Car Loan, etc. - Credit Score Increase

[credit8502020]

Hi All,

I'm assisting a family member with timing for financing and need to confirm the details regarding when to anticipate a score boost due to paying down her car loan to a certain percentage. To help, I'll use a scenario. 

Starting Loan Limit: $15,000

8.9% - $1335

Will the score increase once the loan balance is $1335 (8.9%) of the starting limit? I want to make sure for planning purposes. I know the score will drop once the car is paid off so we're being strategic on some very important financial moves. Also, this rule applies to any installment loans correct? Ex. SSL, etc. 

Thank you in advance. 

[SouthJamaica]

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@credit8502020 wrote:

Hi All,

I'm assisting a family member with timing for financing and need to confirm the details regarding when to anticipate a score boost due to paying down her car loan to a certain percentage. To help, I'll use a scenario. 

Starting Loan Limit: $15,000

8.9% - $1335

Will the score increase once the loan balance is $1335 (8.9%) of the starting limit? I want to make sure for planning purposes. I know the score will drop once the car is paid off so we're being strategic on some very important financial moves. Also, this rule applies to any installment loans correct? Ex. SSL, etc. 

Thank you in advance. 

---

If it's the person's only loan, yes; once the balance gets down to 9% most people experience a large increase in FICO 8 and 9 scores.  If there are more than one open loan, it happens when the aggregate gets down to 9%.

[credit8502020]

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@SouthJamaica wrote:

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@credit8502020 wrote:

Hi All,

I'm assisting a family member with timing for financing and need to confirm the details regarding when to anticipate a score boost due to paying down her car loan to a certain percentage. To help, I'll use a scenario. 

Starting Loan Limit: $15,000

8.9% - $1335

Will the score increase once the loan balance is $1335 (8.9%) of the starting limit? I want to make sure for planning purposes. I know the score will drop once the car is paid off so we're being strategic on some very important financial moves. Also, this rule applies to any installment loans correct? Ex. SSL, etc. 

Thank you in advance. 

---

If it's the person's only loan, yes; once the balance gets down to 9% most people experience a large increase in FICO 8 and 9 scores.  If there are more than one open loan, it happens when the aggregate gets down to 9%.

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@SouthJamaica Thank you for mentioning those specific details. It's not their only loan. They have a mortgage. In your experience although it may not be a huge increase, have you heard of others receiving any increase at all when just one loan gets down to 9%? 

[SouthJamaica]

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@credit8502020 wrote:

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@SouthJamaica wrote:

---

@credit8502020 wrote:

Hi All,

I'm assisting a family member with timing for financing and need to confirm the details regarding when to anticipate a score boost due to paying down her car loan to a certain percentage. To help, I'll use a scenario. 

Starting Loan Limit: $15,000

8.9% - $1335

Will the score increase once the loan balance is $1335 (8.9%) of the starting limit? I want to make sure for planning purposes. I know the score will drop once the car is paid off so we're being strategic on some very important financial moves. Also, this rule applies to any installment loans correct? Ex. SSL, etc. 

Thank you in advance. 

---

If it's the person's only loan, yes; once the balance gets down to 9% most people experience a large increase in FICO 8 and 9 scores.  If there are more than one open loan, it happens when the aggregate gets down to 9%.

---

@SouthJamaica Thank you for mentioning those specific details. It's not their only loan. They have a mortgage. In your experience although it may not be a huge increase, have you heard of others receiving any increase at all when just one loan gets down to 9%? 

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No I haven't.

Many folks report that mortgages are treated separately and differently, but I have no experience in that area.

[credit8502020]

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@SouthJamaica wrote:

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@credit8502020 wrote:

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@SouthJamaica wrote:

---

@credit8502020 wrote:

Hi All,

I'm assisting a family member with timing for financing and need to confirm the details regarding when to anticipate a score boost due to paying down her car loan to a certain percentage. To help, I'll use a scenario. 

Starting Loan Limit: $15,000

8.9% - $1335

Will the score increase once the loan balance is $1335 (8.9%) of the starting limit? I want to make sure for planning purposes. I know the score will drop once the car is paid off so we're being strategic on some very important financial moves. Also, this rule applies to any installment loans correct? Ex. SSL, etc. 

Thank you in advance. 

---

If it's the person's only loan, yes; once the balance gets down to 9% most people experience a large increase in FICO 8 and 9 scores.  If there are more than one open loan, it happens when the aggregate gets down to 9%.

---

@SouthJamaica Thank you for mentioning those specific details. It's not their only loan. They have a mortgage. In your experience although it may not be a huge increase, have you heard of others receiving any increase at all when just one loan gets down to 9%? 

---

No I haven't.

Many folks report that mortgages are treated separately and differently, but I have no experience in that area.

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@SouthJamaica Ok. Thank you! 

[Thomas_Thumb]

Aggregate balance to loan ratio does include mortgages. For those who have one or more open mortgages, the mortgage typically dominates the B/L calculation often referred to as aggregate installment utilization.

If a profile has multiple open loans then taking an individual loan below 9% has no impact on score by itself. Likewise, paying it off will not trigger the "no open loan" penalty. A potential score impact comes from whether or not aggregate installment utilization crosses some threshold.

Mortgages are a particular classification of installment loans as called out in reason statements. Fico algorithms are less influenced by low utilizations on these loans. I never saw any Fico points benefits anywhere along the line from 50% => 40% => 30% => 20% => 10% => 9% => 7% => 5% => 3% => 1% utilization. That said, score was dinged when the mortgage (only open loan) was paid off and closed.

[credit8502020]

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@Thomas_Thumb wrote:

Aggregate balance to loan ratio does include mortgages. For those who have one or more open mortgages, the mortgage typically dominates the B/L calculation often referred to as aggregate installment utilization.

If a profile has multiple open loans then taking an individual loan below 9% has no impact on score by itself. Likewise, paying it off will not trigger the "no open loan" penalty. A potential score impact comes from whether or not aggregate installment utilization crosses some threshold.

Mortgages are a particular classification of installment loans as called out in reason statements. Fico algorithms are less influenced by low utilizations on these loans. I never saw any Fico points benefits anywhere along the line from 50% => 40% => 30% => 20% => 10% => 9% => 7% => 5% => 3% => 1% utilization. That said, score was dinged when the mortgage (only open loan) was paid off and closed.

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@Thomas_Thumb Thank you! I appreciate you sharing those specifics.