topic Re: installment loans in Understanding FICO® Scoring

installment loans

Anonymous — Thu, 28 Feb 2008 14:49:54 GMT

Do installment loans that are paid and older still count into the fico percentage?In other words, if I have no open installment loans am I getting 0 points in this area?

Re: installment loans

Anonymous — Thu, 28 Feb 2008 14:55:14 GMT

Credit mix is on OPEN accounts-

So you are lsing a few points for mix-

Auto, secured loan, unsured loan, Student loans, are all intallment accounts.

Re: installment loans

Anonymous — Thu, 28 Feb 2008 15:29:41 GMT

Just so I understand.....if I have no open installment loans is my fico score taking a hit?

Re: installment loans

Anonymous — Thu, 28 Feb 2008 15:57:47 GMT

rob22 wrote:
Just so I understand.....if I have no open installment loans is my fico score taking a hit?

Perhaps, although just a very small one. remember that credit mix is only 10% of your score, and the installment vs no-installment question is just a small part of that 10%.

Re: installment loans

Kat — Fri, 29 Feb 2008 16:59:27 GMT

I'm a bit fuzzy here. If credit mix is worth 10% -- doesn't that mean that the "right mix" could be worth up to 85 points? Since I don't have any open installment or mortgage loans, could I improve my scores (all in low 700's) by opening up a personal installment loan? Right now my cc util is about 65%, should I look into transferring some of this debt to a personal loan?

Re: installment loans

Anonymous — Fri, 29 Feb 2008 17:29:26 GMT

If you take out a personal loan then it would be a "consumer finance loan" which knocks your credit score a bit because you are borrowing cash, that doesn't look good.

If your scores are over 700 don't worry about it.

Re: installment loans

Kat — Fri, 29 Feb 2008 17:52:09 GMT

That's interesting. I had assumed that 'consumer finance' loans were from companies offering credit for retail stuff like furniture. I didn't realize that this included a personal loan from your bank or cu.

Thanks for your reply.

Re: installment loans

Anonymous — Fri, 29 Feb 2008 18:11:44 GMT

Kat wrote:
That's interesting. I had assumed that 'consumer finance' loans were from companies offering credit for retail stuff like furniture. I didn't realize that this included a personal loan from your bank or cu.

Thanks for your reply.

Unsecured personal loans from a major bank or CU are not typically coded as CFLs.

Keep in mind that 10% of your score is not 85 points. It's only 55 points. (Remember there is a minimum score of 300, so there are really only 550 points to be had.) The question of installment loan vs. no installment loan is only a small piece of that 10%, as I said above. Yes, I suppose that if one has the "perfect mix", it would be worth the full amount of points for this category, but presumably you already have some points in this category just for having credit cards (and maybe a store card) in the first place. It's not an all or nothing thing here. The effect of adding an installment loan to your mix may be positive, but I wouldn't expect it to be huge, and I definitely wouldn't take out an installment loan I didn't need just for the sake of having one.

Also keep in mind that getting a new installment loan will mean a new inquiry and a new account, which together will probably do enough temporary score damage to offset whatever benefit the additional account type would have added to your "mix" in the first place.

If you really want to help your score fast, concentrate on paying down your CC balances. 65% revolving utilization hurts a lot.

Message Edited by cheddar on 02-29-2008 10:11 AM