card utilization I have found 30% to be a real breakpoint in FICO 8. If I go even 1 percentage point over 30 I get smacked.

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I agree with this.   Going from 0 to 1% utilization I notice a small drop.   Each percentage point increase results in a small drop.   I think the utilization is thrown in the formula and so each 1 percent change will change your score.   I use this fact to change my score.   If I need 10 points within the next month or so, I take my utilization down to 0 and wait until they report, it always works.

[Anonymous]

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@Anonymous wrote:

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@SouthJamaica wrote:

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@atarvuzdar wrote:

Hoping someone can help. I've searched the site front and back and can't seem to find anything about the different thresholds for utilization (both overall and individual CC) and AAoA.

Apologies for asking a question which has probably been asked a million times. Anyone have any info on this or could point me to where that info may be?

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Although the conventional wisdom on overall utilization is that it doesn't affect your score adversely so long as it's 9% or less, I have not found that to be the case. I find that as my revolving utilization moves around from below 1% to more than 4%, my FICO 8 score moves with it. I don't know what a "breakpoint" or "threshold" would be in that region, because I find it to be quite fluid.

On individual card utilization I have found 30% to be a real breakpoint in FICO 8. If I go even 1 percentage point over 30 I get smacked.

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I agree with this.   Going from 0 to 1% utilization I notice a small drop.   Each percentage point increase results in a small drop.   I think the utilization is thrown in the formula and so each 1 percent change will change your score.   I use this fact to change my score.   If I need 10 points within the next month or so, I take my utilization down to 0 and wait until they report, it always works.

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When you say that taking your utilization down to zero gives you the most extra points, do you mean all cards reporting zero?

If so, that is really at odds with what almost everyone else experiences.  Almost everyone experiences a substantial score penalty with all cards at zero (compared with a very low but still positive utilization, i.e. one card reporting a small balance). 

[masscredit]

My auto loan is down to 51%. I'm hoping to see a few points after it drops lower than 50. I came across this thread while searching for non-mortgage utilization points.