When will the proportion of loan balance to loan amount not be considered high?

[masscredit]

The only loan that I have is for my car.  When I look at my reports, I see - Proportion of loan balances to loan amounts is too high.  The loan was for $24,995 and I currently owe $12,635 (50%).  At what point will the proportion of loan balance to loan amount not be considered high? 

[Anonymous]

What is known for certain is that when your installment utilization gets to < 8.99% then all possible scoring penalty will cease. 

Some people think that if the tradeline is old enough (e.g. if you have been making payments for 25+ months) that the penalty might go away at a higher place.  (I.e. you might not have to pay it down to under 9%.)  Contributor Thomas Thumb has made that conjecture.  But if that hypothesis is true, nobody knows where that might be (or exactly how old the account would need to be).

The best thing to do with a car loan is to make your decisions purely based on what saves you the most money.  If you need your cash for something else, then pay it down at the standard rate.  If you have extra cash and feel like paying it down faster, then do that.  Regardless, have an SS loan in place before you pay all of it off (whenever the auto loan is your only installment loan).  Let us know if you need a link that describes how the SS loan technique works.

[Anonymous]

I'm not sure about auto loans, but with mortgages the negative reason code can go away with utilization as high as 75-80%.

[SouthJamaica]

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@masscredit wrote:

The only loan that I have is for my car.  When I look at my reports, I see - Proportion of loan balances to loan amounts is too high.  The loan was for $24,995 and I currently owe $12,635 (50%).  At what point will the proportion of loan balance to loan amount not be considered high? 

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When I had an installment loan with only 15% left to be repaid that negative factor statement was still there. Only when I lowered the installment loan utilization percentage to 9% did it go away.

[RobertEG]

The percent remaining on any installment loan is, by definition, initially 100% for any loan.

FICO recognizes the fact that newer loans have higher % remaining balance, and that percentage is weighted very low in scoring as compared to the % util of revolving credit.

Otherwise, and new installment credit would desimate credit scores.

What the % balance of installment actually represents is the amount of debt remaining, and not the % of discretionary use of revolving credit.

Scoring under utilization of credit is weighted much, much higher for revolving accounts than for installment credit.

It is likely not having a significant scoring impact regardless of what the secret cutoff ranges might be used by the algorithm for reduction in impact.

[Anonymous]

I'm testing out loan utilization now on a boat loan that reports as an auto loan on all 3 reports.  $22,500 initial loan and I also have an SSL reporting for many more years at 8% left.

I let it report at 98% the first month, second month will be under 89%, third month under 49%, then either 29% or 9% and then finally PIF before month 6 or so.

I won't be testing the 25+ months conjecture because I had the cash to pay in full when I bought but the dealer bartered with me to get a loan so I'm getting positive value for the interest I pay instead of getting hit in the pocket book.  I detest paying interest so this barter lets me see what effect that utilization will have.

The loan appears to update/report in a week of each month where nothing else reports or changes, so it should at least tell me something.

On reporting 98% (with the SSL under 8%) I got a 15 point FICO8 hit on all 3 reports.  Wasn't as bad as I feared.