How does having a loan with no set monthly payment affect scoring?

[cr101]

The amount of my set monthly payment for my student loan used to be listed on my credit reports. But, since I am taking advantage of the COVID deferrment, no monthly payment is listed----although I am getting credit for making payments during the deferrment.

I know that some creditors use their own calculation to determine monthly payment if you're seeking credit with them and there's a student loan with no set monthly payment. Overall, does this "no set monthly payment" affect your score? Do you know if creditors take this into consideration when doing normal account reviews? Do they have some type of internal score that 1) calculates your monthly payment during normal reviews or 2) sees "no set monthly payment" as a negative?

[Anonymous]

It's probably a good thing in terms of creditor calculating DTI and ability-to-pay.

For my bank at least, we use monthly payments like those (automatic algorithms typically) to calculate that in applications and review.

[Revelate]

Interesting comment Dumdee but I think I look at it the other way.

Automatic calculations might miss the fact there is no payment information there but I wouldn't be so sure of that.  Anyone looking at that file will know it is in deferment and the only rational reason for a tradeline being in such a state is that the borrower cannot afford to pay it right now.

If I were UW, I would want more proof before extending additional credit if I saw anything in deferment and frankly the common wisdom of show a bureaucrat what they are expecting to see absolutely has an underwriting analogy.

FICO scoring wise I think it irrelevant: worst case it discounts the tradeline but /shrug.  Since FICO doesn't know income, it doesn't do any sort of DTI calc in the main algorithms anyway but internal scoring is very much YMMV.

[dragontears]

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@cr101 wrote:

The amount of my set monthly payment for my student loan used to be listed on my credit reports. But, since I am taking advantage of the COVID deferrment, no monthly payment is listed----although I am getting credit for making payments during the deferrment.

I know that some creditors use their own calculation to determine monthly payment if you're seeking credit with them and there's a student loan with no set monthly payment. Overall, does this "no set monthly payment" affect your score? Do you know if creditors take this into consideration when doing normal account reviews? Do they have some type of internal score that 1) calculates your monthly payment during normal reviews or 2) sees "no set monthly payment" as a negative?

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I am not aware of minimum monthly payment amount having any score impact with the exception of the newish EQ resiliency score so there should not be a score response due to the listed payment amount. 

Now how lenders view it is a completely different ball of wax. Some could see it as a sign of financial distress andauto deny you, some could go off of the reported payment and some could use an in-house formula to determine your DTI. 

[cr101]

Thanks for the replies. It sounds like I might have to wait and just see what each specific lender does if I apply for a CLI.

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@Revelate wrote:

Anyone looking at that file will know it is in deferment and the only rational reason for a tradeline being in such a state is that the borrower cannot afford to pay it right now.

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Hmm. That's what I'm afraid of, that they'll see it as a bad thing. These deferrments were applied automatically, even if the borrower was making payments. So, it would suck if lenders saw it as a negative. 

[Anonymous]

I don't know that the algorithm would be able to see anything different than a regular monthly payment installment loan.  The way I see it is that it's looking at installment loan utilization.  The loan is open, so it's considering that utilization.  The only difference is that the loan balance and thus utilization isn't dropping... but since utilization is a moment in time metric it basically means it's looking at the same metric from month to month. 

I do wonder if that went on for a prolonged period of time if it would be seen as no loan activity at some point due to the balance not changing.  I'm thinking from people saying that they've seen a penalty for not using a revolver for a length of time and then saying they saw a score gain when finally using it again.