Does Installment account affect credit score?

Anonymous · ‎03-08-2016

I took a personal loan. I thought installment loan would not affect the credit score. But in my equifax report, i saw the debt to credit ratio as 100% as the full balance is being reported. It shows as Installment account though. So does it do damage to the utilization rate?

RobertEG · ‎03-08-2016

Installment loans are not a major factor.

It can improve your mix of credit, but that is a minor category.

Under utilization of credit, it is also a minor part of the major category.

Installment loans do not have a % util. That applies only to revolving credit.

Revolving credit has a ratio of current balance to initial balance, with is always very high when a loan is first opened, It has negligible scoring impact.

It is not included under your % util.

While a high balance could be viewed as a risk since it represents credit obligation, it was assessed by the creditor when the loan was granted as acceptable risk,and FICO does not consider it a substantail risk indicator.

Anonymous · ‎03-10-2016

@Anonymous wrote:
I took a personal loan. I thought installment loan would not affect the credit score. But in my equifax report, i saw the debt to credit ratio as 100% as the full balance is being reported. It shows as Installment account though. So does it do damage to the utilization rate?

No, it is not included in UTI% by FICO. However, remaining installment balance IS looked at by FICO (in other parts of the scoring formula), and as you lower the balance past some milestones you may see some point gains. People have reported seeing small point gains for getting below 50%, and more at below 10%.

Revelate · ‎03-10-2016

@Anonymous wrote:
@Anonymous wrote:
I took a personal loan. I thought installment loan would not affect the credit score. But in my equifax report, i saw the debt to credit ratio as 100% as the full balance is being reported. It shows as Installment account though. So does it do damage to the utilization rate?
No, it is not included in UTI% by FICO. However, remaining installment balance IS looked at by FICO (in other parts of the scoring formula), and as you lower the balance past some milestones you may see some point gains. People have reported seeing small point gains for getting below 50%, and more at below 10%.

It's more like 70% (maybe 80%) and 10%.

@RobertEG: I don't call 20-45 points gain dependant on file for pretty installment ratios under FICO 8 to be trivial honestly; it was ignored under FICO 04, not sure on FICO 9, but with FICO 8 and it's industry options being dominant, I'd suggest it's a pretty major component with that score swing if one can use it to one's advantage.