topic Re: Utilization and installment ? in General Credit Topics

Utilization and installment ?

dragnldy — Fri, 04 Apr 2008 04:53:55 GMT

How do installment loans figure into your utilization? Does FICO figure it only to what you still owe, or does it go by what your high balance was if there was not a specific CL? I have a revolving loan with a $12,600 CL and accessing $5K right now. I also have an installment loan which started out as $1117 and is down to $800.

Re: Utilization and installment ?

Anonymous — Fri, 04 Apr 2008 05:28:52 GMT

Revolving loans are counted in util with credit cards, as you can repeatedly access the money in the loan as it is paid down.

Installment loans are not counted in util. Otherwise when you get a new mortgage it would tank your scores for years because the util on that loan would be high for many years, especially if you constantly refinance the loan.

Re: Utilization and installment ?

Anonymous — Fri, 04 Apr 2008 05:32:00 GMT

dragnldy wrote:

How do installment loans figure into your utilization? Does FICO figure it only to what you still owe, or does it go by what your high balance was if there was not a specific CL? I have a revolving loan with a $12,600 CL and accessing $5K right now. I also have an installment loan which started out as $1117 and is down to $800.

FICO does count utilization on installment loans in its scoring model, but the effect it has is MUCH smaller than utilization on revolving accounts.

For installment loans, your utilization is the ratio of the loan's current balance to the original loan amount. So the installment loan you mentioned is currently at $800 / $1117 = 72%.

Expect a few points when it goes below 60%, but again, don't expect much because intallment loans just don't count as much as revolving.

For revolving accounts, FICO uses the current balance divided by the credit limit. In the absence of a reported credit limit, FICO will use the past high balance in its place.

Message Edited by cheddar on 04-04-2008 01:32 AM

Re: Utilization and installment ?

dragnldy — Fri, 04 Apr 2008 05:44:46 GMT

That's what I was thinking, but wanted some confirmation. Was debating which one to pay down with income tax, but need the good TL I get from it. Will use the money for the revolving one instead.

Re: Utilization and installment ?

Anonymous — Fri, 04 Apr 2008 10:59:25 GMT

cowpaddi wrote:
Otherwise when you get a new mortgage it would tank your scores for years because the util on that loan would be high for many years

Mortgages are excluded.