Installment "monthly payment" a factor?

[Anonymous]

I used to wonder about the questions in the first couple of posts, and send a token payment in at times on a loan of mine.  Its been probably at least 2 years now since I last paid(I gave up caring about DOLA after awhile, especially since I was not monitoring my scores), so I suppose I could do a test, now that I monitor my scores.  

Interesting thread, I'm quite glad someone brought it up.  ....on a side note, it's amazing to see what compounding interest can do, it almost should be criminal.  

[Anonymous]

CaptainJ, it sounds like you'd be the perfect test subject for this topic of discussion, since it's been years like you said since you last paid on your loan.  If you make a payment and your score changes immediately following that account being reported with a new balance, it may give some evidence that DOLA actually matters.

[SouthJamaica]

---

@SouthJamaica wrote:

I noticed that my Equifax report lists the "monthly payment" on an installment loan.

This particular loan was prematurely paid down so that I could pay a nominal amount for the next 58 months to pay it off, but of course the report lists the original monthly amount.

Questions:

1. Is this "monthly payment" a factor in FICO scoring?

2. If so, in which scoring models?

---

So does anybody know the answer to my question? Does the "monthly payment" of an installment loan factor into FICO scores, and if so which scoring models?

[Anonymous]

I am having a little trouble imagining how FICO would use this MP data in its scoring model.  Can you offer a couple hypothetical scenarios where FICO would use it and how?

PS.  I realize you are not suggesting that FICO does use it, but having at least one (or more) conjectural methods of how they might use it would help me.

[SouthJamaica]

---

@Anonymous wrote:

I am having a little trouble imagining how FICO would use this MP data in its scoring model.  Can you offer a couple hypothetical scenarios where FICO would use it and how?

PS.  I realize you are not suggesting that FICO does use it, but having at least one (or more) conjectural methods of how they might use it would help me.

---

A takes out a 15k 60 month installment loan, with monthly payments of $310.

Within 2 months he pays off the loan prematurely to a balance of $1350.

Although he can now pay off the loan with $25 per month, his credit reports continue to list the "monthly payment" as $310.

Is that "monthly payment" item factored into any of A's FICO scores, and if so which one(s)?

Every credit report lists the monthly payment, and the total of monthly payments; is there any FICO algorithm which would factor that into "amount of debt".

[Anonymous]

Sorry I was unclear.  I totally understand what a monthly payment is for an installment loan and that it is calculated at month 0 when the loan is first taken out.  I realize it appears on one's reports..  And I totally get how paying down a loan with a huge payment early on would give you the practical freedom to pay $0 per month or a much smaller monthly amount if you wanted to.  (This assumes that the lender doesn't continue to force you to make the same MP as before -- some do that.)

So all this I understand.

What I was asking is whether you had some kind of idea -- any idea -- how FICO 8 (or an earlier model) could be using MP in its scoring model.  And if so if you could give a hypothetical example of how the model would use the MP.

For example, are you imagining that loans with big MPs might give you more scoring points than those with smaller MPs?

Again, I realize you are not saying that you think it would give you more -- or that you are saying that FICO probably does somehow use the MP field.  I am saying that I am having trouble imagining any way that they could use it in their model.  I was wondering if you had any ideas.

If you can throw out a hypothetical example, it might be easier to assess how likely it is.

[Revelate]

DOLA is generally DOLU when it comes to the bureaus and FICO.

As long as the lender keeps reporting the balance every month, it's not any issue even if the balance stays fixed for extended periods of time.  Where this goes sideways is lenders like Synchrony which don't report a statement if it's $0 and maybe there's some inactivity flag which we've never found.  This would tie in there if it exists in my opinion.

Likewise monthly payment isn't factored from any of the data we have or understand, it is used in DTI calculations which is why it's on the report really and I'm almost 100% confident that various UW does look at it but at least for all current FICO algorithms it doesn't matter.

This may change if we get to trended payments in FICO 10 / VS 4 or whatever, I have no idea how it's going to look at an installment tradeline with $0 for payments... I'm hoping no news = good news on that front haha, should be on credit cards theoretically, hopefully it will be here too.

And in news of the personally wierd, I have floated my auto loan balance when I was between gigs, prior to that I was paying it down aggressively but when I go into a cash conservation state, that includes auto loans in terms of minimum payments which in this case was $0 from the prepayments.

[SouthJamaica]

---

@Anonymous wrote:

Sorry I was unclear.  I totally understand what a monthly payment is for an installment loan and that it is calculated at month 0 when the loan is first taken out.  I realize it appears on one's reports..  And I totally get how paying down a loan with a huge payment early on would give you the practical freedom to pay $0 per month or a much smaller monthly amount if you wanted to.  (This assumes that the lender doesn't continue to force you to make the same MP as before -- some do that.)

So all this I understand.

What I was asking is whether you had some kind of idea -- any idea -- how FICO 8 (or an earlier model) could be using MP in its scoring model.  And if so if you could give a hypothetical example of how the model would use the MP.

For example, are you imagining that loans with big MPs might give you more scoring points than those with smaller MPs?

Again, I realize you are not saying that you think it would give you more -- or that you are saying that FICO probably does somehow use the MP field.  I am saying that I am having trouble imagining any way that they could use it in their model.  I was wondering if you had any ideas.

If you can throw out a hypothetical example, it might be easier to assess how likely it is.

---

I don't know enough about FICO algorithms and factors to do that. I'm just wondering if somehow having that fictionally large monthly payment hurts in some way.

[SouthJamaica]

---

@Revelate wrote:

DOLA is generally DOLU when it comes to the bureaus and FICO.

As long as the lender keeps reporting the balance every month, it's not any issue even if the balance stays fixed for extended periods of time.  Where this goes sideways is lenders like Synchrony which don't report a statement if it's $0 and maybe there's some inactivity flag which we've never found.  This would tie in there if it exists in my opinion.

Likewise monthly payment isn't factored from any of the data we have or understand, it is used in DTI calculations which is why it's on the report really and I'm almost 100% confident that various UW does look at it but at least for all current FICO algorithms it doesn't matter.

This may change if we get to trended payments in FICO 10 / VS 4 or whatever, I have no idea how it's going to look at an installment tradeline with $0 for payments... I'm hoping no news = good news on that front haha, should be on credit cards theoretically, hopefully it will be here too.

And in news of the personally wierd, I have floated my auto loan balance when I was between gigs, prior to that I was paying it down aggressively but when I go into a cash conservation state, that includes auto loans in terms of minimum payments which in this case was $0 from the prepayments.

---

So you're saying (a) it wouldn't factor into A's FICO score and (b) it might factor into a manual review.

Would it factor into an automated review?

[Anonymous]

As far as we know, installment loan utilization percentage is all that matters, never dollars.  This is one of the reasons why a $500 SSL seems to do the same trick at single-digit utilization that a significantly paid down auto loan, mortgage, etc. does with respect to scoring.  That said, if dollars aren't considered with respect to the original debt, I don't see how they would be considered on a month to month basis either.  This is of course nothing other than a gut feeling based on what we know of installment loans, but that's my thought process on it.