Installment Loan Threshold?

[Trudy]

Good Morning/Afternoon...

I've read that one may see a positive impact on their score when their loan balance reaches 8.9% or less of original loan amount and not before.  If this is correct does this apply to an individual loan or does it combine all installment loans?

I believe I've also read somewhere about all loans, but may have been making a different point.

[Anonymous]

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@Trudy wrote:

Good Morning/Afternoon...

I've read that one may see a positive impact on their score when their loan balance reaches 8.9% or less of original loan amount and not before.  If this is correct does this apply to an individual loan or does it combine all installment loans?

I believe I've also read somewhere about all loans, but may have been making a different point.

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It combines all installment accounts together.  Here's how that factor works. You take all your current open installment accounts (only the open ones -- ignoring all closed account). You then add up all the amount you currently owe. Call that CURRENT. Then you add up the amounts that the accounts were originally for (sometimes listed as the High Balance). Call that ORIGINAL. Then you divide CURRENT by ORIGINAL and you get a percent.

When that % is close to 100, or if you don't have any open loans at all, then you get no FICO points from this factor. But when the % is very low (say 1-9%) then you get most or all of the points from this factor.

[Trudy]

Thank you CGID.  Unfortunate but good to know.  Have an auto loan nearing the 8.9% but I just re-fi'd my home in June 2018. 

Is it correct there are no other thresholds for loans?

[SouthJamaica]

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@Anonymous wrote:

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@Trudy wrote:

Good Morning/Afternoon...

I've read that one may see a positive impact on their score when their loan balance reaches 8.9% or less of original loan amount and not before.  If this is correct does this apply to an individual loan or does it combine all installment loans?

I believe I've also read somewhere about all loans, but may have been making a different point.

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It combines all installment accounts together.  Here's how that factor works. You take all your current open installment accounts (only the open ones -- ignoring all closed account). You then add up all the amount you currently owe. Call that CURRENT. Then you add up the amounts that the accounts were originally for (sometimes listed as the High Balance). Call that ORIGINAL. Then you divide CURRENT by ORIGINAL and you get a percent.

When that % is close to 100, or if you don't have any open loans at all, then you get no FICO points from this factor. But when the % is very low (say 1-9%) then you get most or all of the points from this factor.

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+1

I would add that while this works for the FICO 8 and FICO 9 scores, it usually doesn't work -- or works only slightly -- for the mortgage scores.

[Trudy]

Good to know.  Thanks SJ.

[jons998877]

Are student loans figured into this total? Why I ask is because I am currently in a PAYE play, which is income based payments. For this first year at least, my principal will actually increase, not sure about next year. Which is fine as I am in a Public Service Forgiveness Program where the reamining balance will be forgiven after 120 payments. 

[Anonymous]

Yes.  I am not sure that we have ever definitively ruled out that student loans under deferment (e.g. a junior in college) might be treated differently.  But that doesn't apply to you.  Your SLs are regular loans on which you are making (possibly small) monthly payments.  So they are part of the aggregate installment utilization calculation.

Indeed, in your case, it sounds like your installment utilization could go over 100%.  Again, there's no evidence that a total installment utilization (TIU) of 104% affects you differently from one of 97%.  It just means that (in both cases) you are not getting any bonus points for having open installment debt that is significantly paid off.  I think the current hypothesis is that those bonus points might begin to materialize when you get below 68.99%.

[slither43]

I guess i'll test that theory asmy auto loan is at 70% and is my only current loan. Find out next month as I made another double payment

[ibebarrett]

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@jons998877 wrote:

Are student loans figured into this total? Why I ask is because I am currently in a PAYE play, which is income based payments. For this first year at least, my principal will actually increase, not sure about next year. Which is fine as I am in a Public Service Forgiveness Program where the reamining balance will be forgiven after 120 payments. 

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I'll find out soon enough, I am on the REPAYE plan, but have recently picked up a 3rd SOI to help me get my credit straight. I just put in the payment that finally brought my loans below 100%, just have to wait for nelnet to report it now in another 70 days -.-. The plan is to just pay ~10% of the loan at a time until I find a significant bump in score, then transition to smaller regular payments. At least that was the plan before I found out they only report every 90 days -.-

[Anonymous]

@slither43 What B/L percentage will that put you at? Is it your only open loan? May I ask, are you Clean/dirty? AooA? AoYA? You don't have any inquiries or possible aging thresholds close by, do you? Does it report at the end of the month? Would be cool to narrow it further.