Accounts with balances comment

[BabyBlue]

I just pulled my TU credit report from here, www.myfico.com/12. I wanted to see the four negative comments.

The score is 758 and the negative comments as follows:

• short revolving history (7 years)
• short account history (almost 3 years)
• too many accounts with balances
• recently opened a new credit account (in September).

I can agree with three of the comments, but I do not understand the one regarding too many accounts with balances. It says that FICO High Achievers have 3 on average. I thought that is what I had: 2 student loans (aren't those unrated), a car loan and two credit cards. Are they counting the student loans in, maybe?

Total number of accounts - 11.

4 out of 11 - installment loans (two student loans, a car loan and a paid off personal loan)

7 out of 11 - credit cards (one lost/stolen, the rest active, two active with a balance)

I thought that the key was to have less than half of all the credit accounts report a balance. What am I doing wrong?

[haulingthescoreup]

The fact that this is the third listed negative, with scores as good as yours, means that the formula is scraping the edges of the bowl a bit to get something to criticize other than short-ish history.

Do you have 11 open accounts, or 11 accounts total? If it's 11 open open accounts, If I'm counting correctly, you have 5 accounts total out of 11 (SL's x2, auto loan, 2 CC's) reporting balances, and 2 CC's out of 6 open CC's with balances. Certainly not too shabby at all. Yes, the SL's are counted, as are any open accounts.

The half of all/ fewer than half of revolving bit is a basic guideline. For some people, that's such an astonishing goal that it's a kindness to not tell them that even better is only one CC with a balance, because they're blown away by the thought of not having balances report on all 17 CC's or whatever. If I suddenly let that many more accounts report balances, instead of the 1 or 0 CC's that usually report, I would definitely lose points. (I have 15 open accounts, 3 of which are installment.)

You can try having only 1 CC report, instead of 2, and you might see a score change, but it probably won't be much. Same when that new account hits six months, if you don't open anything else in the meantime. Right now, you are basically doing everything that you should, and it will take getting that AAoA up to 5 years to get the next big score advance, I think.

[BabyBlue]

Thanks, Hauling, for your response. Actually, only 9 accounts are open - 3 installment and 6 credit cards.

Does that mean I should have no more than 4 accounts report a balance, is that correct?  I am hoping this will make a few point difference.

Also, I guess I am still  confused about student loans - I thought they were not rated. Yet, they seem to count for every purpose (AAoA, etc.) other than installment balance. If I pay off my car, will they count as installments for the mix of credit accounts?

[MarineVietVet]

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@BabyBlue wrote:

Thanks, Hauling, for your response. Actually, only 9 accounts are open - 3 installment and 6 credit cards.

Does that mean I should have no more than 4 accounts report a balance, is that correct?  I am hoping this will make a few point difference.

Also, I guess I am still  confused about student loans - I thought they were not rated. Yet, they seem to count for every purpose (AAoA, etc.) other than installment balance. If I pay off my car, will they count as installments for the mix of credit accounts?

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The car loan only counts into the mix as long as it's open. Once it's paid off and closed you lose that part of the mix but the closed account will continue to report for up to 10 years which helps your AAoA (Average Age of Accounts). Credit mix is only 10% of the total FICO score so IMO it's not all that important.

Optimal credit utilization for FICO scoring purposes seems to be:

Total revolving utilization > 0 and < 9%, the lower the better, and
Reporting a balance on less than half of your revolving TL's, and
Reporting a balance on half or less of all TL's.

[BabyBlue]

Thanks, Marinevietvet. I guess my question wasn't very clear. Let me paraphrase it. I have three open installment accounts - 2 student loans and a car loan. If I pay off the car loan, will the student loans count as installments for credit mix purposes? I read some posts that say that they will. However, I encountered a few posts that say that student loans are excluded from the mix of credit calculations.

I do know that the credit mix is only 10% of the score, but I plan on applying for a mortgage within the next 2 years or so, and until then I would like to maximize my credit score.

[creditwherecreditisdue]

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@BabyBlue wrote:

Thanks, Hauling, for your response. Actually, only 9 accounts are open - 3 installment and 6 credit cards.

Does that mean I should have no more than 4 accounts report a balance, is that correct?  I am hoping this will make a few point difference.

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That is correct. If you have 9 open TL's only 4 can report a balance. If five or more report you will get that message. As to how many points that costs you... It's not very many. (10ish maybe.) You can tell us after you fix it.

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@BabyBlue wrote:

Also, I guess I am still  confused about student loans - I thought they were not rated. Yet, they seem to count for every purpose (AAoA, etc.) other than installment balance. If I pay off my car, will they count as installments for the mix of credit accounts?

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As far as I know student loans count just the same as any other installment loan would in every way.

[Jazzzy]

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@BabyBlue wrote:

Thanks, Marinevietvet. I guess my question wasn't very clear. Let me paraphrase it. I have three open installment accounts - 2 student loans and a car loan. If I pay off the car loan, will the student loans count as installments for credit mix purposes? I read some posts that say that they will. However, I encountered a few posts that say that student loans are excluded from the mix of credit calculations.

I do know that the credit mix is only 10% of the score, but I plan on applying for a mortgage within the next 2 years or so, and until then I would like to maximize my credit score.

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Hi BabyBlue...my student loans show in the installment total on all 3 of my reports.