topic Re: Theoretical scoring question in Understanding FICO® Scoring

Theoretical scoring question

Anonymous — Sun, 14 Apr 2019 01:27:01 GMT

Ok, I’m thinking of taking a loan at my CU to pay off my cards and a couple grand extra for some projects at home. It’s kind of a no-brainer as the interest rate is far better than that on my cards, and I have preapproval, just have to tell them OK.

My question is this:

Currently I’m at about 58% aggregate UTI, a little under $7800 outstanding across my cards. I’m looking to take $12k out. I’m interested to hear theories on what will happen with my scores. All my cards but one will be at zero, I’ll be dropped into AZEO. But I’ll have a new loan out and will actually have more debt than I did before. Do you think that the new loan at full UTI will be outweighed by my cards all falling through 3 scoring thresholds and all but one sitting at $0? Am I looking at score increases for doing this? I’m not familiar enough with the effect of loans vs cards when it comes to scoring to be able to really come up with a knowledgeable answer.

As I said, it’s pretty much a good plan as I modeled it and I’m looking at $238/month for 5 years (with no penalty for paying extra ahead, which I will do in order to pay it off in between 1-2 years, although the extra money comes off the end of the loan - I can’t let it float for years at 8% UTI). I will be paid off sooner than if I just keep paying the cards and I’ll have some new flooring in my house as well. I’m just curious about score changes as a result of doing this - do you think I stand to make a net gain, loss, or break-even in scoring?

Note, there’s no credit mix bonus to me doing this, as I have a loan active already. Any gain or loss would basically be solely on account of the new loan vs the zeroed out cards.

Re: Theoretical scoring question

Anonymous — Sun, 14 Apr 2019 01:57:04 GMT

I think you will have an increase. The cards dropping to azeo will give a boost, the new loan/hp will drop it a bit but I am going to guess the boost will be greater.

Re: Theoretical scoring question

Anonymous — Sun, 14 Apr 2019 02:01:48 GMT

That’s kind of the way I’m thinking as well, or maybe just hoping anyway. I’ve had heavy spend on my AmEx cards the last few weeks (travel to Cleveland for two nights and airfare for my kids to fly to Florida to see my parents in June) and although I pay larger payments (threw $300 at Delta Gold and $180 at Ascend yesterday, which won’t be the last of such payments I make before the due date on the 23rd), I’m still carrying a balance and currently Ascend is at 71%. That one and Disco will fall through four thresholds each individually. I would think that knocking those out along with all the others would outweigh the effects of taking the loan.

Re: Theoretical scoring question

Anonymous — Sun, 14 Apr 2019 02:08:34 GMT

Your score will go up.

We'd be able to predict better how much the score would go up if we knew the following:

* The age of your youngest account

* The balance and original loan amount of all your current open loans

Re: Theoretical scoring question

Anonymous — Sun, 14 Apr 2019 02:07:16 GMT

Lol age of youngest is a week and a half - I got the Lowe’s card on 4/3. It reported 1-2 days later. Having a new youngest account will barely be a blip age-wise.

My other loan, the only one I have, was originally $14.8k, currently about $11k. Taking the second loan to wipe the cards will allow me to pay roughly 50-60% extra per month on each loan relative to the amount due, and still PIF on the occasions that I use a CC.

Re: Theoretical scoring question

Anonymous — Sun, 14 Apr 2019 02:15:54 GMT

Your score will go up quite a bit then.

Three more questions:

What is the age of your oldest account? (Closed or open)

How many accounts do you have? (Closed or open)

Do you have any derogs and if so how serious are they?

If you have a moderately decent Age of Oldest (4+ years?) and 6+ accounts and a clean report, then you are in a scorecard that permits you to have an extremely high score and you might get quite a little boost. If you have severe derogs then the scorecard you are in puts a sharp cap on how far your score can go up and you might see less benefit.

Re: Theoretical scoring question

Anonymous — Sun, 14 Apr 2019 02:25:56 GMT

Thank you @CGID. I might be primed for a decent bump then. To address each point:

AoOA is 12 years 8 months (Home Depot card, still open)
Total open accounts is 12 (one loan, 11 cards, all perfect payment history), 5 closed (4 loans, one CC closed PIF in good standing by me)
Derogs - nothing active, all are paid in full, no settlements: an old chargeoff from Synch about 6 years old per DoFD on each bureau, a collection by EAS that should be coming off this reporting cycle on each bureau, and one collection on EX that I’m not having any luck with so far that’s a little under two years old. Not a small number, but the Synch collection I can start EE on in October, the one from EAS should be gone shortly, and it’ll only leave me the one on EX, with TU and EQ clean.

Re: Theoretical scoring question

Anonymous — Sun, 14 Apr 2019 02:30:00 GMT

With collections and chargeoffs you are in a dirty scorecard and will not get as much of a bump as if you were in a clean on.

Anyway, none of that matters, since you will get some scoring bonus and it is certainly the right move financially.

Just be sure that, once you pay off your CC debt you continue to pay all cards in full every month and work at paying down your installment debt as quickly as you can.

Re: Theoretical scoring question

Anonymous — Sun, 14 Apr 2019 02:36:24 GMT

Yeah I knew I wasn’t on a clean scorecard yet but I am headed in that direction and I’ll take it. Like FireMedic1 likes to say, it’s not a sprint

I will be able to PIF going forward and am looking forward to that. And honestly I’d be thrilled to bump up 25-30 points over the next few months from this to get over 670, and then continue to climb as the loans are paid down.

Re: Theoretical scoring question

Trudy — Sun, 14 Apr 2019 04:22:38 GMT

From what I can gather in these forums implies dropping your UTL in your case will outweigh a reset of a loan and AoYA. Can't quantitate scores but my experience with adding a new account in 21 months after 3 years and resetting my loan from 65% UTL to 100% with a re-fi, I saw the following changes:

Same # of accts reporting, -1 INQ at 2 year although score should have been not impact after 1 year, same UTL% for individual and aggregate:

(EQ, TU, EX)

Fico 8 base

-23, -8, -15

FICO 9 base

-20, -8, -13

MTG

+3, 27, -56

Re: Theoretical scoring question

Anonymous — Sun, 14 Apr 2019 11:36:56 GMT

I’m hoping my experience goes the other way. You had a major reset to your AoYA, which I hope is the cause of most of your classic score drop. I’m looking for a boost in classic FICO8s and don’t care about my mortgage score, as my mortgage was paid off last summer. But if I could gain what you lost in FICO8 scores I’d be quite happy to take it along with the financial improvement.

Re: Theoretical scoring question

SouthJamaica — Sun, 14 Apr 2019 15:31:45 GMT

@Anonymous wrote:
Ok, I’m thinking of taking a loan at my CU to pay off my cards and a couple grand extra for some projects at home. It’s kind of a no-brainer as the interest rate is far better than that on my cards, and I have preapproval, just have to tell them OK.

My question is this:

Currently I’m at about 58% aggregate UTI, a little under $7800 outstanding across my cards. I’m looking to take $12k out. I’m interested to hear theories on what will happen with my scores. All my cards but one will be at zero, I’ll be dropped into AZEO. But I’ll have a new loan out and will actually have more debt than I did before. Do you think that the new loan at full UTI will be outweighed by my cards all falling through 3 scoring thresholds and all but one sitting at $0? Am I looking at score increases for doing this? I’m not familiar enough with the effect of loans vs cards when it comes to scoring to be able to really come up with a knowledgeable answer.

As I said, it’s pretty much a good plan as I modeled it and I’m looking at $238/month for 5 years (with no penalty for paying extra ahead, which I will do in order to pay it off in between 1-2 years, although the extra money comes off the end of the loan - I can’t let it float for years at 8% UTI). I will be paid off sooner than if I just keep paying the cards and I’ll have some new flooring in my house as well. I’m just curious about score changes as a result of doing this - do you think I stand to make a net gain, loss, or break-even in scoring?

Note, there’s no credit mix bonus to me doing this, as I have a loan active already. Any gain or loss would basically be solely on account of the new loan vs the zeroed out cards.

1. You'll lose points for the new loan and gain points for the improved revolving utilization.

2. As to whether it will be a net gain or loss, no one knows the answers to that, and the answers will vary across the spectrum of scoring models.

Re: Theoretical scoring question

Anonymous — Sun, 14 Apr 2019 15:42:16 GMT

SJ, fair enough. Toward what CGID was saying, being that my AoYA will essentially be unchanged, I’m in agreement that those two factors will be the vast majority of what comes into play. I’m hoping that the negative of one additional TL is more than offset by some very considerable UTI improvements. Thank you.

Re: Theoretical scoring question

SouthJamaica — Sun, 14 Apr 2019 21:38:00 GMT

@Anonymous wrote:
SJ, fair enough. Toward what CGID was saying, being that my AoYA will essentially be unchanged, I’m in agreement that those two factors will be the vast majority of what comes into play. I’m hoping that the negative of one additional TL is more than offset by some very considerable UTI improvements. Thank you.

I hope so too