For optimal scoring - Installment loans

[s_haliz]

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@manyquestions wrote:

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@s_haliz wrote:

I just wanted to let you know that it is possible to have a perfect FICO even without an intallment loan (like car loan).....I don't have car loan....

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All you have showing on your report are credit cards? No mortgage, no loans of any type?

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Small mortgage - Yes. But that is not "installment loan"..... Installament loan usually points to "auto loan"......Which I don't have....

[Thomas_Thumb]

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@bdhu2001 wrote:

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@elim wrote:

It amazes me you must stay in debt by opening another instalment loan to keep those FICO points. It's easy to see by your "paid on-time and in full" instalment loans that your instalment credit is good.  I would think you should gain the points for early pay-off.

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You're FICO score is based on your responsible use of credit, not responsible money management.  Only 10% of your FICO is based on credit mix, but that can be up to 85 pts for most people.  

Once you pay off your house or car, you may start using those funds for other expenses.  Some people pay off everything, including credit cards, because they feel using credit is too tempting and they can't handle credit.  The FICO algorithm has no memory of utilization and no idea of why you aren't using credit simply.  Thus, it can't predict whether or not you'll be as responsible with new payments as you were with previous payments.

35% of your score is based on payment history, thus you continue to get pts for your previous great payments & an additional 15% of FICO is based on length of credit history.

If you paid off and closed all of your RV, it would affect your credit mix and would also affect your score even though the history stays on your report for 10 years.  But that 10 years calculates into 15% length of credit history.  But most of us maintain a few cards for various reasons. Even without a good mix, you can still get the best rate on loans and credit.  But you aren't as likely to reach 850.

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A few points of clarification - You can have a Fico 8 score of 850 with no open loans on file (perhaps no closed loans as well). Also, mix may only be worth 30 points for a clean profile (see below)

1) The full Fico score range is 550 points (300 to 850). So 10% of 550 represents a 55 point potential.

2) I strongly suspect a clean profile will score at least 550 points. So "real" range on clean profile score may only be 300 points. Ten percent of 300 is only 30 points.

3) Fico 08 (and Fico 09) have large buffers so it is possible to achieve max score of 850 with less than ideal mix - including no open installment loan or mortgage.

Note: FWIW - I attached a link to a prior post where a MyFico member states having had an Fico 08 score of 850 with NO OPEN OR CLOSED loans of any kind on file.

http://ficoforums.myfico.com/t5/Understanding-FICO-Scoring/Our-Forums-FICO-High-Achievers-Who-has-at...

[manyquestions]

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@Thomas_Thumb wrote:

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@bdhu2001 wrote:

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@elim wrote:

It amazes me you must stay in debt by opening another instalment loan to keep those FICO points. It's easy to see by your "paid on-time and in full" instalment loans that your instalment credit is good.  I would think you should gain the points for early pay-off.

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You're FICO score is based on your responsible use of credit, not responsible money management.  Only 10% of your FICO is based on credit mix, but that can be up to 85 pts for most people.  

Once you pay off your house or car, you may start using those funds for other expenses.  Some people pay off everything, including credit cards, because they feel using credit is too tempting and they can't handle credit.  The FICO algorithm has no memory of utilization and no idea of why you aren't using credit simply.  Thus, it can't predict whether or not you'll be as responsible with new payments as you were with previous payments.

35% of your score is based on payment history, thus you continue to get pts for your previous great payments & an additional 15% of FICO is based on length of credit history.

If you paid off and closed all of your RV, it would affect your credit mix and would also affect your score even though the history stays on your report for 10 years.  But that 10 years calculates into 15% length of credit history.  But most of us maintain a few cards for various reasons. Even without a good mix, you can still get the best rate on loans and credit.  But you aren't as likely to reach 850.

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A few points of clarification - You can have a Fico 8 score of 850 with no open loans on file (perhaps no closed loans as well). Also, mix may only be worth 30 points for a clean profile (see below)

1) The full Fico score range is 550 points (300 to 850). So 10% of 550 represents a 55 point potential.

2) I strongly suspect a clean profile will score at least 550 points. So "real" range on clean profile score may only be 300 points. Ten percent of 300 is only 30 points.

3) Fico 08 (and Fico 09) have large buffers so it is possible to achieve max score of 850 with less than ideal mix - including no open installment loan or mortgage.

Note: FWIW - I attached a link to a prior post where a MyFico member states having had an Fico 08 score of 850 with NO OPEN OR CLOSED loans of any kind on file.

http://ficoforums.myfico.com/t5/Understanding-FICO-Scoring/Our-Forums-FICO-High-Achievers-Who-has-at...

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Do you happen to have any links to threads with discussions of the Fico 08 buffers mentioned above? Do the buffers appear to be the same accross TU, EX, EQ or do they vary in how easy it is to stay at 850?

[Thomas_Thumb]

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@manyquestions wrote:

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@Thomas_Thumb wrote:

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A few points of clarification - You can have a Fico 8 score of 850 with no open loans on file (perhaps no closed loans as well). Also, mix may only be worth 30 points for a clean profile (see below)

1) The full Fico score range is 550 points (300 to 850). So 10% of 550 represents a 55 point potential.

2) I strongly suspect a clean profile will score at least 550 points. So "real" range on clean profile score may only be 300 points. Ten percent of 300 is only 30 points.

3) Fico 08 (and Fico 09) have large buffers so it is possible to achieve max score of 850 with less than ideal mix - including no open installment loan or mortgage.

Note: FWIW - I attached a link to a prior post where a MyFico member states having had an Fico 08 score of 850 with NO OPEN OR CLOSED loans of any kind on file.

http://ficoforums.myfico.com/t5/Understanding-FICO-Scoring/Our-Forums-FICO-High-Achievers-Who-has-at...

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Do you happen to have any links to threads with discussions of the Fico 08 buffers mentioned above? Do the buffers appear to be the same accross TU, EX, EQ or do they vary in how easy it is to stay at 850?

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The term "buffer" is probably not actually correct. It is just a convenient way to state that both Fico 08 and Fico 09 provide a mechanism to achieve a "perfect score" without actually scoring perfect on all factors (or elements - such as the ability to get a 10 in a gymnastics routine with a high degree of difficulty although you have a wobble).

There are no definitive statements from Fico on "buffer". Nonetheless, the fact remains that "buffers" exist based on data posted by many who have received 850 scores. Are there differences relative to the three CRAs?, absolutely. However, it appears that the "tweaking" Fico allows has been throttled back in Fico 09 relative to Fico 08. Fico 04 was a free for all by comparison with each CRA setting its own real world max.

Unfortunately, there is no concrete answer I can offer to your question relative to hard buffer "values".

[jamie123]

Like people have stated, you don't need an installment loan on your reports to get a perfect 850 on FICO 08. That's really great if you want to get another credit card down the line because credit card lenders use FICO 08 in determining eligibility.

Your FICO 04 Mortgage and FICO Auto scores will however lag far behind your FICO 08 scores without having installment loan history. Once your FICO 08 scores are above 760 any extra points are bragging rights because you will qualify for any credit card that you want.

Lenders make their loan decisions on both scores and history. If you don't have installment loan history it can be more difficult to get an auto loan or mortgage and your FICO 04 and FICO Auto loan scores will be much lower.

[Thomas_Thumb]

Jamie - Agree that having a installment loan (assuming good payment history) in ones credit file is viewed favorably by loan officers.

Note: The OP has a closed installment loan on file. An open loan may provide a few added points but, given the closed loan, opening a new one for points only might not be the right strategy in OP's case.

[Anonymous]

Hey....

Ok...so here is my question.  With my profile listed below I just leased a 2016 Range Rover Sport.....Now....this is the first time I have ever leased/financed a car. Usually I just buy them.....so I have no installment loan history on my account.  What do you think the change on my bureau will be???  Any guesses???  Just figured I would throw this out there.  If more info is necessary let me know.

Thanks guys as always.

Gregg

[SouthJamaica]

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@Anonymous wrote:

Hey....

Ok...so here is my question.  With my profile listed below I just leased a 2016 Range Rover Sport.....Now....this is the first time I have ever leased/financed a car. Usually I just buy them.....so I have no installment loan history on my account.  What do you think the change on my bureau will be???  Any guesses???  Just figured I would throw this out there.  If more info is necessary let me know.

Thanks guys as always.

Gregg

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[comment deleted, I misread your question]

[Anonymous]

Big hit?  Little hit??

[Anonymous]

ps  only 1 inquiry...already figured into tu.....lost 4 points

gregg