topic Re: Multiple Installment loans under 8.9% in Understanding FICO® Scoring

Multiple Installment loans under 8.9%

GreyvyTrain — Thu, 15 Aug 2024 22:01:58 GMT

I have student loans that will stack up, all being reported as different accounts due to disbursement dates. My question is, if I am to pay each one down to under 8.9%, will each one give me a boost to my scores as they each report under that certain percentage? Or if just having one installment loan reporting under that percentage is the only boost you get?

Re: Multiple Installment loans under 8.9%

MissLiz — Thu, 15 Aug 2024 23:36:31 GMT

I thought the aggregate of all installment loans needed to be under 8.9 to get the boost, but I have some questions about it myself.

Re: Multiple Installment loans under 8.9%

GreyvyTrain — Thu, 15 Aug 2024 23:43:05 GMT

@MissLiz
I'm sure that's possible, no clue. Would love to learn though so I can know how to plan out my method of attack on a new loan every 2.5 months lol.

Re: Multiple Installment loans under 8.9%

Thomas_Thumb — Fri, 16 Aug 2024 02:23:10 GMT

@GreyvyTrain wrote:
I have student loans that will stack up, all being reported as different accounts due to disbursement dates. My question is, if I am to pay each one down to under 8.9%, will each one give me a boost to my scores as they each report under that certain percentage? Or if just having one installment loan reporting under that percentage is the only boost you get?

It's all about aggregate installment balance to loan ratio (utilization). That is the metric Fico scores. No you won't get a boost for each loan paydown if aggregate remains elevated. I personally believe there is another aggregate threshold somewhere between 60% and 70% but influence on score is minor.

Re: Multiple Installment loans under 8.9%

GreyvyTrain — Fri, 16 Aug 2024 02:34:37 GMT

@Thomas_Thumb Gotcha. So, in theory, I can pay down each one as they come (every 2-3 months), and get it below the 9% or so, but once the next one hits it will be another to pay back down on the aggregate in order to see the boost?

Another question I had was is each one of these loans when they disperse and are added to my report going to hit me with a "new account ding" each time? I've read that the AAoA will definitely be beaten down with these, but in the long run they'll help the AAoA once they start to age themselves, being that there will be so many of them.

Re: Multiple Installment loans under 8.9%

Thomas_Thumb — Fri, 16 Aug 2024 02:51:23 GMT

Good question, I don't know the answer to that. I would think loan age is based on origination date for the loan.

For credit cards there is only 1 new account "ding". A new account puts you in the penalty box. Later, if additional CC accounts are opened within 12 months, no additional ding, but time in the penalty box increases. Youngest account needs to increase to 12 months for the penalty to be removed.

Re: Multiple Installment loans under 8.9%

SouthJamaica — Fri, 16 Aug 2024 04:44:50 GMT

@GreyvyTrain wrote:
I have student loans that will stack up, all being reported as different accounts due to disbursement dates. My question is, if I am to pay each one down to under 8.9%, will each one give me a boost to my scores as they each report under that certain percentage? Or if just having one installment loan reporting under that percentage is the only boost you get?

It's only the aggregate that is scored.

I myself have been wondering if a new installment loan resets the "Age of Youngest Account" metric.

Re: Multiple Installment loans under 8.9%

Revelate — Wed, 21 Aug 2024 01:45:54 GMT

@Thomas_Thumb wrote:
@GreyvyTrain wrote:
I have student loans that will stack up, all being reported as different accounts due to disbursement dates. My question is, if I am to pay each one down to under 8.9%, will each one give me a boost to my scores as they each report under that certain percentage? Or if just having one installment loan reporting under that percentage is the only boost you get?
It's all about aggregate installment balance to loan ratio (utilization). That is the metric Fico scores. No you won't get a boost for each loan paydown if aggregate remains elevated. I personally believe there is another aggregate threshold somewhere between 60% and 70% but influence on score is minor.

Has anyone gotten closer than my old loan testing data in terms of nailing down the range?

Been throwing cash at my 6.5% mortgage, might get my aggregate installment down to 70% by the end of the year and at that point I can go hunting but might take a bit since it's two mortgages rather than smaller loans.

Re: Multiple Installment loans under 8.9%

FicoMike0 — Wed, 21 Aug 2024 14:21:56 GMT

I myself have been wondering if a new installment loan resets the "Age of Youngest Account" metric.

It seems to. When I did my ssl, I got the "new account" reason code.

Re: Multiple Installment loans under 8.9%

SouthJamaica — Wed, 21 Aug 2024 16:46:51 GMT

@FicoMike0 wrote:

I myself have been wondering if a new installment loan resets the "Age of Youngest Account" metric.
It seems to. When I did my ssl, I got the "new account" reason code.

Yes but the real thing we need to know is whether it resets AoYA for purposes of scoreboard assignment. If so, it would likely cost me 26 points in EX FICO 8.

Re: Multiple Installment loans under 8.9%

Revelate — Thu, 22 Aug 2024 09:53:30 GMT

@SouthJamaica wrote:
@FicoMike0 wrote:

I myself have been wondering if a new installment loan resets the "Age of Youngest Account" metric.
It seems to. When I did my ssl, I got the "new account" reason code.

Yes but the real thing we need to know is whether it resets AoYA for purposes of scoreboard assignment. If so, it would likely cost me 26 points in EX FICO 8.

It will.

Unless you actually need your credit for something (mortgage or whatever) it doesn't matter. If you are talking serious credit app then just sit on your hands.

Re: Multiple Installment loans under 8.9%

Patient957 — Thu, 22 Aug 2024 16:16:57 GMT

@Revelate wrote:

Unless you actually need your credit for something (mortgage or whatever) it doesn't matter. If you are talking serious credit app then just sit on your hands.

But I think SJ's dilemma is their only open installment loan is running out soon, which is certain to cause a 30ish point drop. It's a catch 22.

If it were me, I'd just open the SSL, because at least after 12 months any damage would be over. Letting the installment loan expire would cause a point loss for an indefinite period of time.

Re: Multiple Installment loans under 8.9%

SouthJamaica — Thu, 22 Aug 2024 16:28:06 GMT

@Patient957 wrote:
@Revelate wrote:

Unless you actually need your credit for something (mortgage or whatever) it doesn't matter. If you are talking serious credit app then just sit on your hands.

But I think SJ's dilemma is their only open installment loan is running out soon, which is certain to cause a 30ish point drop. It's a catch 22.

If it were me, I'd just open the SSL, because at least after 12 months any damage would be over. Letting the installment loan expire would cause a point loss for an indefinite period of time.

Thank you @Patient957 you've hit it right on the head.

To sum up for those who might not realize my situation:

I'm between a rock and a hard place right now. My scores are very depressed because my utilization is obscenely high. And my only open installment loan is just a couple of months away from ending.

My experience has been that being on the scorecard for no new accounts within the past 12 months has actually pumped up my scores quite a bit. E.g., in EX FICO 8 it appears that being on that scorecard is worth 26 points. So if I get knocked off of that, I lose 26 points.

And my experience has been that having a mostly paid down open installment loan pumps up my scores a lot as well. E.g., in EX FICO 8 it appears that having that paid down loan is worth 32 points.

So I'm about to lose 32 points for losing the open loan, if I don't replace it. But if I do replace it I will lose 26 points for getting kicked off the no new accounts scorecard IF a new installment loan has the same bad effect as a new credit card.

Thing is, I'm not so sure a new installment loan does have the same bad effect as a new credit card. But as someone in a weakened position, I'm not anxious to be the one to find out through personal experience. I wish someone else had tested it for me

Re: Multiple Installment loans under 8.9%

Thomas_Thumb — Thu, 22 Aug 2024 17:22:14 GMT

When faced with uncertainty one must soldier on. Your above numbers still point to adding a replacement SSL. If the new installment account does less damage than a new revolving account, so much the better.

Any progress on the utilization front? Hopefully the CLDs have stopped.

Re: Multiple Installment loans under 8.9%

SouthJamaica — Thu, 22 Aug 2024 18:04:09 GMT

@Thomas_Thumb wrote:
When faced with uncertainty one must soldier on. Your above numbers still point to adding a replacement SSL. If the new installment account does less damage than a new revolving account, so much the better.

Any progress on the utilization front? Hopefully the CLDs have stopped.

No progress. And the CLD's have not stopped. Now Amex has gotten into the act, reducing limits on 4 of my 5 cards. The other day they indicated that they would not reduce my limit on the 5th card if I made a payment of a certain amount before a certain date. I made the payment, but I don't really trust them to keep their word.

Re: Multiple Installment loans under 8.9%

Revelate — Sat, 24 Aug 2024 12:30:25 GMT

@SouthJamaica wrote:
@Thomas_Thumb wrote:
When faced with uncertainty one must soldier on. Your above numbers still point to adding a replacement SSL. If the new installment account does less damage than a new revolving account, so much the better.

Any progress on the utilization front? Hopefully the CLDs have stopped.
No progress. And the CLD's have not stopped. Now Amex has gotten into the act, reducing limits on 4 of my 5 cards. The other day they indicated that they would not reduce my limit on the 5th card if I made a payment of a certain amount before a certain date. I made the payment, but I don't really trust them to keep their word.

I know this is a credit forum, and I agree with Patient and Thomas: if we're just talking pure scoring open up the new SSL right now.

But your situation is different: you need to stabilize your finances / report and the score doesn't matter right now. Opening up another account of any type may spook your creditors even more and that's the biggest risk, not damage to the score.

Ultimately the creditors have already flagged you as a financial risk, they're long past worrying about the score they want to stop the bleeding... and that's what is in your best interest too. FWIW I'm having to tighten up on my finances too, looks like my income is basically cut in half this year, and as a result I'm battening down the hatches financially and prettying up the report; nothing to see here lenders.

Re: Multiple Installment loans under 8.9%

SouthJamaica — Sat, 24 Aug 2024 16:16:37 GMT

@Revelate wrote:
@SouthJamaica wrote:
@Thomas_Thumb wrote:
When faced with uncertainty one must soldier on. Your above numbers still point to adding a replacement SSL. If the new installment account does less damage than a new revolving account, so much the better.

Any progress on the utilization front? Hopefully the CLDs have stopped.
No progress. And the CLD's have not stopped. Now Amex has gotten into the act, reducing limits on 4 of my 5 cards. The other day they indicated that they would not reduce my limit on the 5th card if I made a payment of a certain amount before a certain date. I made the payment, but I don't really trust them to keep their word.
I know this is a credit forum, and I agree with Patient and Thomas: if we're just talking pure scoring open up the new SSL right now.

But your situation is different: you need to stabilize your finances / report and the score doesn't matter right now. Opening up another account of any type may spook your creditors even more and that's the biggest risk, not damage to the score.

Ultimately the creditors have already flagged you as a financial risk, they're long past worrying about the score they want to stop the bleeding... and that's what is in your best interest too. FWIW I'm having to tighten up on my finances too, looks like my income is basically cut in half this year, and as a result I'm battening down the hatches financially and prettying up the report; nothing to see here lenders.

Yeah well that's a separate issue, and it's got a pretty obvious solution.

The topic of this thread is the "pure scoring" aspect of replacing one paid-down loan with another when one is on the > 12 month scorecard. So let's stick to that topic. You've opined that it will count as a new account to knock me off the good scorecard. I'm not so sure. And I haven't seen any substantiation one way or the other yet.

Unfortunately I may have to supply the test case.

Re: Multiple Installment loans under 8.9%

Revelate — Sat, 24 Aug 2024 16:16:06 GMT

I can absolutely tell you that it resets AOYA on FICO 04 models. I'm 99.99% sure it does on FICO 8 but I don't have my old credit tracking data for proof.

Experian changed their interface and it may be impossible to get old reports and I wasn't really tracking my scores that much, but I actually get reason codes for their FICO 3 (their FICO 04 model), and I know EQ FICO 5 segments on 2 years for new account.

A mortgage from May 2023 is the only account I have opened since 2020, and check out the reason codes:

Re: Multiple Installment loans under 8.9%

SouthJamaica — Sun, 25 Aug 2024 05:59:16 GMT

The fact that it's called a "new account" in the user interface doesn't necessarily mean it knocks you off the > 12 month scorecard.

Re: Multiple Installment loans under 8.9%

FicoMike0 — Sun, 25 Aug 2024 14:26:55 GMT

I guess my data is not helpful here. My aoya hasn't been more than 12 months in two years, then, I was unscorable! I'm planning for my oldest accounts (> 10 years) to age off in a year or so. That will reduce my age metrics considerably. My "current era" oldest account is 21 months.

My plan is, to have a ssl < 9% in place, ✔

Have my aoya reach 12 months, and

Have most recent hp reach 12 months.

Hopefully, the latter two will counterbalance the age lose.