Ideal utilization for installment loan

[Anonymous]

I've seen the figure 35% of original balance for installment loans.  Does it matter if it is a student loan or a car loan?  Does anyone know if it has tiers (like 35% one level and 25% is another level)?

[Anonymous]

No tiers.  There is no such thing as good utilization on an installment loan.  Paying on time every month is the only benefit.

People say there is a percentage, but I have never seen one.  My scores have been the same with 20% left of my car loan as they were with 95% of my car loan.

[Anonymous]

I think there is a minor undetectable difference that you would normally attribute to other things. It is a tiny fraction of revolving util's power. Anything under 100 percent down to maybe 10 will probably keep you in the same 10 point ballpark all things being even.

[Junejer]

I wouldn't argue with either mel or DIG on their answers. FICO gives that argument, but I have yet to see any evidence of it. I have even heard of people paying down to 35% to see and nothing, nil, zilch, nada, zero...

Edit: Fix spelling error

Message Edited by ByrdMan on 10-10-2008 08:20 PM

[marty56]

On my new autoloan, I got a score hit until I made my first payment so IMHO I would say that 1% is the same as 99%.

[CreditAble]

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@marty56 wrote:
On my new auto loan, I got a score hit until I made my first payment so IMHO I would say that 1% is the same as 99%.

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 I believe the big variable is having prior installment tradelines with a minimum of two year on time payment history. I will guess that your credit files have at least two installment loans, each with two year payment histories. Furthermore if you didn't get dinged for 99% I believe that you would have to have one or more paid off installment tradelines in file.

 From my experience the overall utilization on more than one open installment loan makes a big difference.

 By any chance when you opened the installment tradeline, did you have an existing installment trade line open with a substantially reduced utilization? I know for a fact that average utilization of two installment loans can count big for scoring. I paid off an installment loan when my other installment loan was over 80% util, and I took a 38 point hit.

 I am absolutely convinced that lower total utilization on multiple revolving tradelines may count a lot toward scoring, especially if there are no prior paid off installment loans in file.

 It would be interesting to know how extensive your prior installment loan history is because your experience is definitely not the same as mine. There has to be some other major variable.

 There is no way I will never pay off an installment loan early if it has a utilization below 15% and I have another open installment loan above 70%.

 BTW the biggest hit was TU.

 The loan that was paid off early was my first installment loan and the remaining open loan was my second installment loan. I have read that 80% utilization on an installment loan can hurt. Perhaps scoring buckets come in to play after one has one paid off installment loan.

 Would anybody out there have any info or opinions about the influence of buckets on the importance of installment loan balances on credit scores? 

Message Edited by CreditAble on 10-13-2008 11:57 AM

[Anonymous]

I'm curious also if "buckets" have anything to do with it.

[borg_cube]

Oh crap. I just paid off the remaining $2800 of a $36000 car loan I've had for 36 months and bought a new car on a 100% credit installment plan, 36 months at 0%.

The CRA's have not yet updated to show that the old car loan is now paid off.

Looks like I'll be an unwilling guinea pig here and will report back if I get a hit.

Also looks like I'll have to come up with a few thousand dollars to get the new one below 80% to truly test this out.

Happy to oblige!

[haulingthescoreup]

I got a ding on the very first time that my auto loan reported, because by definition, it was at 100%. By the next statement, the ding was gone. I think I had reduced the principal by a whopping $90 or so, lol.

[CreditAble]

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@borg_cube wrote:

bought a new car on a 100% credit installment plan, 36 months at 0%.

.....Also looks like I'll have to come up with a few thousand dollars to get the new one below 80% to truly test this out.

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 All is not lost. At least you didn't pay a down payment for the new car loan. I will never use a down payment for a new car in the future. I would use the down payment money to reduce the new loan balance substantially in the first few months.

 While you are waiting on your credit score update, now is a good time to contact the loan issuer and ask the most important question. "Will extra (early) payments be credited as prepayments of payments due and NOT reduction of principal?"

 Specifically ask if you will be able to skip payments in the future that are made early. That way you can pay double or triple payments until the score gets where you want it to be. You can then skip some subsequent payments if you want to  (to take advantage of the $0 interest). 

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borg_cube wrote: 
 Looks like I'll be an unwilling guinea pig here and will report back if I get a hit.

Happy to oblige!

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 I definitely will appreciate the info. Remember prior paid off installment history info is important also in order to draw more accurate conclusions.