@bob2323 wrote:Hi, all. I have a been preapproved for an unsecured personal line of credit with excellent rates. However, my FICO 8s are >800, and my mortgage FICOs (5, 4, 2) are all >750. I don't wish to compromise any of these scores by accepting the line of credit and using it in the wrong way.
I am finding totally conflicting info on the Internet about how a line of credit affects utilization ratio. A blog post on Experian says that a line of credit is treated like a credit card. A blog post on a money management site says lines of credit are excluded from the ratio.
Anyone have any clarity on this? I'm concerned about my FICO 8 but also the FICO mortgage score.
In my experience, if it's an open ended line of credit (borrow, pay it back and borrow again) it reports as and counts like a credit card (even though it shows up in loans or other accounts).
If you borrow once, and when paid off it's closed. It should report as a loan and not count against your score the same way a maxed out credit card does.
@bob2323 wrote:Hi, all. I have a been preapproved for an unsecured personal line of credit with excellent rates. However, my FICO 8s are >800, and my mortgage FICOs (5, 4, 2) are all >750. I don't wish to compromise any of these scores by accepting the line of credit and using it in the wrong way.
I am finding totally conflicting info on the Internet about how a line of credit affects utilization ratio. A blog post on Experian says that a line of credit is treated like a credit card. A blog post on a money management site says lines of credit are excluded from the ratio.
Anyone have any clarity on this? I'm concerned about my FICO 8 but also the FICO mortgage score.
It sounds like you are getting ready for mortgage or in the future obtain a mortgage loan? If so lenders will advise to avoid any new credit apps for about a year. Any new credit will affect your scores, and no lines are not excluded from the ratio, they factor into your credit profile.
The thing is how much of an effect will they lower your scores? It seems the longer the credit you have the less impact new credit will affect your scores, the shorter credit like myself at 7yrs 4months it seems to a ding me more, but still not that bad.
I have 2 inquires that are about 1 year old and wont drop off for another year. I have the seeking credit code that they say hurts my scores, how much? I dont know. I had a 790 score, but I am using some credit at the moment. So new credit, using credit, overall uti rasied from 3% to 5%, one card at 39% UTIL all has an affect on my all credit scores. TU and EQ, all factor them differently too.
@bob2323 wrote:Hi, all. I have a been preapproved for an unsecured personal line of credit with excellent rates. However, my FICO 8s are >800, and my mortgage FICOs (5, 4, 2) are all >750. I don't wish to compromise any of these scores by accepting the line of credit and using it in the wrong way.
I am finding totally conflicting info on the Internet about how a line of credit affects utilization ratio. A blog post on Experian says that a line of credit is treated like a credit card. A blog post on a money management site says lines of credit are excluded from the ratio.
Anyone have any clarity on this? I'm concerned about my FICO 8 but also the FICO mortgage score.
They're counted in utilization like a credit card.
I just had a new personal line report, and it did NOT affect my utilization ratio at all. FICO 8 took a seven point hit - presumably for the new account and reduction of AAoA.
13Oct22 Exp F8: 812
@calisig wrote:I just had a new personal line report, and it did NOT affect my utilization ratio at all. FICO 8 took a seven point hit - presumably for the new account and reduction of AAoA.
It does affect your aggregate revolving utilization. Both the limit and the balance are included.
Regardless of whether the credit line is counted in revolving util, you should expect to take a ding on scores.
- INQ. Hard pull when you accept the pre-approval. It will be scored for 12 months, stays on the report for 24 months.
- New account. Scored typically as <12 months being new.
- AAoA. The average of your accounts will go down.
All of these things will impact your scores in a negative way. How much specifically we can't say.
From a util perspective , you didn't say what you'd use the CL for. If it's debt consolidation and you're going to pay off higher interest debt, that's probably a good thing in the big picture and makes sense financially. It really comes down to what you'll be using it for.
If you plan to go for a mortgage in the next 12 months, you need to consider how much debt you're carrying now. If you're carrying reolving balances, then your mortgage scores are being weighed down. Ideally get to AZEO for those scores. Keep in mind that DTI will matter.
@SouthJamaica wrote:
It does affect your aggregate revolving utilization. Both the limit and the balance are included.
While I don't doubt that SouthJamaica and @GatorGuy are correct in some way, this is what I see: My new mortgage represented 95% of my total debt. Now it is 85% - with my new personal loan accounting for 10% of my current debt structure. And the cost of the new personal loan? Seven FICO8 points!
Despite the fact that both of my new installment loans are at 100% utilization, after reviewing all of my before and after Experian credit data and charts, I see no indication of any change in aggregate revolving utilization. As far as I could tell by the Experian reports, my aggregate revolving credit limit remained the same.
@calisig wrote:
@SouthJamaica wrote:
It does affect your aggregate revolving utilization. Both the limit and the balance are included.While I don't doubt that SouthJamaica and @GatorGuy are correct in some way, this is what I see: My new mortgage represented 95% of my total debt. Now it is 85% - with my new personal loan accounting for 10% of my current debt structure. And the cost of the new personal loan? Seven FICO8 points!
Despite the fact that both of my new installment loans are at 100% utilization, after reviewing all of my before and after Experian credit data and charts, I see no indication of any change in aggregate revolving utilization. As far as I could tell by the Experian reports, my aggregate revolving credit limit remained the same. So maybe the way my new personal loan's credit limit = current utilization got factored in, after deducting for AAoA reduction and a new account (which seem like would amount to at least four out of my seven reduction points), was with three points maybe?
I don't understand your post. You seem to be mixing together apples and oranges.
Installment loan utilization is one thing.
Revolving utilization is something else.
A personal line of credit goes in revolving utilization.
Not every change in revolving utilization causes a score change.