topic Re: Installment Loan Affecting Score in Understanding FICO® Scoring

Installment Loan Affecting Score

CreditBob — Mon, 03 Jun 2019 02:09:14 GMT

Back in January a few months ago I opened an installment loan & the starting balance was $ 525. So the new balance is $ 138. One of the indicators highlighted in red for the FICO score states the following, current balance is too high in relation to the original amount. How much more of the $ 138 balance do I need to bring down so that this is no longer a factor? Does nay member have nay experience in this area? And just to reconfirm the information if off of the Myfico website.

Re: Installment Loan Affecting Score

Anonymous — Mon, 03 Jun 2019 03:02:35 GMT

In order to get that negative reason statement to go away, you'd need the balance on your loan to report at $46 or less. Taking the balance down to that amount will allow you to cross the 8.9% installment loan utilization threshold for maximum points. Until that threshold is crossed, your score isn't realizing maximum benefit from the loan, so the negative reason statement that you're seeing can be displayed. Take it down to $46 and that negative reason statement will go away and your score will increase.

Re: Installment Loan Affecting Score

CreditBob — Mon, 03 Jun 2019 03:14:52 GMT

Thanks for letting me know. I always had the impression that when an an installment account was paid down to at least half of the original balance, then that was a major factor. My bad on my thinking, but all is good

Re: Installment Loan Affecting Score

Revelate — Mon, 03 Jun 2019 04:26:21 GMT

@CreditBob wrote:
Thanks for letting me know. I always had the impression that when an an installment account was paid down to at least half of the original balance, then that was a major factor. My bad on my thinking, but all is good

Minor factor, at least on my old data I found a breakpoint on installment utilization and an early paydown but BBS is right the money shot is at that lower one.

Doesn't seem like anyone has been able to conclusively nail down the top breakpoint, I'm looking for it now but not sure it matters that much.

Re: Installment Loan Affecting Score

Anonymous — Tue, 04 Jun 2019 00:40:20 GMT

8.9% is the magic spot for CC's at least.

Installment loans though come in all shapes and sizes. I get that reason code just for my mortgage. My car has been under 50% or even 10% for awhile now and it's still coming up but, covnersely I have 800+ scores. If it's truly a factor it can't be for more than a dozen points.

Re: Installment Loan Affecting Score

Revelate — Tue, 04 Jun 2019 11:43:01 GMT

@Anonymous wrote:
8.9% is the magic spot for CC's at least.

Installment loans though come in all shapes and sizes. I get that reason code just for my mortgage. My car has been under 50% or even 10% for awhile now and it's still coming up but, covnersely I have 800+ scores. If it's truly a factor it can't be for more than a dozen points.

Every datapoint so far of reaching aggregate 8.9% installment has been between roughly 20-35 points depending on scorecard.

There's tons of data on that if you really want to research it on your own, but it is non-trivial (read as > single mortgage tier). My issue is like yours these days, mortgages skew this calculation so badly: even paying 200k to my own mortgage wouldn't get me to that 8.9% aggregate. Total suck.

Re: Installment Loan Affecting Score

CreditBob — Tue, 04 Jun 2019 15:17:10 GMT

Thanks for the information.

Re: Installment Loan Affecting Score

CreditBob — Tue, 04 Jun 2019 15:17:44 GMT

Thank you for the feedback.

Re: Installment Loan Affecting Score

Anonymous — Wed, 19 Jun 2019 07:49:36 GMT

@Anonymous wrote:
8.9% is the magic spot for CC's at least.

Installment loans though come in all shapes and sizes. I get that reason code just for my mortgage. My car has been under 50% or even 10% for awhile now and it's still coming up but, covnersely I have 800+ scores. If it's truly a factor it can't be for more than a dozen points.

Yup, they come in all shapes and sizes. They are also considered in the aggregate, so no, you are NOT getting it just because of your mortgage. You are getting it because your aggregate installment B/L is over 8.9%. It is most certainly more than a dozen points. You should maybe do a bit of research and testing.

Re: Installment Loan Affecting Score

Anonymous — Wed, 19 Jun 2019 12:24:18 GMT

Agreed, aggregate is what matters when it comes to that negative reason statement. And, as Rev suggested, the gain is likely to be 20+ points, not a dozen.