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Installment Loan Affecting Score

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Established Contributor

Installment Loan Affecting Score

Back in January a few months ago I opened an installment loan & the starting balance was $ 525. So the new balance is $ 138. One of the indicators highlighted in red for the FICO score states the following, current balance is too high in relation to the original amount. How much more of the $ 138 balance do I need to bring down so that this is no longer a factor? Does nay member have nay experience in this area? And just to reconfirm the information if off of the Myfico website.

Message 1 of 10
9 REPLIES 9
Super Contributor

Re: Installment Loan Affecting Score

In order to get that negative reason statement to go away, you'd need the balance on your loan to report at $46 or less.  Taking the balance down to that amount will allow you to cross the 8.9% installment loan utilization threshold for maximum points.  Until that threshold is crossed, your score isn't realizing maximum benefit from the loan, so the negative reason statement that you're seeing can be displayed.  Take it down to $46 and that negative reason statement will go away and your score will increase.

Message 2 of 10
Established Contributor

Re: Installment Loan Affecting Score

Thanks for letting me know. I always had the impression that when an an installment account was paid down to at least half of the original balance, then that was a major factor. My bad on my thinking, but all is good
Message 3 of 10
Moderator Emeritus

Re: Installment Loan Affecting Score


@CreditBob wrote:
Thanks for letting me know. I always had the impression that when an an installment account was paid down to at least half of the original balance, then that was a major factor. My bad on my thinking, but all is good

Minor factor, at least on my old data I found a breakpoint on installment utilization and an early paydown but BBS is right the money shot is at that lower one.

 

Doesn't seem like anyone has been able to conclusively nail down the top breakpoint, I'm looking for it now but not sure it matters that much.




        
Message 4 of 10
Established Contributor

Re: Installment Loan Affecting Score

8.9% is the magic spot for CC's at least.

 

Installment loans though come in all shapes and sizes.  I get that reason code just for my mortgage.  My car has been under 50% or even 10% for awhile now and it's still coming up but, covnersely I have 800+ scores.  If it's truly a factor it can't be for more than a dozen points.

500K+ TCL / 800+ FCOs
Message 5 of 10
Moderator Emeritus

Re: Installment Loan Affecting Score


@Obscure-Expert wrote:

8.9% is the magic spot for CC's at least.

 

Installment loans though come in all shapes and sizes.  I get that reason code just for my mortgage.  My car has been under 50% or even 10% for awhile now and it's still coming up but, covnersely I have 800+ scores.  If it's truly a factor it can't be for more than a dozen points.


Every datapoint so far of reaching aggregate 8.9% installment has been between roughly 20-35 points depending on scorecard.

 

There's tons of data on that if you really want to research it on your own, but it is non-trivial (read as > single mortgage tier).  My issue is like yours these days, mortgages skew this calculation so badly: even paying 200k to my own mortgage wouldn't get me to that 8.9% aggregate.  Total suck.




        
Message 6 of 10
Established Contributor

Re: Installment Loan Affecting Score

Thanks for the information.
Message 7 of 10
Established Contributor

Re: Installment Loan Affecting Score

Thank you for the feedback.
Message 8 of 10
Valued Contributor

Re: Installment Loan Affecting Score


@Obscure-Expert wrote:

8.9% is the magic spot for CC's at least.

 

Installment loans though come in all shapes and sizes.  I get that reason code just for my mortgage.  My car has been under 50% or even 10% for awhile now and it's still coming up but, covnersely I have 800+ scores.  If it's truly a factor it can't be for more than a dozen points.


Yup, they come in all shapes and sizes. They are also considered in the aggregate, so no, you are NOT getting it just because of your mortgage. You are getting it because your aggregate installment B/L is over 8.9%. It is most certainly more than a dozen points. You should maybe do a bit of research and testing.







Installment loan reported this month,so technically, I'm at 2 months, but AoYA points were NOT reset. When new CCs hit and it is reset, I'll put the number it is.+1,+2,+2(Forgive typos, mobile.)(Everything said is Just IMHO.)
Scores updated AUG 4, '19. Since then, 5 HP dings to add; will update again.
Message 9 of 10
Super Contributor

Re: Installment Loan Affecting Score

Agreed, aggregate is what matters when it comes to that negative reason statement.  And, as Rev suggested, the gain is likely to be 20+ points, not a dozen.

Message 10 of 10
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