Good stuff as always CGID...So what i am gathering is it will certainly differ from what (type) of loan you have reporting. But with a higher percentage of loans being personal the threshold will vary from the percentage of the loan balance you're carrying. But, to maximize Fico scoring 8.9% threshold is good as golden.
@credit_endurance wrote:Good stuff as always CGID...So what i am gathering is it will certainly differ from what (type) of loan you have reporting. But with a higher percentage of loans being personal the threshold will vary from the percentage of the loan balance you're carrying. But, to maximize Fico scoring 8.9% threshold is good as golden.
Real close, BC! I'd only adjust that word certainly. Whether FICO does indeed have higher breakpoints depending on loan type is highly conjectural. Not everyone agrees that loan type matters at all. If it does, the strongest evidence is that a profile consisting solely of a mortgage would get a much higher breakpoint than the classic 8.9% for when FICO completely eliminates all penalty whatsoever. (One piece of evidence is that FICO uses language in its official reason statements that seems to imply it is somehow considering mortgage debt differently.)
If I had a mortgage only and nothing else, I wouldn't be in a hurry to pay it past 69% (if the sole concern was scoring). That's just my guess. Obviously I'd still pay it down if I got the reason code suggesting the balance was too high, or if I didn't like paying the interest.
Certainly for other loan types the perfect sweet spot appears to be < 8.9%. As I mentioned there is some conjecture that the thresholds could be higher if a loan has a few years of payment history behind it. (25 months?) Again, highly conjectural -- many people wouldn't agree that this has been shown. (Partly because it is difficult to show. I have a test case in mind, but as far as I know nobody has executed it.)
A final piece of advice. When paying down loans, always look to see if the loan handler allows "pre-payment." That's where you pay off a big chunk and the LH responds by extending the due date far into the future. Some student loans respond very well to that. My 42k SL has had a balance of $62 for a long time now. The loan handler will permit to say open for 20 years before I have to make the last payment.
When a loan handler does not allow pre-payment, then by paying the balance down you will hasten when that loan gets paid off. If the original loan amount was huge, the payoff will likely cause your total installment util to go way up (since TIU considers open loans only). All told, loan paydown decisions should be based more on financial sense rather than score chasing. Just important to do it knowing what will happen to your score -- you want to avoid being surprised.
@credit_endurance wrote:I thought I would present this topic while not being sure if it has actually been touched upon.
For the fico "guru's" or anyone who could share their expierences with Fico 8 and the ole "porportion of loan balances to loan amounts to high" blah blah blah'. What has been your thresehold for bringing down the balance to a amount where Fico no longer mentioned it in your fico summary? Also when does Fico no longer consider a loan balance too high?
My experience was that it disappeared when the utilization got down to 9%. At 15% I had that negative factor, at 9% I did not.
@SouthJamaica wrote:
@credit_endurance wrote:I thought I would present this topic while not being sure if it has actually been touched upon.
For the fico "guru's" or anyone who could share their expierences with Fico 8 and the ole "porportion of loan balances to loan amounts to high" blah blah blah'. What has been your thresehold for bringing down the balance to a amount where Fico no longer mentioned it in your fico summary? Also when does Fico no longer consider a loan balance too high?
My experience was that it disappeared when the utilization got down to 9%. At 15% I had that negative factor, at 9% I did not.
This is my experience as well.
@Anonymous wrote:SJ and Rev, are either of you speaking from the experience of the loan being a mortgage by chance?
CGID, in your first post you suggested that perhaps ~70% could be a break point if the installment loan is a mortgage. From my experience, I suggest can confirm that this number is in fact higher.
On my credit report I currently have 3 installment loans. Two are auto loans, at roughly 16% utilization and 38% utilization and a mortgage that's at roughly 79% utilization. Because the auto loans are small and highly insignificant to the mortgage, aggregate utilization across installment loans sits at about 74%. Under FICO 08, I have no negative reason codes at all. I've had "substantial installment loan repayment" as a positive code although I'm aware that positive codes don't mean they're actually raising your score. If I pull up archived reports from late 2016 where the above percentages were a bit higher, aggregate utilization being roughly 78%, the reason codes are the same. I'm guessing that the breakpoint with the presence of an installment loan could be closer to ~80%. Of course, earlier than this I was not actively monitoring my reports and am not sure exactly when my negative reson codes for high installment loan utilization went away.
No, auto loan and various other personal / secured loan types.
I still truly doubt there's a distinction between mortgages and anything else and all the data points that way but there's no conclusive proof of it so /shrug. It's going to remain till someone who has a mortgage and gets reason codes cares enough to look I guess.
@Anonymous wrote:SJ and Rev, are either of you speaking from the experience of the loan being a mortgage by chance?
Not in my case. The loan I was referring to was a small share secured loan.
CGID, in your first post you suggested that perhaps ~70% could be a break point if the installment loan is a mortgage. From my experience, I suggest can confirm that this number is in fact higher.
On my credit report I currently have 3 installment loans. Two are auto loans, at roughly 16% utilization and 38% utilization and a mortgage that's at roughly 79% utilization. Because the auto loans are small and highly insignificant to the mortgage, aggregate utilization across installment loans sits at about 74%. Under FICO 08, I have no negative reason codes at all. I've had "substantial installment loan repayment" as a positive code although I'm aware that positive codes don't mean they're actually raising your score. If I pull up archived reports from late 2016 where the above percentages were a bit higher, aggregate utilization being roughly 78%, the reason codes are the same. I'm guessing that the breakpoint with the presence of an installment loan could be closer to ~80%. Of course, earlier than this I was not actively monitoring my reports and am not sure exactly when my negative reson codes for high installment loan utilization went away.