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Installment utilization do closed loans factor in?

Chandler455
Frequent Contributor

Installment utilization do closed loans factor in?

I have 4 loans paid down to close to 0 but i am getting dinged mortgage points for amount of accounts with balance if I close two of them do closed loans factor in to installment utilization or not thanks! Stupid question I figure not but you never know

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6 REPLIES 6
Dumbee
Established Contributor

Re: Installment utilization do closed loans factor in?

nope, they don't

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BrutalBodyShots
Super Contributor

Re: Installment utilization do closed loans factor in?

You are looking at 2 different factors... [installment] loan utilization and accounts with balances.  It sounds like you're only considering the utilization end of it and not the accounts with balances.

 

Taking 2 non-zero balance accounts down to 0 of course results in 2 less accounts with balances, which is a factor that Fico scores especially those of the mortgage flavor are very sensitive to.  Reducing this number by 2 could raise your mortgage scores.

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Chandler455
Frequent Contributor

Re: Installment utilization do closed loans factor in?

I'm not buying a house soon, but I'm assuming my profile would be more appetizing not having 4 open loans I'm guessing my best move to maximize all scores would be to pay all down except one to under 9% to maximize mortgage points and regular points

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Business
Costco visa 10k | Amex Amazon prime 9k

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Message 4 of 7
BrutalBodyShots
Super Contributor

Re: Installment utilization do closed loans factor in?

It would be, definitely.  Also remember that any open loan balances / monthly payments are factored into DTI, another important factor considered when entering the mortgage process.  Eliminating those open loan balances will remove debt from the numerator of the DTI equation, thus lowering DTI percentage and strengthening your profile.

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SouthJamaica
Super Contributor

Re: Installment utilization do closed loans factor in?


@Chandler455 wrote:

I have 4 loans paid down to close to 0 but i am getting dinged mortgage points for amount of accounts with balance if I close two of them do closed loans factor in to installment utilization or not thanks! Stupid question I figure not but you never know


You're mixing up different things.

 

Aggregate installment utilization percentage is one thing. No a closed loan is not counted in installment utilization.

 

Accounts with balances is a totally different thing. It includes both revolvers and installment loans. Closed installment loans with no balance are not counted in accounts with balances.

 

If you have 4 loans and each is paid down to 9% or less of the original loan amount, and you pay 2 of them down to zero.....

(a) you will have reduced your accounts with balances by 2, which may help one or more of your scores and

(b) you may slightly increase your installment utilization percentage, but not enough to harm any of your scores

 

Message 6 of 7
SouthJamaica
Super Contributor

Re: Installment utilization do closed loans factor in?


@Chandler455 wrote:

I'm not buying a house soon, but I'm assuming my profile would be more appetizing not having 4 open loans I'm guessing my best move to maximize all scores would be to pay all down except one to under 9% to maximize mortgage points and regular points


Your mortgage scores are more sensitive to number of accounts with balances than they are to installment utilization percentage.

 

It's the FICO 8's and 9's that are highly sensitive to aggregate installment utilization percentage.

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