topic Re: Lower UTIL for a boost. Need Advice in Understanding FICO® Scoring

Lower UTIL for a boost. Need Advice

Anonymous — Fri, 13 Jul 2018 10:01:58 GMT

I've posted before about how I need a 7pt-30pt boost in my mid mortgage fico. I tried goodwill letters with the 2 lates and a short sale to fall off in a the fall. EX and TU said to call them Aug 1st to ask for an early removal of the shortsale.

I can pay down my debts to see if that will boost my score. One loan officer said to pay $4000 towards the car but I'd rather pay down high interest rate cards first and get all accounts under 30% util.

Here's my breakdown. Experts!, please let me know if this should help or if I should allocate funds elsewhere. We are in escrow right now and my mid score is 673. To get a much better rate, I need to be above a 680 (it would be awesome if I could get to 700).

Re: Lower UTIL for a boost. Need Advice

Anonymous — Fri, 13 Jul 2018 10:30:29 GMT

Not an expert yet but I’d divert an extra $147 out of your proposed Chase auto payment to the Amex and pay it off. That’d give you AZEO on the cards and wouldn’t make your loan much higher in utilization, and you’d still be below 30% on everything.

Re: Lower UTIL for a boost. Need Advice

AndySoCal — Fri, 13 Jul 2018 11:45:25 GMT

As far as the FICO score and and credit utilization is related to revolving accounts (Credit cards) rather than installment. I would focus on getting your credit card utilization under 10% on all cards. Secondly, use the FICO score simulator to give you an idea if did pay those debits down approximate amount of the score change.

Below is a link to an article on FICO score and credit utilization

Credit Utilization

Re: Lower UTIL for a boost. Need Advice

Anonymous — Fri, 13 Jul 2018 18:38:43 GMT

The HIUSA is a LOC. Should I still pay off the Amex?

I was trying to do the AZEO method. I think you may be right being that the LOC may report as a revolving account.

Re: Lower UTIL for a boost. Need Advice

AndySoCal — Sat, 14 Jul 2018 12:35:54 GMT

I would pay it off as other(s) have suggested.

Re: Lower UTIL for a boost. Need Advice

SouthJamaica — Sun, 15 Jul 2018 11:13:02 GMT

In my opinion you'll get more mileage in your mortgage scores from reducing your revolving debt than from reducing your installment debt.

Re: Lower UTIL for a boost. Need Advice

HeavenOhio — Mon, 16 Jul 2018 20:06:41 GMT

@Anonymous, fully paying off your auto loan could backfire. It's likely to lower your FICO8 scores substantially (by 30 points possibly). What it'll do to or for your mortgage scores is much less clear.

However, it's very clear that paying down your revolving debt would help. I think your plan to bring each of your revolving accounts to "below 30%" is good, but I'd make it 27% or below. That's because "below 30%" actually means 28.9% or below. 29.000001% rounds up to 30% and is no longer below 30%. Paying to 27% ensures that the next month's interest won't bump you over the scoring threshold.

Having said that, I'd go further and do AZEO, i.e. pay down all revolving accounts to zero except one, with the remaining account having a tiny balance (at least $5 but not much more than that). It's better that the small balance be on a card rather than the LOC, though, and I'm not clear if you have the funds to pay to AZEO that way.

If you can't do AZEO, I think I'd pay off all cards except for one with a tiny balance, and get the LOC down as far as you can. With the loan, simply continue to make on-time payments.

I'd take the $3,000 from your proposed loan payment and divert it toward the LOC. That brings your overall revolving utilization safely below 8.9%, which is generally considered optimum. And it brings your individual revolving account utilization below 28.9%, which is also generally considered optimum. And it leaves you with two of six revolving accounts with positive balances, which is good, and depending on how FICO treats your profile, may possibly be the same as leaving a balance on only one account.

Re: Lower UTIL for a boost. Need Advice

Thomas_Thumb — Mon, 16 Jul 2018 16:23:49 GMT

@Anonymous wrote:
I've posted before about how I need a 7pt-30pt boost in my mid mortgage fico. I tried goodwill letters with the 2 lates and a short sale to fall off in a the fall. EX and TU said to call them Aug 1st to ask for an early removal of the shortsale.
I can pay down my debts to see if that will boost my score. One loan officer said to pay $4000 towards the car but I'd rather pay down high interest rate cards first and get all accounts under 30% util.
Here's my breakdown. Experts!, please let me know if this should help or if I should allocate funds elsewhere. We are in escrow right now and my mid score is 673. To get a much better rate, I need to be above a 680 (it would be awesome if I could get to 700).

Not sure if the HI USA FCU is a credit card or loan/LOC. Assuming it is not a credit card, I agree you should report a small balance on your AMEX-11000.

I do think it is good to get your loan below 30% but, otherwise I'd go with standard monthly payments at this time. My guess is interest rate on a Chase Auto loan is quite a bit less than APR on carryover balances on CCs.

A potential payment example is provided below. Nothing special about the exact amounts. If HI USA FCU is a credit card, then reallocate $147 of the Chase Auto payment to the AMEX-11000 to pay balance to zero so only one CC is reporting a balance. The key threshold for revolving UT is under 29% on an individual card basis NOT under 30%. Also for all revolvers combined you want aggregate utilization under 9%

Account Description	CL or Loan	Balance	UT%	Payment	New Bal	New UT%
HI USA FCU	$30,000	$11,543	38.5%	$4,250	$7,293	24.3%
AMEXD	$6,000	$0	14.4%	$0	$0	0.0%
* AMEX-11000	$13,500	$1,947	0.0%	$1,800	$147	1.1%
Barclays	$15,000	$0	35.5%	$0	$0	0.0%
Chase Auto	$21,823	$7,747	0.0%	$1,800	$5,947	27.3%
Citicard	$11,000	$2,638	24.0%	$2,638	$0	0.0%
Credit One	$400	$0	0.0%	$0	$0	0.0%

Re: Lower UTIL for a boost. Need Advice

HeavenOhio — Mon, 16 Jul 2018 16:56:22 GMT

@Thomas_Thumb, the OP indiates in post #4 that the HI USA FCU account is a LOC.

Re: Lower UTIL for a boost. Need Advice

Thomas_Thumb — Mon, 16 Jul 2018 20:54:30 GMT

OK - I see that now.

So I'd suggest the OP stick with leaving a small balance on the AMEX to be safe.

Re: Lower UTIL for a boost. Need Advice

Anonymous — Tue, 17 Jul 2018 08:43:57 GMT

Thank you both for your suggestions! HI USA is a LOC.

Today I paid off all credit cards. I also paid $4700 to HIUSA LOC, leaving a balance of $6764 (util 22.5%)

I left the car loan as is and didn't pay anything towards it. I hope I did this right!

We will do a rapid rescore soon.

Bonus news: M&T bank (short sale in fall 2011) responded to my goodwill letter and may be removing the TL soon! This could put us in a much better position than before!

Re: Lower UTIL for a boost. Need Advice

Anonymous — Tue, 17 Jul 2018 08:51:41 GMT

Thank you! I didn't see your post until after I made my payments, but I think I did what you suggested except I didn't leave a balance on the cc. If my calculations are correct, I should now be at 8.9%.

Re: Lower UTIL for a boost. Need Advice

Anonymous — Tue, 17 Jul 2018 09:14:09 GMT

I didn't leave a balance on the AMEX. I hope that'll be okay. This should bring my revolving accounts down to 8.9%. I beleive the LOC is counted as a revolving account. Again, thank you for your advice!

Updated...

Re: Lower UTIL for a boost. Need Advice

HeavenOhio — Tue, 17 Jul 2018 11:19:30 GMT

@Anonymous, revolving utilization is optimized when one account reports a small balance and the rest report zero. It's always recommended that the account with the positive balance be a major card (not a store card, not an AU, and not a LOC) because it's tough to tell how one's profile will react when the balance is on something other than a major card.

You might be fine and not be dinged. Or maybe there's a small ding. The worst case scenario is that you receive the "all cards at zero" ding, which can be pretty substantial (15–20 points on FICO8, not sure about mortgage scores). With one card and the LOC reporting positive balances, a ding would have been small, or it might not have occurred at all. Using that tack would have been less of a gamble as the scoring result would have been more predictable.

Re: Lower UTIL for a boost. Need Advice

Thomas_Thumb — Tue, 17 Jul 2018 12:52:44 GMT

@Anonymous wrote:
I didn't leave a balance on the AMEX. I hope that'll be okay. This should bring my revolving accounts down to 8.9%. I beleive the LOC is counted as a revolving account. Again, thank you for your advice!
Updated...

The above paydown is not ideal. You may be leaving quite a few points on the table:

1) All CCs reporting a zero balance may cost you 15 to 20 points vs reporting a balance on one card. I'd recommend charging something on a CC card and letting the balance report on a statement. You can then pay the statement balance in full to avoid interest charges. No need to ever carry a balance month to month; just allow one to report and then PIF by due date.

2) I do think not taking the Auto loan to below 29% might be costing 5 to 10 potential points.

The fix for #1 above is quite easy. A small charge on any card (say $5 or more) - ideally one with a higher limit (say any card but Credit One) will do.

Re: Lower UTIL for a boost. Need Advice

Anonymous — Tue, 17 Jul 2018 15:00:19 GMT

Some have reported little to no score gains from lowering installment loan utilization across the believed revolving utilization thresholds. I know some people like SJ didn't see much of a score gain until installment loan utilization was paid down across the 8.9% mark into "ideal" territory.

Re: Lower UTIL for a boost. Need Advice

SouthJamaica — Tue, 17 Jul 2018 15:45:35 GMT

@Anonymous wrote:
Some have reported little to no score gains from lowering installment loan utilization across the believed revolving utilization thresholds. I know some people like SJ didn't see much of a score gain until installment loan utilization was paid down across the 8.9% mark into "ideal" territory.

Your memory is great, but we were talking about FICO 8 scores. Yes when I first took out the Alliant SSL I was looking for a point gain, but didn't find it until I'd paid the loan down to 9%, at which point my FICO 8 and 9 scores benefited handsomely, as did some of the other scores.

But the OP is concerned specifically with mortgage scores. And my experience in the mortgage score realm has been:

EX FICO 2 doesn't care at all about my overall installment loan utilization

EQ FICO 5 doesn't care at all about my overall installment loan utilization

TU FICO 4 does react similarly to FICO 8, but with only about 25% of the signal strength -- i.e., if dropping to 8.9% got me 32 points in TU FICO 8, it would probably pick up around 8 points in TU FICO 4

Needless to say, this is just my experience with my profile, and as we know, each profile reacts differently to the same stimuli.

Re: Lower UTIL for a boost. Need Advice

Thomas_Thumb — Tue, 17 Jul 2018 19:26:21 GMT

@Anonymous wrote:
Some have reported little to no score gains from lowering installment loan utilization across the believed revolving utilization thresholds. I know some people like SJ didn't see much of a score gain until installment loan utilization was paid down across the 8.9% mark into "ideal" territory.

I see a SSL as being treated differently than Auto loans or Mortgages. Payment history/age of open loan really does not come into play with token SSLs. Those that get a SSL for score boosting typically pay down balance immediately to get B/L under 9%. This shortcuts potential points that could have been awarded from a lengthly open installment loan payment history.

Not sure how old the OPs Auto loan is. If it is over 2 years, he may not see a significant score shift dropping below a 9% B/L. It would be nice to get some data points on longer term loans (over 24 months payment history) being paid down from above 20% to under 9%. I'd be surprised if point gain exceeds 10 point. Unfortunately, it looks like the OP won't have the opportunity to test this due to a potential mortgage.

End of the day, having the short sale fall off will be the biggest score booster - even if lates are still on file. On derog scorecards utilization has a muted signal strength. However, having zero cards reporting a balance may not be muted. Also, in general, # and/or % of cards is given more weight on Mortgage Ficos than with Fico 8.

Re: Lower UTIL for a boost. Need Advice

Anonymous — Tue, 17 Jul 2018 21:05:37 GMT

TT, above you sort of lump auto loans and mortgages together when discussing the topic of whether it's substantially paid down. My understanding has always been that mortgages are viewed differently than any other installment loan type, which of course includes auto loans. I can definitely understand a 30 year mortgage that's 10 years paid down to be considered a "substantial" paydown even if utilization wise it's still at 75% or so. You spoke of 2 years [as a supposed threshold?] and an auto loan in the same sentence. Do you believe or have you seen data to show that an auto loan that crosses the 2 year mark in age counts for something with respect to scoring, outside of a utilization percentage of course? I've always thought that getting below 8.9% on a non-mortgage loan is what mattered most, whether it's an auto loan, SSL, etc. Perhaps my understanding on that is flawed.

Re: Lower UTIL for a boost. Need Advice

Thomas_Thumb — Wed, 18 Jul 2018 15:53:45 GMT

I mentioned Auto and Mortgage specifically but do lump them together from a payment history perspective. What is common between Mortgages and most Auto loans are payments extending out over many years.

Open loan payment history is mentioned in a reason statement as a scoring consideration. Two years is not mentioned anywhere by Fico - that's a hypothesis on my part. I have seen data points that support the aging theory. Unfortunately, the data is not rigorous. For example, a poster reports Fico 8 scores dropping 30 points after paying off a car loan with over 2 years payment history. The loan had over 30% B/L prior to paydown and was the only open loan on file. The result indicates points had already been realized, IMO, without having to drop below the 9% SSL benchmark.

For mortgages fairly high B/L ratios do not appear to harm score. There are various data points out there with slightly different results. Conservatively I'd say dropping below 69% B/L is all that's needed for favorable treatment by Fico - assuming at least a couple years of payment history. Is two years an important threshold for mortgage payment history? Not sure. Is five years important, again not sure?

The below speaks to length of time for installment loans and length of time for open installment loans. These particular attributes only refer to installment loans in general - other Fico reason statements speak to Auto and "non mortgage".