B/L ratio and effect on score

[Snook_on_the_Line]

So right now I have on my reports:

1 closed pif installment loan

2 closed pif credit cards

8 open credit cards

0 open installment loans

0 charge cards

everything both open and closed show no negative info 

I have a student loan that's been transferred to nelnet thru the fresh start thing

it is not yet reporting.   

my question is am I going to lose or gain points when it starts to report

my uti is always under 5%

and my scores below are current 

my thoughts are that any points I gain from adding the installment loan to the mix will be offset by the fact that after my first payment my B/L ratio will be 99%

[Snook_on_the_Line]

The balance of the loan is 7800

ive got an extra 3200 sitting in my checking account that I could throw at it in month one

That would bring the B/L to ~59%
That would definitely save me a chunk of change in interest

[FicoMike0]

You can be a test case. Let us know what happens.

[SouthJamaica]

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@Snook_on_the_Line wrote:

So right now I have on my reports:

1 closed pif installment loan

2 closed pif credit cards

8 open credit cards

0 open installment loans

0 charge cards

everything both open and closed show no negative info 

I have a student loan that's been transferred to nelnet thru the fresh start thing

it is not yet reporting.   

my question is am I going to lose or gain points when it starts to report

my uti is always under 5%

and my scores below are current 

my thoughts are that any points I gain from adding the installment loan to the mix will be offset by the fact that after my first payment my B/L ratio will be 99%

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Because you already have a closed installment loan, you will not be adding any points by reason of credit mix.

You will gain points by having an open installment loan.

You will lose points by reason of the fact that the loan has a high percentage balance.

As to the net, I would expect a point loss, but not a terrible one.

[Snook_on_the_Line]

@SouthJamaica 

At what B/L ratio could I expect to start seeing a net positive effect on score?

@FicoMike0 

My first payment is due on Valentine's Day 

I've worked out a payment schedule that I can afford that starts with bringing the B/L to 59% so we'll see what happen in march. 

[Snook_on_the_Line]

Here's the payment schedule I've worked out

its $7800 loan at 6.8% over ten years

im not a fan of being in debt for that long so this will pay it off in 18 months

its an extra $110 on top of the $89 monthly

with an extra $3200 in month one and an extra $700 in June.  

should save me $2697 in interest 

the total interest this way would be under $300

which is great because this loan has amassed over 3k in intrest in the 15yrs it's been in default

[SouthJamaica]

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@Snook_on_the_Line wrote:

@SouthJamaica 

At what B/L ratio could I expect to start seeing a net positive effect on score?

@FicoMike0 

My first payment is due on Valentine's Day 

I've worked out a payment schedule that I can afford that starts with bringing the B/L to 59% so we'll see what happen in march. 

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Sad to say, the only time you get any significant boost is when the balance falls below 10%.

[Thomas_Thumb]

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@Snook_on_the_Line wrote:

@SouthJamaica 

At what B/L ratio could I expect to start seeing a net positive effect on score?

@FicoMike0 

My first payment is due on Valentine's Day 

I've worked out a payment schedule that I can afford that starts with bringing the B/L to 59% so we'll see what happen in march.

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@Snook_on_the_Line 

Old timers (Inverse and Captool) presented some results in 2016-17 showing a score gain when B/L was reduced from above 70% to the low 60s%. A score gain of 3-10 points passing from above 90% to under 60% is plausible.

Any solid before and after B/L vs score data you can record along the way will be useful even if score change is 0. Key point is eliminating background noise from other variables changing significantly around the paydown period.

I'd certainly be interesting in seeing score at +95% B/L and then a score update at 59%-60% B/L the next month.

[FicoMike0]

Wow, that's a great plan! If you can pay off a 10 year loan in 18 months, you'll be a real credit hero. I'm glad you worked out how much you're saving on interest, that should be real motivation to stick with the plan. I think you get it, fico is just a number, saved interest is real money in your pocket.

[Thomas_Thumb]

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@Thomas_Thumb wrote:

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@Snook_on_the_Line wrote:

@SouthJamaica 

At what B/L ratio could I expect to start seeing a net positive effect on score?

@FicoMike0 

My first payment is due on Valentine's Day 

I've worked out a payment schedule that I can afford that starts with bringing the B/L to 59% so we'll see what happen in march.

---

@Snook_on_the_Line 

Old timers (Inverse and Captool) presented some results in 2016-17 showing a score gain when B/L was reduced from above 70% to the low 60s%. A score gain of 3-10 points passing from above 90% to under 60% is plausible.

Any solid before and after B/L vs score data you can record along the way will be useful even if score change is 0. Key point is eliminating background noise from other variables changing significantly around the paydown period.

I'd certainly be interesting in seeing score at +95% B/L and then a score update at 59% - 60% B/L the next month.

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@Snook_on_the_Line 

Check out the below link (posts 58 and 60). Some interesting data showing some nice spikes in score reducing B/L from over 95% to just under 65%. Dropping B/L 65% => 51%  provided a small added benefit or no further point gain depending on the Fico model.

https://ficoforums.myfico.com/t5/Understanding-FICO-Scoring/Does-AOYA-include-installment-loans/m-p/...

Looking forward to your data.