topic Re: Benefit of installment at 100% in Understanding FICO® Scoring

Benefit of installment at 100%

Anonymous — Sun, 15 Apr 2018 00:57:40 GMT

DH doesn’t have an installment...he is considering refinancing one of our auto loans currently financed under my name only. He is pre-approved for the same interest rate @ 2.99%. We owe 52 months, would refi for 48 saving $1K in interest.

The installment would come in at 100% initially and it would slowly be paid down.

I realize a shared secured which can be paid down immediately to 9% would give him a bigger bump. But would the car refi be worth it instead?

Re: Benefit of installment at 100%

Anonymous — Sun, 15 Apr 2018 01:57:55 GMT

Do you know of a share secured that can be paid down immediately to 9%? I wasn’t able to find one.

Re: Benefit of installment at 100%

Anonymous — Sun, 15 Apr 2018 01:56:27 GMT

@Anonymous wrote:
@Anonymous doesn’t have an installment...he is considering refinancing one of our auto loans currently financed under my name only. He is pre-approved for the same interest rate @ 2.99%. We owe 52 months, would refi for 48 saving $1K in interest.

The installment would come in at 100% initially and it would slowly be paid down.

I realize a shared secured which can be paid down immediately to 9% would give him a bigger bump. But would the car refi be worth it instead?

The text in blue answers the question in green. Yes. You will save 1k.

But it sounds like you are asking whether there would be a scoring benefit as well. If he has no installment account on his report, including closed ones, then I am pretty sure it would help him within a couple months (by a few points) since it would improve his credit mix. If he already has a closed installment, then I am less certain about the immediate benfit, but over time it would help him.

I'd make the decision based on the financial considerations. If it is purely a scoring move, there are better choices.

Re: Benefit of installment at 100%

Anonymous — Sun, 15 Apr 2018 03:09:34 GMT

Something feels off with the math to me on the refi example. The refi would be going from a 2.99% interest rate loan to another 2.99% interest rate loan, except the term would go from 52 months to 48 months... so 4 months less of payments, but $1k is saved in interest? I have no clue what the amount of the loan is, maybe it's high, but saving $1k in interest seems like a lot for what doesn't appear to be a huge difference in terms. Most times in refi's I see it being done due to the interest rate being less, but that doesn't seem to be the case here.

Re: Benefit of installment at 100%

Anonymous — Sun, 15 Apr 2018 14:13:02 GMT

Yep you are right...I made a mistake in the original calculation. We would save a very marginal amount of $.

The intent would be to get DH a score boost....but if he refi’s the loan it would be at 100% until it begins to pay down. We eventually want to get a mortgage but will have to wait a couple years due to BK and Deed in Lieu combo. So the score boost isn’t absolutely critical at this moment.

Re: Benefit of installment at 100%

SouthJamaica — Sun, 15 Apr 2018 15:14:57 GMT

@Anonymous wrote:
@Anonymous doesn’t have an installment...he is considering refinancing one of our auto loans currently financed under my name only. He is pre-approved for the same interest rate @ 2.99%. We owe 52 months, would refi for 48 saving $1K in interest.

The installment would come in at 100% initially and it would slowly be paid down.

I realize a shared secured which can be paid down immediately to 9% would give him a bigger bump. But would the car refi be worth it instead?

You don't mention whether he has any other open installment loan or not, but most likely, either way his FICO 8 score will take a hit until the new loan gets paid down. If he has no other installment loan in his name, the hit will probably be less drastic, because he'll also be picking up some points for 'credit mix'.

Re: Benefit of installment at 100%

Anonymous — Sun, 15 Apr 2018 15:17:41 GMT

He has no installments, that’s the only reason to consider it. All his Fico tracking products say his scores are being held back due to not having an installment.

He will either get a SSL or do this refi. Since he needs an installment, just considering best option.

Re: Benefit of installment at 100%

SouthJamaica — Sun, 15 Apr 2018 16:24:06 GMT

@Anonymous wrote:
He has no installments, that’s the only reason to consider it. All his Fico tracking products say his scores are being held back due to not having an installment.

He will either get a SSL or do this refi. Since he needs an installment, just considering best option.

Best option is clearly to keep paying down current loan. No new accounts. No inquiries. No 100% utilization.

(Before Alliant discontinued it's SSL program, that was a great way to pick up a few points, but no one has posted an open-to-all alternative to Alliant yet.)

Re: Benefit of installment at 100%

Anonymous — Sun, 15 Apr 2018 19:23:55 GMT

I thought NFCU offered a good alternative to alliant SSL? We are members

Re: Benefit of installment at 100%

Anonymous — Sun, 15 Apr 2018 20:16:37 GMT

I was recently told in another thread that NFCU will advance the due date on share secured loans, but I don’t know if they will advance the due date to almost the end of the term. Will have to call and ask.

Re: Benefit of installment at 100%

Anonymous — Mon, 16 Apr 2018 22:21:30 GMT

The people here I have spoken with have reported complete success with the SSL at Navy. We need more confirmations, so if you are willing to take the plunge that will be great.