topic Re: New auto loan. in General Credit Topics

New auto loan.

Suzette2 — Tue, 26 Apr 2022 14:44:51 GMT

So, I just got a new auto loan. Does the total loan amount get added to credit total? Does it drop your FICO for a while, and if so, after how many payments does it go back up?

Just paid 5 cards to zero and Amex/discover now 5 percent.

tgabks!

Re: New auto loan.

SouthJamaica — Tue, 26 Apr 2022 15:23:42 GMT

@Suzette2 wrote:
So, I just got a new auto loan. Does the total loan amount get added to credit total?

Installment utilization is a totally different metric than revolving utilization.
A new auto loan gets added to your installment utilization.

Does it drop your FICO for a while,

Usually

and if so, after how many payments does it go back up?

No one really knows about that but probably you do get slight increases. The only thing that is clear is that you can get a big bang in your FICO 8 and 9 scores when your aggregate installment utilization gets paid down to below 10% but more than zero.

Just paid 5 cards to zero and Amex/discover now 5 percent.

Great. When it reports that way, you're optimized in revolving utilization.

tgabks!

Re: New auto loan.

coldfusion — Tue, 26 Apr 2022 16:12:43 GMT

@SouthJamaica wrote:
@Suzette2 wrote:
So, I just got a new auto loan. Does the total loan amount get added to credit total?

Installment utilization is a totally different metric than revolving utilization.
A new auto loan gets added to your installment utilization.

Does it drop your FICO for a while,

Usually

and if so, after how many payments does it go back up?

No one really knows about that but probably you do get slight increases. The only thing that is clear is that you can get a big bang in your FICO 8 and 9 scores when your aggregate installment utilization gets paid down to below 10% but more than zero.

Just paid 5 cards to zero and Amex/discover now 5 percent.

Great. When it reports that way, you're optimized in revolving utilization.

tgabks!

Don't be surprised if you initially take a moderate hit in the range of 25 - 30 points on FICO 8 scores when the loan first reports due to the 100% utilization. As you pay down the loan and assuming your credit status remains stable you should start to rebound within several months and they will gradually improve.

For giggles and grins I pulled up my own scoring history and while I did take 30-35 point hits when the loan first reported my own FICO scores started to recover in less than 3 months and within a year they had rebounded to their pre-loan levels. While that may not be typical and the pace of the recovery of your scores may be quite a bit different, due to a number of different factors like your overall credit history and the length of your loan, it is an example of what could happen.