topic Re: Installment Loan Util Thresholds? in Understanding FICO® Scoring

Installment Loan Util Thresholds?

EW800 — Sun, 20 May 2018 03:35:46 GMT

Just wondering if anyone can confirm what the installment loan thresholds may be? I realize that it could very by profile, however wondering if we may have any rule of thumb. I currently have an auto loan that is sitting at 34.9% Util. I seem to recall that going below 29% maybe be a point that FICO likes to see, however I may be mistaken. Any Ideas?

Thanks!

Re: Installment Loan Util Thresholds?

Anonymous — Sun, 20 May 2018 03:51:53 GMT

8.99% is certainly a well-tested threshold for FICO 8.

It's probable that different models (and within a model different scorecards) have a few breakpoints above that. E.g. 29% and 69% -- just to make up a few numbers. But knowing exactly what those are is more than I think anyone knows -- again bearing in mind that there are many models and many scorecards.

Less than 8.99% gives you all the scoring points from this factor and a utilization in the 90s gives you zero. In between likely gives you some.

Some scoring models (such as, it is believed, the EQ and TU mortgage scores) ignore installment utilization altogether.

There is some evidence that one may be able to get all of the scoring points from a mortgage alone that is under 69% and several years old -- and thus mortgages may be scored a bit differently.

Re: Installment Loan Util Thresholds?

Anonymous — Sun, 20 May 2018 04:00:29 GMT

Some members (SJ is one) have stated that taking an installment loan below 9% has resulted in a 15-20 point gain. If that's the case on some profiles and an installment loan is "worth" say 30 points total it would mean that the range from 100% down to 9% (91% of the loan) is only worth 10-15 points, which really isn't all too significant. That being said, dropping below 9% utilization seems to definitely be the greatest impact point, under FICO 08 anyway.

Re: Installment Loan Util Thresholds?

SouthJamaica — Sun, 20 May 2018 14:24:33 GMT

@EW800 wrote:
Just wondering if anyone can confirm what the installment loan thresholds may be? I realize that it could very by profile, however wondering if we may have any rule of thumb. I currently have an auto loan that is sitting at 34.9% Util. I seem to recall that going below 29% maybe be a point that FICO likes to see, however I may be mistaken. Any Ideas?

Thanks!

From my experience, the only one that mattered a lot, in FICO 8, was getting the overall percentage down to 9% or less.

Re: Installment Loan Util Thresholds?

SouthJamaica — Sun, 20 May 2018 14:32:00 GMT

@Anonymous wrote:
8.99% is certainly a well-tested threshold for FICO 8.

It's probable that different models (and within a model different scorecards) have a few breakpoints above that. E.g. 29% and 69% -- just to make up a few numbers. But knowing exactly what those are is more than I think anyone knows -- again bearing in mind that there are many models and many scorecards.

Less than 8.99% gives you all the scoring points from this factor and a utilization in the 90s gives you zero. In between likely gives you some.

Some scoring models (such as, it is believed, the EQ and TU mortgage scores) ignore installment utilization altogether.

There is some evidence that one may be able to get all of the scoring points from a mortgage alone that is under 69% and several years old -- and thus mortgages may be scored a bit differently.

In my profile, overall installment utilization reduction, ultimately down to 9%, had no effect on my EX mortgage score (as opposed to a 31 point increase in EX FICO 8), but resulted in a 13 point increase in my TU mortgage score (as opposed to a 37 point increase in TU FICO 8). It wasn't fully reported to EQ at the time, so I never found out how EQ FICO 5 would have behaved.

Re: Installment Loan Util Thresholds?

SouthJamaica — Sun, 20 May 2018 14:34:16 GMT

@Anonymous wrote:
Some members (SJ is one) have stated that taking an installment loan below 9% has resulted in a 15-20 point gain. If that's the case on some profiles and an installment loan is "worth" say 30 points total it would mean that the range from 100% down to 9% (91% of the loan) is only worth 10-15 points, which really isn't all too significant. That being said, dropping below 9% utilization seems to definitely be the greatest impact point, under FICO 08 anyway.

In my case the trip down from 89% to 9% was worth 37 points in TU FICO 8, 31 points in EX FICO 8, 13 points in TU FICO 4, and no points in EX FICO 2.