Most of us know that FICO calculates age differently for each type of account (Reason Codes: J1 auto, J2 revolvers, J4 all installments, J5 mortgages, J6 open installments, etc.) and then, somehow, recalculates the total length of time (Reason Code: J0); however, my question is about utilization. I know revolvers (Reason Code: Q1 & Q0 or P5 & P6) and specific installments (P0 auto, P8 mortgages etc.) calculate utilization ratio score values differently/separated, but where/what is the utilization value for all installment loans? The combined value like FICO calculates for age with Reason Code J0? Since P8 is only used in mortgage scores (along with HELOC); does FICO 8 actually use (or ignore) mortgage utilization ratios in its score calculations?
I attempted to answer this question using logic; however, that is not supported by data – so I ask the community. First, here is my thinking.
Maybe FICO does not use the mortgage calculation in 8 at all. That is due to the outlier that mortgage loans tend to be with respect to time. Most auto or personal loans are at a much lower value than a mortgage loan and for a lot shorter time period (3 to 7-years verses 15 to 30 years for the mortgage). After 2 to 4-years other installment loans would have a relatively low utilization ratio (could be very low), while a mortgage loan would still be extremely high. Assuming no negatives (baddies) across the board; this mortgage utilization ratio should not be a higher risk factor for FICO 8 than the other installment loans (auto, personal etc.) of a shorter duration. Of course all loan types would take the AoYA hit, but that would be recouped after a year or two – yet the utilization ratio differential remains.
Anyone have any data or input? Thanks
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