@credit8502020 wrote:Hi All! I just pulled a recent 3B report and my Equifax
When I look at the analysis, the following negative factor is listed:
The balance on your mortgage or non mortgage installment loan is relatively high.
The only loan I currently have is a car loan that has 18% left on it. When I hit the the 8.9% point on the loan I should see an increase in my score correct? I've considered paying it down really low and then paying the remainder the full term of the loan to avoid as much interest as possible, but want to make sure I will not receive any penalties,etc. for doing so.
Is 18% considered high and if not, any ideas of what I should do to get Equifax to update this?
18% is not high in real life. In FICO-land, yes, a loan balance above 9% is high. So yes, you'll see a boost in score once the balance is brought below that threshold.
Only pay your loan down if your lender pushes your remaining payments out into the future upon making a large payment (may want to confirm this with them first). You want the term of the loan to stay in tact - otherwise, you'll end up paying it off and having it close in the near-term and, since its your only loan, FICO will penalize you for having no active installment.
@credit8502020 wrote:Hi All! I just pulled a recent 3B report and my Equifax
When I look at the analysis, the following negative factor is listed:
The balance on your mortgage or non mortgage installment loan is relatively high.
The only loan I currently have is a car loan that has 18% left on it. When I hit the the 8.9% point on the loan I should see an increase in my score correct? I've considered paying it down really low and then paying the remainder the full term of the loan to avoid as much interest as possible, but want to make sure I will not receive any penalties,etc. for doing so.
Is 18% considered high and if not, any ideas of what I should do to get Equifax to update this?
If that's your only loan, then yes you should see a good increase in your FICO 8's. On my way down I remember getting that negative reason code even when I was down to 14%. Only when I got it down to 9%, did (a) the reason code go away, and (b) my FICO 8 scores rise precipitously.
@credit8502020 wrote:
@thornback wrote:
@credit8502020 wrote:Hi All! I just pulled a recent 3B report and my Equifax
When I look at the analysis, the following negative factor is listed:
The balance on your mortgage or non mortgage installment loan is relatively high.
The only loan I currently have is a car loan that has 18% left on it. When I hit the the 8.9% point on the loan I should see an increase in my score correct? I've considered paying it down really low and then paying the remainder the full term of the loan to avoid as much interest as possible, but want to make sure I will not receive any penalties,etc. for doing so.
Is 18% considered high and if not, any ideas of what I should do to get Equifax to update this?
18% is not high in real life. In FICO-land, yes, a loan balance above 9% is high. So yes, you'll see a boost in score once the balance is brought below that threshold.
Only pay your loan down if your lender pushes your remaining payments out into the future upon making a large payment (may want to confirm this with them first). You want the term of the loan to stay in tact - otherwise, you'll end up paying it off and having it close in the near-term and, since its your only loan, FICO will penalize you for having no active installment.
@thornback Thank you! Yes, that's my concern. It is a Capital One car loan and unfortunately the interest rate is high, but because it's almost paid off it definitely didn't make sense to refinance to get a lower rate. I'm going to give them a call and confirm once I have the funds to pay it down.
Unfortunately when you ask CSR's about things like this, the answers are all over the place. They really don't know.
The only way for you to find out if Capital One will advance the payment dates once you prepay is to pay it down to 9% and see what happens with the payment dates. Unless of course someone reading this has experience with a Capital One auto loan.
@credit8502020 wrote:Just figured I'd provide an update. I paid Capitol One down and it just advanced to a later due date. Ex. In May I paid two full payments ahead and it showed that the next payment was not due until July. It took Capitol One quite sometime to update my balance, but they finally did. Thank God I'm now under 8.9%!!!
Now I'm preparing to strategize because I really don't want my score to go down once I finish paying off my car and I also don't really want another installment loan that I don't need and have to pay for!
There is a relatively simple solution to this; either buy a new car or opt for a new SSL. The new car thing has pluses and minuses; you'll have a new loan which can count against you in a couple of ways, A) the fact it's new, and B) by definition it will have a high utilization percentage. The SSL option is less obvious for those uninitiated/unaware of this path. An SSL (Secured Share Loan), which can be easily opened at PenFed and NFCU, among other financial institutions (mostly credit unions) counts the same as a car loan from the FICO scoring perspective, however, there are a few key differences:
- Low Interest (as an example, PenFed is currently charging 2.05% on SSLs)
- You can push the next due date months or years out into the future (it depends upon the initial term of the loan) by paying the loan down under 9% almost immediately after opening up the loan.
- Some (most or even all?) financial institutions require the security money to "age" for 30 days before allowing the loan to be initiated.
- Different financial institutions have different rules on how long the term can be relative to the size of the loan/security deposit.
