Multiple Personal Loans and Your Score

[Anonymous]

Hi, I heard that FICO doesnt like when people have a certain number of personal loans open at one time and that this may lower your overall score. Does anyone know if this is true?

Also, precisely how many personal loans should one person have at one time, not including a mortgage, auto loan and student loan?

I am asking in terms of having a good credit mix that will help your score and not hurt it. Hoe many is too many and hoe mauch is not enough?

[Anonymous]

Really all that's recommended is one open loan at any given time and if that loan is paid down to a single-digit utilization percentage, it will aid in raising Fico scores.  Adding additional loans generally isn't going to accomplish much.  There's definitely no need to attempt to have a bunch of different kinds of loans (personal, mortgage, auto, student, etc) just for the sake of "credit mix."

What you want to look at when it comes to multiple loans is installment loan utilization overall.  Basically you take the sum of the amounts owed on all of your loans and divide that by the sum of all of the original loan balances.  Any time you add a new loan it will typically raise this percentage, as you're then factoring in a 100% utilization account. 

[SouthJamaica]

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@Anonymous wrote:

Hi, I heard that FICO doesnt like when people have a certain number of personal loans open at one time and that this may lower your overall score. Does anyone know if this is true?

Also, precisely how many personal loans should one person have at one time, not including a mortgage, auto loan and student loan?

I am asking in terms of having a good credit mix that will help your score and not hurt it. Hoe many is too many and hoe mauch is not enough?

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Interestingly, I just had the experience of closing out 5 of my 6 personal loans. It seems to have added points to two of my mortgage scores, EQ FICO 5 and EX FICO 2. It does not seem to have improved my FICO 8's at all. So my experience suggests that the answer to your question might be : one.

I doubt this has anything to do with credit mix.

[Anonymous]

One is fine

Multiple will probably ding your score across versions like mortgage and auto due to: 'too many credit accounts reporting a balance'

Only reasons I've used multiple is because:

I don't care about maximizing my score in the short term

Fatten my report with loans and extra on-time payments, instead of a ton of cards and 1 loan

They're all credit union loans which look nice

[Anonymous]

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@Anonymous wrote:

Hi, I heard that FICO doesnt like when people have a certain number of personal loans open at one time and that this may lower your overall score. Does anyone know if this is true?

Also, precisely how many personal loans should one person have at one time, not including a mortgage, auto loan and student loan?

I am asking in terms of having a good credit mix that will help your score and not hurt it. Hoe many is too many and hoe mauch is not enough?

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@Anonymous Credit Mix has 3 metrics we are aware of, diversity, quantity of bankcards, and loan:revolver ratio.

Diversity is satisfied by having one non-mortgage loan, one national bankcard, and perhaps maybe one other type, like retail, chargecard, or mortgage loan. Closed tradelines are believed to count for this metric.

quantity of bankcards is important to maximize credit mix. I believe 5 to 7 bankcards is sufficient, some believe a couple more, but under 10 is enough. 

Revolver:Loan ratio has not been studied extensively, but it is believed a ratio of 3:1 or 4:1 is optimal, however this metric is not believed to be very influential.

So the algorithm is more worried about you having too many revolvers than too many loans; however keep in mind each additional loan you have increases the accounts with a balance Metric which can be counterproductive if there's too many, especially if you have a low quantity of accounts, increasing the ratio. 

[UpAndComing74]

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@Anonymous wrote:

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@Anonymous wrote:

Hi, I heard that FICO doesnt like when people have a certain number of personal loans open at one time and that this may lower your overall score. Does anyone know if this is true?

Also, precisely how many personal loans should one person have at one time, not including a mortgage, auto loan and student loan?

I am asking in terms of having a good credit mix that will help your score and not hurt it. Hoe many is too many and hoe mauch is not enough?

---

@Anonymous Credit Mix has 3 metrics we are aware of, diversity, quantity of bankcards, and loan:revolver ratio.

Diversity is satisfied by having one non-mortgage loan, one national bankcard, and perhaps maybe one other type, like retail, chargecard, or mortgage loan. Closed tradelines are believed to count for this metric.

quantity of bankcards is important to maximize credit mix. I believe 5 to 7 bankcards is sufficient, some believe a couple more, but under 10 is enough. 

Revolver:Loan ratio has not been studied extensively, but it is believed a ratio of 3:1 or 4:1 is optimal, however this metric is not believed to be very influential.

So the algorithm is more worried about you having too many revolvers than too many loans; however keep in mind each additional loan you have increases the accounts with a balance Metric which can be counterproductive if there's too many, especially if you have a low quantity of accounts, increasing the ratio.

Question please.  I have a similar situation but much less util.  Do mortage scores react to number of accounts with balances? I have 6 accounts with balances that I can go to 3. Will this help Mortgage scores? 

2 Auto Loans/3 Student Loans.   One Auto only has $800 remaining and 2 Student Loans Combine for $2000. I can pay them off or pay them all the way down to keep util factored in.

Also, if I pay off an account, does it still age and count towards my AAoA.  Student loans are18 years and I do not want to lose that by payinhg it off.   THANKS

[Anonymous]

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@UpAndComing74 wrote:

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Question please.  I have a similar situation but much less util.  Do mortage scores react to number of accounts with balances? I have 6 accounts with balances that I can go to 3. Will this help Mortgage scores? 

2 Auto Loans/3 Student Loans.   One Auto only has $800 remaining and 2 Student Loans Combine for $2000. I can pay them off or pay them all the way down to keep util factored in.

Also, if I pay off an account, does it still age and count towards my AAoA.  Student loans are18 years and I do not want to lose that by payinhg it off.   THANKS

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I believe you received the answers to your questions in another active thread, but to recap:  Closed accounts count the same as open accounts toward your age of accounts.  Closing 2 student loans that have 18 years of age will allow those 18-year accounts to still factor into your age of accounts even when closed, so long (usually about 10 years) as they remain on your CR.  Yes, mortgage scores are sensitive to number of accounts with a balance.  If you were to bring 3 accounts that currently have non-zero balances to $0 that should help your mortgage scores.  How much sort of depends on profile, so the others may be able to give you a better idea.

[UpAndComing74]

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@Anonymous wrote:

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@UpAndComing74 wrote:

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Question please.  I have a similar situation but much less util.  Do mortage scores react to number of accounts with balances? I have 6 accounts with balances that I can go to 3. Will this help Mortgage scores? 

2 Auto Loans/3 Student Loans.   One Auto only has $800 remaining and 2 Student Loans Combine for $2000. I can pay them off or pay them all the way down to keep util factored in.

Also, if I pay off an account, does it still age and count towards my AAoA.  Student loans are18 years and I do not want to lose that by payinhg it off.   THANKS

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I believe you received the answers to your questions in another active thread, but to recap:  Closed accounts count the same as open accounts toward your age of accounts.  Closing 2 student loans that have 18 years of age will allow those 18-year accounts to still factor into your age of accounts even when closed, so long (usually about 10 years) as they remain on your CR.  Yes, mortgage scores are sensitive to number of accounts with a balance.  If you were to bring 3 accounts that currently have non-zero balances to $0 that should help your mortgage scores.  How much sort of depends on profile, so the others may be able to give you a better idea.

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Sorry to harp and cross post. But I trust answers in quantity.  Last question as I am prepared to go pay off 3 accounts as I type....Does the "Accounts with Balances" matter if the accounts are revolving or installment?

@Anonymous 

[Anonymous]

An account with a balance is any open account on your CR with a non-zero reported balance.  By default all open loans would constitute an account with a balance (as if they didn't have a balance, they'd report closed) and then any revolvers with a non-zero balance would count. 

[Anonymous]

I saw someone on Yoube say that everyone should have a minimum of two installment loans to achieve good credit. However, I've also heard other people say one is enough... How many installment loans do credit companies want to see on your report?