topic Re: Reason code 4.. in Understanding FICO® Scoring

Reason code 4..

Anonymous — Thu, 03 Mar 2011 18:25:16 GMT

Just pulled my MYFICO/12 TU report, and noticed that I'm being dinged for not having any "installment loan". The question is: why? I dont need an installment loan, is that my fault? why am I indirectly being forced to pay interest on a random loan that I dont even need? :-S

Re: Reason code 4..

Anonymous — Thu, 03 Mar 2011 18:35:55 GMT

Is there a reason you pull yours myfico12 instead of standard report? Just curious...

Anyways, you are not being forced to do anything; but in order to show the best possible mix of credit, you need an installment loan to show. If you truly want the couple extra points from it, you could open a savings secure installment loan through a CU.

Re: Reason code 4..

Anonymous — Thu, 03 Mar 2011 18:40:33 GMT

I pull the 12 because it smothers me with all my negatives, along with their reason codes :-)

Moreover, I believe there should be a bucket for people that dont have any loans, and have clean CC history.

Re: Reason code 4..

Anonymous — Thu, 03 Mar 2011 19:46:21 GMT

I agree that this is one of those silly things that help the score. Because I am obsessive about getting the best score, I'm actually considering getting a small installment loan, even though I have no need for one. That's just crazy. We don't really need it, but if someone is going to dangle the carrot of more points for somewhat minimal work, what the heck. I'll play your silly little game.

I know - it shows we can manage a mix of credit - blah de blah de blah.

Re: Reason code 4..

Anonymous — Thu, 03 Mar 2011 20:17:56 GMT

can a personal loan be paid off the second it's taken out?

I'm seriously contemplating doing something as retarded as that :-/

Re: Reason code 4..

Anonymous — Thu, 03 Mar 2011 21:08:36 GMT

I was considering the same thing until I read that the point of it is that they see you can drudgingly make a fixed payment each month. One suggestion is to get a small loan, pay most of it off right away and then dribble out the rest for like a year. Another person wanted to pay cash for a car but realized it might be an opportunity to show good loan history. Took out the loan that had no early payment penalty and paid 90% of it almost immediately after taking out the loan. Then, just liesurely paid off the small remaining balance.

I suppose this could be taken as paying XX amount in interest over a short period of time to boost your score and look more attractive to lenders you want to approach in the future (e.g., mortgages). So, I guess you could view it as "I paid $XX for a 25 (est.) point boost and a more well-rounded history". It would depend on your goals and how you look at the whole picture.

Some people would be fine with cruising at a nice respectable FICO score and not worry too much about it and I don't think there's anything wrong with that. Some people might obsess about it to the point of distraction. Either way, it's up to us to decide.

Having said that, I do think that it's a little bit silly, particularly if one has a strong payment history with CCC's.

Fun stuff.

Re: Reason code 4..

Anonymous — Thu, 03 Mar 2011 21:24:57 GMT

I also wanted to add that I guess we shouldn't miss the incredible irony of this. There were times in my life that I would have been over the moon to learn that someone would even consider me for an installment loan. Those were days where I really needed it. Now I don't need it and am somewhat complaining about that fact. LOL. Relativity.

Re: Reason code 4..

Anonymous — Thu, 03 Mar 2011 21:53:14 GMT

ifi,

So, what is your current score? And what score do you want to achieve?

And, maybe more important than the two above questions - what is your blood pressure? (I just measured mine - so it's on my brain).

I love to pull /12 cuz I like to see the same four reason codes that my lenders see. But you have to go in with a certain understanding. It's an algorithm that measures your likelihood to pay them back. (I know you already know that). But it's important to remember that it's not a letter grade, and it's not like a comment from a professor on your beautifully written report. It's just a measurement of risk. I like having that window of information but I'm not going to open an installment to keep FICO happy.

I know we've had posters on here with FICO's over 800 with no mortgage. DH had an EQ FICO over 800 with no installments.

And remember, everything over 760 is considered a high achiever. That gives you 90 points of leeway. Be happy.

Re: Reason code 4..

Anonymous — Thu, 03 Mar 2011 23:00:01 GMT

How do you pull TU12? Is it here on myfico and if so, is it the same as ordering the $19.95 TU score here on the FICO scores page?

Re: Reason code 4..

Anonymous — Thu, 03 Mar 2011 23:42:17 GMT

@Anonymous wrote:
How do you pull TU12? Is it here on myfico and if so, is it the same as ordering the $19.95 TU score here on the FICO scores page?

Take your controller, hit up, up, left, triangle, circle......no wait, wrong forum. Visit www.myfico.com/12 :-D

@beam

Hello!

TU: 727 (supposed to be over 750, but Amex and Gemb's untimely reporting is hurting my score :-( )

I want to achieve a score that will get me any card I want (Dang it! had to sound like Anakin Skywalker...)

Right now I'm trying to score a home without a mortgage, so wish me luck!

BTW: My BP is running 140/98, and I'm only in my mid 20's (hope that explains my rant on here, LOL!)

Re: Reason code 4..

Anonymous — Fri, 04 Mar 2011 00:29:00 GMT

@Anonymous wrote:

@Anonymous wrote:
How do you pull TU12? Is it here on myfico and if so, is it the same as ordering the $19.95 TU score here on the FICO scores page?

Take your controller, hit up, up, left, triangle, circle......no wait, wrong forum. Visit www.myfico.com/12 :-D

I'm glad it's not a video game cause at my age I would hurt myself.

Congrats on buying a home without a mortgage. It is my personal belief that the younger generation will be so beyond crazy well-informed (much more than previous gens) that they will be able to game these archaeic financial systems into the ground. Work it! (before they catch on)

Re: Reason code 4..

Anonymous — Wed, 09 Mar 2011 22:24:56 GMT

TU Code 4 (Code 32 for Equifax and Experian) penalizes you for having a lack of recent installment loan information. This falls under the roughly 10% of the weight of the credit scoring formula that is reserved for a credit mix. You can have a good score without having installment loans report to your credit profile. You just cannot expect to have the highest scores if there is no data on installment loans. It doesn't mean that you are necessarily a greater credit risk without installment loans. It does however mean that they do not have enough information to rate your likelihood to repay an installment loan, which will therefore keep your score from reaching the higher range.

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