"accounts opened in past year" - impact on score?

[johnpalley]

thanks, cheddar . i understand. hopefully il get lucky because of the balanced credit factor and my score wont go down. well see. thanks alot

[Anonymous]

Happy to help.  Good luck!  Please keep us posted.

[RobertEG]

Hey, Cheddar and I sometimes differ on philosophy, but not on the basic facts of FICO scoring, and Cheddar is absolutely correct, and is the one who taught me that closing an account does not remove it from avg age.

The staus of an account as open or closed has NO affect whatsover on FICO scoring as it pertains to the categories of payment history or age of account history while it still appears on your CR.  Nor does it matter whether it was closed by the consumer or the creditor.

Closing of a revolv (CC) account instantly removes its CL from your %util, which is not good.  Closing of a CC does not remove any remaining balance from your %util,  So that aint good.  Closiing an account does not remove any prior derogs from that account.  Closing an account, purely from a FICO perspective, just aiint good.  Period. 

[johnpalley]

cheddar and RobertEG , you were right. my installment loan just got posted to scorewatch and my score went down 6 points. im upset but at least it didnt go down more. i have another queston for you guys. since this is a loan and not a credit card how long does it take for a loan to improve your credit score? it has to be quicker than a credit card right? because loans are short term and not long term like credit cards. i know this isnt a financial planning forum i just wanted to get your oppinion. i got this loan to up my score for the short term because im trying to buy a house and i know i made a mistake doing that. but what advice would you give the average person that wants to build credit by an installment loan? after how much time do you think has to go buy after making payments where your score will start to go up? 6 months? 1 year? just approx. i at lease want to get an idea when i can get the 6 points back that i lost. roberteg, you said this earlier, "and also at the same time hurts your credit util category of FICO by adding install debt at a high util. Install debt is not weighed as much in credit util as revolving (credit card) debt, but it still counts". does that mean if i pay alot of the loan off in one payment my score would go up? if thats true i will pay 75% of my loan right now even though i just got the loan. should i do that to get some of the 6 points back and then take time to pay off the last 25%? Message Edited by johnpalley on 06-11-2008 12:30 PM

Message Edited by johnpalley on 06-11-2008 12:33 PM

[Junejer]

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@johnpalley wrote:
cheddar and RobertEG , you were right. my installment loan just got posted to scorewatch and my score went down 6 points. im upset but at least it didnt go down more. i have another queston for you guys. since this is a loan and not a credit card how long does it take for a loan to improve your credit score? it has to be quicker than a credit card right? because loans are short term and not long term like credit cards. i know this isnt a financial planning forum i just wanted to get your oppinion. i got this loan to up my score for the short term because im trying to buy a house and i know i made a mistake doing that. but what advice would you give the average person that wants to build credit by an installment loan? after how much time do you think has to go buy after making payments where your score will start to go up? 6 months? 1 year? just approx. i at lease want to get an idea when i can get the 6 points back that i lost.

Message Edited by johnpalley on 06-11-2008 12:13 PM

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johnpalley, I am neither cheddar or roberteg, but maybe I can help a little. The quickest way to build credit is via the CC route. It poses the most risk and therefore will give you the most reward from a FICO standpoint. It takes a long time to see any advantage from an installment loan (other than credit mix). I opened an installment loan last October to try the same thing, before I found these forums. To date, I don't think that there has been FICO score benefit, other than credit mix.

I was able to build my EQ FICO to 768, without an active CC. In the past, I had always had a good credit mix. Once I added a CC to the mix, the score got as high as 790 (one active installment loan and one active CC 5% util).

HTH

[johnpalley]

byrdman, did your score go down after you got the loan? it seems like the loans for you must of did alot if your score was 768 without a cc, no? you said i wont see a benefit for a long time. what if i paid off 75% of the loan right now? could it be that alot of the reason a loan takes a little while to improve score is because of the utilization. im kind of cheating on the loan if i pay back 75% right away. what do you all think? im trying to get back those 6 points i lost any way possible

Message Edited by johnpalley on 06-11-2008 12:47 PM

[Junejer]

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@johnpalley wrote:
byrdman, did your score go down after you got the loan? it seems like the loans for you must of did alot if your score was 768 without a cc, no? you said i wont see a benefit for a long time. what if i paid off 75% of the loan right now? Message Edited by johnpalley on 06-11-2008 12:41 PM

Message Edited by johnpalley on 06-11-2008 12:42 PM

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Hard to tell, as I had some other derogs deleted in the same timeframe. I was at 737, then 742 when this bogus collection stopped reporting. Then, I found a 30 days past due status that I got removed (actually entire TL went bye-bye ), and the score went to 768. At this time, all I had open was the installment loan. I had an avg age of 6.5 yrs (CCs and installments) and oldest account was 18 years.

[johnpalley]

the thing that doesnt make sense to me about instalment loans is what if i got 1 new loan every month and then kept paying them off a week later. it seems like i should benefit from paying loans off some how. after paying back like 12 new loans in one year my credit goes down from new credit. i dont understand that. what if i flip houses. i would be paying off mortages ive had for like a month or 2 non stop. there is nothing in the scoring system that gives you credit for paying off loans or mortgages.it is another account in good standing on your credit report that got paid off. that says alot for future banks your trying to get money from. how could i pay back a bunch of loans in one year and not benefit?

Message Edited by johnpalley on 06-11-2008 01:37 PM

[Anonymous]

Cheddar made the following comment earlier in this thread,

"...The longer you have had credit, the less of a risk you are.  Why would that metric be limited to open accounts only?"

This would be great if it worked exactly like that.   The literal definition FICO uses is "The older your oldest tradeline is, the less of a risk you are".   I have had credit since 1985, but since my oldest TL is from 1995 (the 1985 account closed years ago is now dropped from my report), I apparently am more of a risk.

Congress needs to amend the FCRA to mandate that positive accounts stay on credit reports longer, say 20-25 years rather than 10.    The way it is now hurts us when older positive TL's age off, whether it be revolving, installment or even mortgages.   If you use the FICO Score Estimator, you will see that your score suffers if you don't have a recent auto loan or mtg.   Having this kind of debt is a requirement for entry into the High Achievers club.

[johnpalley]

boscoe, you said "If you use the FICO Score Estimator, you will see that your score suffers if you don't have a recent auto loan or mtg. Having this kind of debt is a requirement for entry into the High Achievers club." so if i got an auto loan instead of a secured loan my score would of went up instead of down? is this true or are you talkin about any type of loan? i thought a loan was a loan and it didnt matter what kind unless it was a mortgage.

Message Edited by johnpalley on 06-11-2008 01:46 PM