Credit age and Fico

[Patient957]

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@Thomas_Thumb wrote:

It is useful to have a loan on file open or closed. Both are considered the same from a credit mix perspective. Fico 8/9 and likely 10 will bump score for an open loan but, that is not mix related. 

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Right, it's a common misconception that points awarded for an SSL or other open installment loan are 'Credit Mix' related, when they are actually awarded under the 'Amount of Debt' category, which at 30% is much more impactful than Credit Mix.

[Thomas_Thumb]

I suspect an open loan satisfies recent installment payment activity somewhat like a CC reporting a balance satisfies recent revolving account activity.

A paydown to 9% B/L on a small SSL can sure boost score if it is the only open loan. However, the amount of installment debt is not large. 

In contrast, a large mortgage at 50% B/L represents a lot more debt than when it is at 5% B/L. Yet, I saw no score penalty with my mortgage at 50% vs 10% or 5%. Why? Clearly Fico classifies a mortgage differently and uses different criteria for scoring its debt.

[FlaDude]

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@Thomas_Thumb wrote:

Clearly Fico classifies a mortgage differently and uses different criteria for scoring its debt.

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It must, I got a new mortgage 3 years ago and my FICO 8s only took about a 10 point hit (I already had scorable inquries so no hit for that). At 3 years in, I'm still at almost 95% util on the mortgage, have a scorable inquiry, carrying one CC balance at 23% uti (3% total), a CFA reason code and my EQ F8 is 832 so the 95% can't be hurting much. The inq drops this month, I'll have the cc paid in a couple of months, and then will try a month of AZEO to see what kind of score I can reach with my mortgage at 94% and a CFA on my report.

[Thomas_Thumb]

Good to know.

A few posters have suggested 89% might be a thing for mortgage loans. I think length of payment history plays a role in scoring of mortgage loans as well. 

[Realist]

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@Grigs34 wrote:

I've had car loans, CCs, GSLs etc since I was in my late teens/early 20s. I'm currently in my 50s and my credit history is only showing the last 5 years. Why would that be and how important is it? 

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It's pretty important.  You are about to wipe away any credit history you may hold - unless you act sooner than later.  You could be standing on 500 million in cash, but if that credit history disappears, you would essentially be credit poor starting from zero.  Someone that didn't exist in the credit world at all.  Millionares would say, do I need credit anyways?  The answer is why not?  Consider it your play thing if done responsibly.  All of the positive, and none of the negatives - if you manage responsibly.

In the world of credit, you always want to be aging accounts, and accumulating over time.   Age, paid on time, ultilization scores, all matter.  What also matters are alternate loans beyond revolving credit lines.  Lenders want to see fortitude and diversity on a credit report, among a number of potential types of loans.   The goal isn't to only to satisfy payment and keep utilization in check, the larger goal is to build out a credit portfolio among diverse loans that have been successfully been paid on, and paid off.

It's my opinion that there is never a reason not to utilize your credit.  It's far too profitable, when you move into the later portions of credit management.  Perks.  Welcome bonues.  Screwing around with your FICO score just because it's fun.