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FICO says lack on installment loans is affecting my credit score.

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Established Member

FICO says lack on installment loans is affecting my credit score.

Just checked my credit (fico not FAko) score on wellsfargo.com and citi.com and both said a major factor regarding my score is lack of installment loans.Since my house is paid off, and paid for my last car in cash, does Fico, or credit card companies when I apply for  a new card, expect me to pay intrest on a loan just to boost my credit score?

Message 1 of 11
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Community Leader
Super Contributor

Re: FICO says lack on installment loans is affecting my credit score.

I wouldn't frame it in terms of the word "expect", since neither FICO nor CC companies have expectations for you.  They certainly don't care how much money you are paying in interest on loans.  You can have a good FICO 8 score (over 800) and/or be easily approved for a new CC with no open loans.

 

But the FICO 8 model does give an additional 30-35 scoring points to someone who has at least one open loan and who's loans are mostly (but not entirely) paid off.

 

It's pretty easy to have a loan that will stay open for a good while (60 months), on which you pay almost no interest, and which is mostly paid off.  Let us know if you are interested in know more.

Message 2 of 11
Valued Member

Re: FICO says lack on installment loans is affecting my credit score.

CreditGuyinDixie, I'm in the same situation.  Please do share how to keep an open loan with very little interest.  I think I can figure it out, but why re-invent the wheel.  Share your knowledge :-)

Message 3 of 11
Established Member

Re: FICO says lack on installment loans is affecting my credit score.

I just checked my wife's score as reported on her BOA card. It shows FICO 8 based on TransUnion data of 836. She has two main credit cards, and a few store ones. Only one has a balance, it is at 20% UTI, and she is at about 8% only including her cards. She is also an AU on one of my cards with a 31k CL and no balance for a total UTI of around 3%. Both of us are on the mortgage, but she has no installment loans loans in her name. The takeaway is that you can have a high score with nothing but a mortgage and CCs.

 

Her score will probably go down next month, we just got another card in her name and BT'ed about 10k from my cards to that one. I'm curious to see what kind of change that will make.

Current Score: OCT 2018: EX FICO8 739, TU FICO8 713, TU Vantage 665
Inquiries:
This year: 2
Last Year: 2
Oldest Account: 24 years
Average Account Age: 10.4 years
No BK ever, No Derog
Amex Gold, Amex Green, Amex Blue, BoA Platinum Plus, Chase Slate, Chase Amazon, Chase CSP, Sync Lowes, Sync JC Penney, Sync Sleep Number - total CL 91k
Marcus loan, Prosper loan
Message 4 of 11
Community Leader
Super Contributor

Re: FICO says lack on installment loans is affecting my credit score.


@Nayola wrote:

CreditGuyinDixie, I'm in the same situation.  Please do share how to keep an open loan with very little interest.  I think I can figure it out, but why re-invent the wheel.  Share your knowledge :-)


The big idea is to take out a personal loan for a 60-month term and pay it down to 8% of the original loan amount at month 1.  If you go with the right lender, they will push the due date of the next payment out 4.5 years or thereabouts. 

 

A well-tested lender this year has been Navy Fed.  The product would be their Share Secured Loan.  A loan of $3001 or more has a 60-month term.  Any number of people here can walk a person through how to join Navy and then how to implement the Share Secure Loan Technique there.

Message 5 of 11
Community Leader
Super Contributor

Re: FICO says lack on installment loans is affecting my credit score.


@FlaDude wrote:

I just checked my wife's score as reported on her BOA card. It shows FICO 8 based on TransUnion data of 836. She has two main credit cards, and a few store ones. Only one has a balance, it is at 20% UTI, and she is at about 8% only including her cards. She is also an AU on one of my cards with a 31k CL and no balance for a total UTI of around 3%. Both of us are on the mortgage, but she has no installment loans loans in her name. The takeaway is that you can have a high score with nothing but a mortgage and CCs.

 

Her score will probably go down next month, we just got another card in her name and BT'ed about 10k from my cards to that one. I'm curious to see what kind of change that will make.


 

Hi FlaDude!  Thanks for the response.

 

A mortgage is definitely an installment loan.  I think our OP was trying to figure out whether he could have a good score with no loans of any kind. 

 

A FICO 8 score of 810 is certainly possible with no loans.  And if a person has a loan of some kind (mortgage or some other kind) then an 850 is very possible.

Message 6 of 11
Valued Contributor

Re: FICO says lack on installment loans is affecting my credit score.


@Andypanda wrote:

Just checked my credit (fico not FAko) score on wellsfargo.com and citi.com and both said a major factor regarding my score is lack of installment loans.Since my house is paid off, and paid for my last car in cash, does Fico, or credit card companies when I apply for  a new card, expect me to pay intrest on a loan just to boost my credit score?


 

I've had a loan with Alliant Credit Union for the past 14 months that has cost me a grand total of 65 cents in interest to date.  I'd say that's a great tradeoff for the more than 30 point bump in FICO scoring it provides.

Screen Shot 2018-11-09 at 12.39.12 AM.png

This particular type of loan is no longer available from Alliant but you can find a similar loan at any credit union.  Typically they are called "credit builder" or Share Secured loans.






Message 7 of 11
Valued Contributor

Re: FICO says lack on installment loans is affecting my credit score.


@FlaDude wrote:

I just checked my wife's score as reported on her BOA card. It shows FICO 8 based on TransUnion data of 836. She has two main credit cards, and a few store ones. Only one has a balance, it is at 20% UTI, and she is at about 8% only including her cards. She is also an AU on one of my cards with a 31k CL and no balance for a total UTI of around 3%. Both of us are on the mortgage, but she has no installment loans loans in her name. The takeaway is that you can have a high score with nothing but a mortgage and CCs.

 

Her score will probably go down next month, we just got another card in her name and BT'ed about 10k from my cards to that one. I'm curious to see what kind of change that will make.


A mortgage is a type of installment loan and that satisfies the loan component for Fico. The last loan I had that was not a mortgage was 1990. The Auto enhanced Fico version will award a few additional points if you have an auto loan but, the other Fico versions appear to be content with any type of installment loan although B/L metrics are different for mortgages.

 

Side note: It is well known that a Fico 8 credit score of over 820 can be achieved with cards only - it generally requires having a longer credit history and better optimization of other scoring factors.

Fico 8: .......EQ 850 TU 850 EX 850
Fico 9: .......EQ 850 TU 850 EX 850
Fico 4 .....:. EQ 809 TU 823 EX 830 EX Fico 98: 842
VS 3.0:...... EQ 835 TU 835 EX 835
Fico 8 BC:. EQ 892 TU 900 EX 900
CBIS: ........EQ LN Auto 940 EQ LN Home 870 TU Auto 902 TU Home 950
Message 8 of 11
Community Leader
Super Contributor

Re: FICO says lack on installment loans is affecting my credit score.


@MaizeandBlue wrote:

I've had a loan with Alliant Credit Union for the past 14 months that has cost me a grand total of 65 cents in interest to date.  I'd say that's a great tradeoff for the more than 30 point bump in FICO scoring it provides.

Screen Shot 2018-11-09 at 12.39.12 AM.png

This particular type of loan is no longer available from Alliant but you can find a similar loan at any credit union.  Typically they are called "credit builder" or Share Secured loans.


Hi Maize.  Thanks for the nice response.

 

You are right that SS loans are available at many banks or CUs.  The problem is that many of those places do not permit you to pay the loan way down while keeping it open.  Instead they will force you to keep making the same monthly payment, which means paying it down will cause it to be paid off way early.

 

Alliant and Navy are exceptions.  The basic technique can still be implemented at Alliant but now you have to use an unsecured personal loan rather than their previous SSL.  Navy is the best choice as of today if a person can get in.  I would love to find other (tested) examples of CUs or banks that are like Navy and Alliant in this respect -- I know they are out there but haven't found one yet.

Message 9 of 11
Valued Member

Re: FICO says lack on installment loans is affecting my credit score.

Thanks for the explanation.  I recently became a member of Navy Fed, so in the near future I will definitely get this plan in motion!

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