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03-09-2008 09:04 PM - edited 03-09-2008 09:19 PM
For those looking for immediate FICO bumps within the next month or two, I offer the following as an additional strategy to consider. Most posts on here dismiss installment loan %util as being an insignificant factor, but in some cases, it may be the one that can be used in the very short term to get additional pts.
The broad category of credit util counts 30% of total FICO, or 256 pts. A portion of this is revolv util, and a portion of this is install util. While the relative weighting of revolv vs install util used by FICO in their scoring algorithm is not known, assume that revolving is weighted 5 times more than installment. Thus, assume that install accounts for 25% of the 30%, and installment accounts for 5% of that 30%. With this assumption, revolv util accounts for appox 213 points total, and installment util accounts for 42 points total.
Assume that one has minimized %revolv util, and is still looking for a further point gain within a month or two. The only remaining area where any substantial short term points can be immediately gained thus becomes under install util.
Consider an installment loan that is currently at 50% util. If one were to immediately reduce this util to 25% of init loan amount, then up to 10 FICO points would be possible. Not something to just be dismissed.
I do not advocate paying off an existing install loan, for that will hurt in the other "credit mix" category, which is 10% of total FICO. But a short term additional payment on that install loan will reduce install util, and thus may give a short term gain higher than could be obtained by any other immediate action.
Something to be considered…….