How long before "new accounts" are not considered "new"

[krielly]

I have 2 new credit card accounts, both about 4-5 mos old. I have been utilizing at about 7-9% and PIF each month.

How long before these are not considered "new" as far as having a negative impact on my scores?

Also - we have 2 vehicle loans. One taken out in 11/07, and the other in 6/08. Discover Analyst had told me these were still high loan to balance ratio. What kind of ratio is ideal for installment debt, and how long before they are also not considered "new"?

Thanks

K

[Anonymous]

From what I understand the accts are not considered new after 1 year, I've read several threads where the new accounts Flag went away and scores have went up by 10, 20 even 30 points.  Of course, not all have seen a boost in score by that much, it depends on each individual credit file.   

lil_bo

[smallfry]

New accounts? I have heard 24-27 months.

[CreditAble]

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@krielly wrote:

I

- we have 2 vehicle loans. One taken out in 11/07, and the other in 6/08. Discover Analyst had told me these were still high loan to balance ratio. What kind of ratio is ideal for installment debt, and how long before they are also not considered "new"?

Thanks

K

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Once you are below 70% you should be alright if you have prior paid off installment loans in your credit history. If you have no other prior paid off auto loans I would consider less than 50% loan to balance ratio a worthy goal.

 I have been known to rapidly pay down auto loans until they were at 30%. I would make a monthly payment every other week or even weekly at times. I saved a lot of interest that way. I then made payments every third month or so to keep the loan open until the original term had almost been reached,

I was on a mission to get to 800 ASAP. .

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[smallfry]

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@CreditAble wrote:

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@krielly wrote:

I

- we have 2 vehicle loans. One taken out in 11/07, and the other in 6/08. Discover Analyst had told me these were still high loan to balance ratio. What kind of ratio is ideal for installment debt, and how long before they are also not considered "new"?

Thanks

K

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Once you are below 70% you should be alright if you have prior paid off installment loans in your credit history. If you have no other prior paid off auto loans I would consider less than 50% loan to balance ratio a worthy goal.

 I have been known to rapidly pay down auto loans until they were at 30%. I would make a monthly payment every other week or even weekly at times. I saved a lot of interest that way. I then made payments every third month or so to keep the loan open until the original term had almost been reached,

I was on a mission to get to 800 ASAP. .

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Did you actually figure out how much you saved? Rule of 72's they get their interest upfront on car loans it's not like a mortgage.

[krielly]

Thanks for the information. We are rebuilding after a BK in 2005. Scores in the 680's, which I guess isn't terrible considering......

I do have previous paid in full installment loans. Length of Credit History is 18 years, 4 mos. AAA is 7 Years, 10 mos.

Everything was pretty good (other than debt to income ratio) before filing. Trying to clean up some reports further and rebuild credit over the next couple years.

K

[Anonymous]

65% of original loan balance is number that myFICO claims as the "average of FICO high achievers."  And since FICO scores are a bucketing (curve) based model, these averages affect you.

Thus, it is reasonable to conclude that the magical number for best benefit is pay your loan/installment loan down to 65% or lower of original balance.  After this the payment history and age will contribute to increases in credit and score.

For these reasons I have often suggested that:  When making a down payment on an auto loan, attempt to borrow the entire purchase price (unless rate will increase unacceptably) and then pay your down payment toward your loan balance.  You will have the same effect financially, but gain FICO benefits and debt to original loan balance LO review benefits.

[CreditAble]

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@smallfry wrote:

Did you actually figure out how much you saved? Rule of 72's they get their interest upfront on car loans it's not like a mortgage.

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They definitely do not get the interest "upfront" on all car loans.

Yes I am sure exactly how much I saved. 

I got full credit for every single penny that was paid early. How do I know? I kept track of all of the balances each month and knew exactly how much was applied to interest and principle. 

I also had loan statement summaries sent to me every 6 months.

Of course I made absolutely sure how the interest payments were calculated before I even applied for the loan. I checked with multiple reps about my intended plan.I also actually read the loan agreement before i signed it.. There was no up front interest paid at all and no prepayment penalties.

I thought it would go without saying that a reasonable person should verify what kind of interest contract he has before he signs it.

I actually used an amortization calculator to predict my balance reductions as I paid multiple payments in advance. The predicted amounts matched the subsequent real time amounts to within a few cents. 

I have no way of knowing what kind of interest rate contract krielly has, but the interest paid has no bearing on the balance reduction / utility / FICO score / credit worthiness issue. 

Some people are not aware

that there are different methods of calculating interest.

Those people might benefit from your warning about "upfront" interest

when they shop for loans, that they might be paying off early..

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