Student Loan $0 Monthly Payment for 7 years on IBR, Loan Utilization Reported at 135%

[Anonymous]

I have been on an Income Based Repayment Plan for my student loan for 7 years with $0 monthly repayment due to being retired and on S/S and a small Civil Service pension. In about August 2018, I had an unexplained 26 point drop in my FICO score 8 from 687 to 661. I believe it may be that there was a change in reporting of the accrued interest on my student loan as utilization of 135%. My FICO score flatlined for 11 months at 658 after a small credit union loan and last month went back up to 661 when I believe that one hard pull from Dec. 2018 fell off my credit report. Does anyone know if there was a rule change at the Dept. of Education that directed loan servicers to change how they reported credit utilization on student loans? Or was this a change in FICO's algorithm and is there any way to change this or challenge it? Thanks for any assistance you may be able to offer!

[calyx]

Do you have the negative reason codes for your FICO?

Loan installments don't really have that much of an impact on FICO scoring, so I think it might be something else.
And student loan servicers can report either the principle or principle + balance or however they want, as long as it is accurate (for example, mine always reports principle + balance on the last day of the month, but my previous only reported principle).

An inquiry falling off of your report has no bearing on scoring - it becomes unscorable after 1 year, so there must have been something else causing the increase.

Were there any other changes in your score back in 2018?  Did a utilization for a revolver go up, an old account fall off (changing your age metrics) or anything else that you noticed?   There are a lot of moving parts in a FICO score, sometimes nailing down possible reasons for score changes can be difficult.

[Anonymous]

Thanks for taking the time to answer this! I do not have any idea what negative codes for FICO to which you may be referring. I have not purchased the premium package to look at any thing of this nature in depth. I can say that I do have credit cards and other debt being reported. I can say that over the past 12 months I have paid off 2 personal secured loans in total and that I have other credit issuers that I have been paying down the debt monthly on a steady basis (perhaps 2 to 3 accounts). My tracking of my FICO score is through the Discover card which supplies an overview. I do not have any missed payments over the last 3 years. I guess it is possible that I was over my limit on one or two cards by a small amount where those cards did not have any overlimit fees assessed. But at the same time I was paying down 2 or 3 accounts steadily on a monthbly basis. Looking at this I was thinking that the 135% utilization on my student loan which has not changed significantly but does go up each month with accruing interest was the reason for the 26 point drop. Maybe that was not the cause. Sorry I can not be more definitive about my situation! Thanks again for your response.

[Anonymous]

There was a charge somewhat recently (the last year?) for me. My servicer began reporting not only the principal but the interest, which on an income-driven repayment plan, doesn't capitalize. So the balance due go up. But it's a small amount, like you said.
This wouldn't affect our credit score. Once you're over 100% is all the same, from what others have explained to me. In fact, it hard to make your score change by paying off the loans too.
You mentioned you might have been over the limit on your credit card (s)? I think that would result in a loss of points. If and his many for sure, I don't know. It's not my area of expertise. I'm just fairly sure it's not the student loans so you have nothing to worry about there.
Btw, congrats on paying this off for so long! That's a huge chunk out is the total payments required until forgivenes (if you qualify).

[Shooting-For-800]

My DW has a TON of student loan debt and has scores around 780.

She has no baddies.

I do not think that student loans are a heavy impact without any lates.

[Anonymous]

@Shooting-For-800
They definitely aren't. Just look at @calyx's scores! One of my own scores is with the 90D late fallen off of my report and I still have points from not being under 8.9% utilization, etc. My loans are long past 150% utilization.
They just don't have very much of an impact. We had a discussion in another thread about how you could get above an 800 if other areas were ideal. It's nice to know the longevity of student loans is taken into account with credit scores.

[calyx]

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@Anonymous wrote:

Thanks for taking the time to answer this! I do not have any idea what negative codes for FICO to which you may be referring. I have not purchased the premium package to look at any thing of this nature in depth. I can say that I do have credit cards and other debt being reported. I can say that over the past 12 months I have paid off 2 personal secured loans in total and that I have other credit issuers that I have been paying down the debt monthly on a steady basis (perhaps 2 to 3 accounts). My tracking of my FICO score is through the Discover card which supplies an overview. I do not have any missed payments over the last 3 years. I guess it is possible that I was over my limit on one or two cards by a small amount where those cards did not have any overlimit fees assessed. But at the same time I was paying down 2 or 3 accounts steadily on a monthbly basis. Looking at this I was thinking that the 135% utilization on my student loan which has not changed significantly but does go up each month with accruing interest was the reason for the 26 point drop. Maybe that was not the cause. Sorry I can not be more definitive about my situation! Thanks again for your response.

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Hi @Anonymous - the good news is that the student loans are a nice, long, positive tradeline, which is helping your scores.

I just wanted to address what you mentioned above - Late payments can impact your score for 7 years, and while they lessen over time, any major late payments will still have a big impact.   I commend you for having 3 years of no lates - that's great!   And if you keep it up, you'll have a clean file which should really help your score.

The utilization on your cards will have a heavy impact on your score - both individually and as an aggregate.   The utilization percentage has known threshholds, and if any of them are over 89%, they're considered "maxxed" and you have a major ding.  Your cards should ideally be under 29% (aggregate or total credit utilization under 9%).   If you look around the forums, particuarly the pinned topics in the "Understanding scoring" section, you might learn more.

And as for negative reasons, even on your discover it should give you some idea of what's hurting - plus you can see other factors playing into suppressing your score, like this from mine:

I wish I could pull up my older scorecards - you could see that "serious delinquency" was holding my scores down, and I had other factors.

[Anonymous]

Thanks to all who responded, it is much appreciated. It appears from everything you've said that my student loans were not the factor that resulted in the 26 point loss in 2018. I guess it will remain a mystery since I don't have any method to determine what caused that decrease. The two negative factors that have been on my Discover summary were Too high utilization on revolving accounts and utilization on loans (which when I click on that shows student loans, auto loans, etc.). At the present time, I only have the student loan and a loan for a new furnace/central AC which is shown as a mortgage. The loan for the mortgage has been paying down for 6 years with never a missed payment and the loan should be paid off in the next year completely.  My current summary on Discover shows a 661 FICO score with 0 inquiries, no missed payments, 13 years credit history, and basically there has been no upward movement at all except for the 3 point increase last month. Prior to that the FICO score was at 658 for 11 months in a row. So I am still puzzled but thanks for your help.

[Anonymous]

If the one you have is Experian, when you sign up for freecreditscore.com Experian gives you a free copy of your credit score and report. More often if you have a major change in your credit report like an inquiry. You can always go back and look at the old copies if there are any. I time the Discover Scorecard so I get EX 2x per month.
Congrats on paying off your mortgage soon and good that whatever it was isn't affecting you currently.

[Anonymous]

Just a note that this month I also had a 5 point increase in my FICO score so that's 8 points in the last couple months! I am continuing to pay down accounts and will have a couple more paid off in 2020. Looking at my on time payments I think it is more like 5-6 years without a late payment. I can see that my utilization is where there is most of the issues. That should go down slowly too!