topic Re: Will paying off Alliant SSL boost my score? in Understanding FICO® Scoring

Will paying off Alliant SSL boost my score?

toadsworth — Thu, 08 Mar 2018 02:18:06 GMT

When I set up the Alliant SSL, I had no installment accounts but now I have a car lease reporting. It’s a 3 year lease with 2 years and 3 months remaining, starting balance $8600 current balance $6200 ($239/mo). The Alliant SSL was $500 and is paid down to $44 remaining, next payment due 2021.

Would it raise my scores to pay off the Alliant SSL? Would it lower them?

Re: Will paying off Alliant SSL boost my score?

Anonymous — Thu, 08 Mar 2018 03:10:31 GMT

The likely result would be no score change at all. Installment loan utilization both with the loan open and with it closed is going to be essentially the same, so there would be no scoring changed based on utilization. The only possibility of gaining a point or two could be because you would then have one fewer account with a balance. Depending on your number (and percentage) of accounts with balances, eliminating one sometimes can be ever so slightly beneficial to scoring... but usually not.

Re: Will paying off Alliant SSL boost my score?

Anonymous — Thu, 08 Mar 2018 03:24:25 GMT

Here is the thread you probably read that helped you decide to add that Alliant loan and pay it down to $44.

http://ficoforums.myfico.com/t5/Understanding-FICO-Scoring/Adding-an-installment-loan-the-Share-Secure-technique/td-p/4506756

Read the first two posts, especially the second one that explains the Theory Behind The Technique, or Why It Works.

Then think about these questions:

(1) What is my total installment utilization right now?

(2) If I paid off the Alliant loan next month....

(a) What would my TIU be in three months?

(b) What would happen when my car lease was paid off?

(3) If I did not pay off the Alliant loan....

(a) What would my TIU be in three months?

(b) What would happen when my car lease was paid off?

I am giving you the tools to answer these questions, rather than telling you the answer, because with credit (and other things) it's important to know why things work the way they do. Only way to do that is to sit down with pen and paper and crunch some numbers.

Let us know what you uncover.

Re: Will paying off Alliant SSL boost my score?

SouthJamaica — Thu, 08 Mar 2018 03:25:45 GMT

@toadsworthwrote:
When I set up the Alliant SSL, I had no installment accounts but now I have a car lease reporting. It’s a 3 year lease with 2 years and 3 months remaining, starting balance $8600 current balance $6200 ($239/mo). The Alliant SSL was $500 and is paid down to $44 remaining, next payment due 2021.

Would it raise my scores to pay off the Alliant SSL? Would it lower them?

It would raise your overall installment utilization percentage from 68.6% to72%, so if 70% is a threshold it would cause a small drop in your FICO 8 scores. Why take the chance?

Re: Will paying off Alliant SSL boost my score?

toadsworth — Thu, 08 Mar 2018 04:12:37 GMT

So, plugging exact exact values in, with the SSL my current installment util is 71.36% and in 3 months will be 63.49%. Without the SSL that would be 75% and 66.66%. I underestimated the utilization buffer the SSL provides.

I’ll be keeping the SSL, as it’ll still be active and giving me a boost when I’m in the market for my next car lease.

I was about to ask if paying the SSL down more would help much but when I look at three months out it’s only a fractions of a percent util change.

So, it’s apparent that from a utilization standpoint I should keep the SSL but what about the boost from having one less account with a balance?

Re: Will paying off Alliant SSL boost my score?

Anonymous — Thu, 08 Mar 2018 04:28:07 GMT

@toadsworthwrote:
So, plugging exact exact values in, with the SSL my current installment util is 71.36% and in 3 months will be 63.49%. Without the SSL that would be 75% and 66.66%. I underestimated the utilization buffer the SSL provides.

I’ll be keeping the SSL, as it’ll still be active and giving me a boost when I’m in the market for my next car lease.

I was about to ask if paying the SSL down more would help much but when I look at three months out it’s only a fractions of a percent util change.

So, it’s apparent that from a utilization standpoint I should keep the SSL but what about the boost from having one less account with a balance?

Good work figuring out the answer.

As far your last question, there you are getting into highly speculative territory. It is true that it would be an additional account with a balance. On the other hand, there's also been some speculation that one or more models consider the ratio of the number of revolving accounts to number of installment. When that number is too high (many revolvers to only one open installment) the conjecture is that you might get dinged a few points. Since it looks like you have a huge number of cards, having two open installments might benefit you.

The point is, when you get into such wildly speculative territory, you might end up with different things canceling each other out. I'd focus on the things that are known to be scoring factors: CC utilization, installment utilization, having 3+ cards and 5+ accounts, paying bills on time, etc.

Re: Will paying off Alliant SSL boost my score?

DollyLama — Fri, 09 Mar 2018 02:13:20 GMT

@SouthJamaicawrote:
@toadsworthwrote:
When I set up the Alliant SSL, I had no installment accounts but now I have a car lease reporting. It’s a 3 year lease with 2 years and 3 months remaining, starting balance $8600 current balance $6200 ($239/mo). The Alliant SSL was $500 and is paid down to $44 remaining, next payment due 2021.

Would it raise my scores to pay off the Alliant SSL? Would it lower them?

It would raise your overall installment utilization percentage from 68.6% to72%, so if 70% is a threshold it would cause a small drop in your FICO 8 scores. Why take the chance?

+1 I paid off an installment loan (last payment)in Feb, CC is 1 card AZEO and UTL went down. Got bumps in UTL then turned around and lost 7 each on EQ and EX (which I only have 4 more payments left). I figure TU was not affected, because the remaining one loan is being double reported.

Re: Will paying off Alliant SSL boost my score?

NRB525 — Fri, 09 Mar 2018 13:39:28 GMT

OP, the other consideration is that your Alliant SSL is no longer available. If you did not have it, and your car lease expires in two years, then no installment loans, and the common complaint of dozens of points lost is yours.

I would consider starting another SSL of $500 to get that onto an amortization path. By the time the lease and existing SSL are done, the one you started in mid-2018 will be reaching a nice utilization level on its 5 year mission.

Re: Will paying off Alliant SSL boost my score?

Anonymous — Fri, 09 Mar 2018 14:00:13 GMT

Looking at the scores the OP has now, I don't know that having a SSL would provide any real-world benefit 2 years from now. If his scores are in the 720's-730's now, in 2 years time just from natural aging there's no reason to believe that his scores wouldn't be in the mid-upper 700's, assuming no introduction of negative items and if utilization is kept ideal. That being said, the 25-30 point score boost associated with a SSL really wouldn't matter much on his profile, as with mid-upper 700's scores he'd be able to obtain the best products/rates already.

Re: Will paying off Alliant SSL boost my score?

toadsworth — Fri, 09 Mar 2018 14:30:12 GMT

Thanks for the input guys; when my SSL hits one year from being done, I’ll probably get a $500 unsecured loan from Alliant as the paying it down early trick still works with them. Then once it’s on autopilot and correctly reporting at $44 I’ll pay off the original one.

Actually now I have another question for the experts out there. Since we are talking about how this affected my installment utilization; would it provide a bigger boost/buffer if I did a larger loan and paid it down right away next time?

Re: Will paying off Alliant SSL boost my score?

NRB525 — Fri, 09 Mar 2018 14:40:34 GMT

No, OP, you aren’t listening. The Alliant trick is no longer available. There is no way to reproduce the $44 balance on the $500 that sits still like that for years. All gone.

As to the other comment about “no benefit from the SSL”, apparently it has been a while since we saw the regular march of posts lamenting loss of points when the last installment loan, usually an auto loan, paid off. How soon we forget. There IS a big score drop waiting for OP when both the Alliant and lease go to paid off.

Re: Will paying off Alliant SSL boost my score?

Anonymous — Fri, 09 Mar 2018 14:45:34 GMT

My comments in blue below.

@toadsworthwrote:
Thanks for the input guys; when my SSL hits one year from being done, I’ll probably get a $500 unsecured loan from Alliant as the paying it down early trick still works with them. Then once it’s on autopilot and correctly reporting at $44 I’ll pay off the original one.

You propose adding a new SSL 12 months before the current one is paid off. I am guessing that is because you think it might take 11-12 months to get it reporting properly. That's overkill. 90 days is fine. And of course you may already have an installment loan at that time, e.g. a car lease or a car loan or a mortgage (etc.) -- in which case there is no value in adding another SSL.

Actually now I have another question for the experts out there. Since we are talking about how this affected my installment utilization; would it provide a bigger boost/buffer if I did a larger loan and paid it down right away next time?

From the Share Secured Loan thread (that I suggested you look at earlier):

Does the size of the loan matter?
No. A $500 loan works just as well as a $10,000 loan. Almost everyone chooses a small loan amount.

Re: Will paying off Alliant SSL boost my score?

toadsworth — Fri, 09 Mar 2018 14:54:04 GMT

I thought I’d read somewhere on here that while the SP SSL isn’t available from Alliant, the paying it early trick works with their unsecured loan as well.

Good to know that I only need like 90 days or so; I’ll set a reminder (:

Also, I know that the amount of the loan doesn’t matter in terms of the scoring boost it brings for having an installment account and for having it report at under 9% but I’m wondering if it would be an effective utilization buffer for all of my installment accounts? For example if my current Alliant SSL had been $10,000 instead of $500 then my combined installments util between my car and the SSL would be closer to 35%.

Re: Will paying off Alliant SSL boost my score?

Anonymous — Fri, 09 Mar 2018 15:19:58 GMT

Yeah, you could indeed get some marginal help with your TIU (total installment utilization) by taking out a huge loan and paying it down. For the benefit of others reading this post, a clearer example is taking out a one million dollar loan and paying it down to $100 at Day 5. Then you could buy a 60k car and still have a TIU < 8.9%.

In practice, however, it is very difficult to get the huge amount loan amount(s) needed to realistically offset other "real" loans. A better strategy is to simply buckle down and pay off existing loans faster and then put a $500 SSL (using the paydown technique) in place shortly before all existing loans (cars, etc.) are paid off.

Of course accelerating payoff schedules of existing loans only is right if it makes sense financially. It's a bad move if you have credit card debt, or if you think you can do better by placing the cash into a Roth IRA or similar vehicle.

Re: Will paying off Alliant SSL boost my score?

NRB525 — Fri, 09 Mar 2018 15:32:19 GMT

From the comments, I think I may be missing a subtle part of the discussion about the SSL.

The Alliant SP SSL is indeed gone, correct? So the quiet way to get to $44 of $500 reporting is no longer available. I think that part I get.

It sounds like a HP term loan is available, meaning an applicant could take a HP, get a $500 Alliant term loan, pay that to $44 of $500 and let that sit. The HP fades in a year and the benefit runs for near 5 years.

Do I have that right?

Re: Will paying off Alliant SSL boost my score?

Anonymous — Fri, 09 Mar 2018 15:39:49 GMT

Hey NRB. That's it exactly.

I think what our OP proposed earlier was getting an unsecured loan with Alliant and then paying it down.

I have been using the term SSL broadly simply to mean anyone using that technique (getting a small loan and ten paying it down but keeping it open). An unsecured loan is only a drawback if a person thinks he might not get approved or if an inquiry is a big deal.

I have also been using the term SSL because I am confident that we will find true SSL alternatives to Alliant by this summer.

Re: Will paying off Alliant SSL boost my score?

toadsworth — Fri, 09 Mar 2018 15:44:01 GMT

Yes, in the Alliant thread it is mentioned that if you qualify for it, the unsecured loan (requires HP) still has the ability to be paid down early, pushing the next payment date out by years. Not exactly good for rebuilders but still useful if someone with a better profile needs an installment account.

Re: Will paying off Alliant SSL boost my score?

NRB525 — Fri, 09 Mar 2018 19:55:48 GMT

Ok, in that case may I suggest editing a new paragraph into the lead post of the Credit Topics SSL thread? To clarify that the SP SSL is not available, but the second option of using a HP to go unsecured is available? Then folks can make the choice to use a HP, which fades in 12 months, to set up the benefit for 5 years? Right now it looks like no such option exists, unless one diligently reads through all the posts in the thread.

Re: Will paying off Alliant SSL boost my score?

Glen_M — Sat, 10 Mar 2018 02:56:56 GMT

@NRB525wrote:
...
The Alliant SP SSL is indeed gone, correct?

So the quiet way to get to $44 of $500 reporting is no longer available.

Yes, and No.

While Alliant no longer offers that loan, other institutions still do. They may just have some additional caveats.

Re: Will paying off Alliant SSL boost my score?

Anonymous — Sat, 10 Mar 2018 03:06:37 GMT

Thanks for the suggestion, NRB. It was included in the Quest for An SSL Alternative To Alliant:

http://ficoforums.myfico.com/t5/General-Credit-Topics/The-Quest-for-an-SSL-alternative-to-Alliant/td-p/5162448

It's Post #2: CUs/Banks that work for sure (though they may not be perfect). The two we know of currently are Navy Fed (a true SSL) and Alliant (an unsecured loan).

My own work life has been crazy and I have not had time to do a lot of research on different banks in the last three weeks.