Question for FICO Experts: Will Installment Loan Improve Experian FICO 2 Score?

[Anonymous]

Note to SouthJ:  OK.  That's less crazy sounding.  I was always puzzled by what I had thought you had seen -- namely that exactly one of TU or EQ got a boost while the other one remained unchanged.  Given that the two mortgage scores both use FICO 04 that seemed really weird.  Now I realize that it was possible that both EQ/TU did behave the same way, but the specific loan did not report to both so you couldn't tell.

To summarize, as touches the OP's question, we don't know.    We have incomplete and conflicting data.  It remains one of the questions about FICO scoring that would be great to get an answer to, but which we have never found 4-5 people to carefully test. 

[Anonymous]

---

@seattlecredit08 wrote:

---

By the way, a slightly separate question-- what is the general consensus nowadays with respect to opening a brand new installment loan right before a mortgage application that will report as paid to 9% but will only show 1 month of history? 

Thanks!

---

Hi Seattle.  I am not sure how this new question is different from your first one.  Your initial question was (I think) which of the three bureaus get a boost (if any).  Unsure how this question is different.  Are you asking something like this?

Suppose we knew that it only boosts TU and EQ and has no effect on EX (or vice versa).  Does the boost take 3-4 months to realize in the mortgage models -- mutliple consecutive months of reporting the very low balance?  Or is one sufficient?

With FICO 8 it has happened instantly.  I am guessing the FICO mortgage models would be no different.

From what I can tell, a purely practical need (rather than theoretical speculation) is prompting this thread.  That practical need is buying a house in the very near future (e.g. next 45 days).  If so, then my bottom line is to lean toward not adding the loan.  We don't know what bureau it would help, we don't know how much, we don't know how fast.  We do know that old credit models can sometimes be sensitive to people opening new accounts in the previous 30 or 60 days.  A strategy that may not help and if so it's unclear how, and could hurt and that's a bit more clearly verified, is a strategy best avoided.  That's just my opinion.

[SouthJamaica]

---

@seattlecredit08 wrote:

---

@SouthJamaica wrote:

---

@Anonymous wrote:

SJ, when you say that TU reacted significantly, can you quantify that in number of points?

---

Yes. It was a 13-point move (as compared to a contemporaneous 37 point move in FICO 8).

---

Very interesting. Was this a 13-point move with the balance of the installment loan already reporting under 9%?

It occurred when the installment utilization went down to 9%

And did the new instllment account impact AAOA at the time?

Yes but that had occurred in an earlier billing cycle.

By the way, a slightly separate question-- what is the general consensus nowadays with respect to opening a brand new installment loan right before a mortgage application that will report as paid to 9% but will only show 1 month of history? 

I don't know what the consensus is, but my advice would be NOT to do it.

Thanks!

---

[SouthJamaica]

---

@Anonymous wrote:

Note to SouthJ:  OK.  That's less crazy sounding.  I was always puzzled by what I had thought you had seen -- namely that exactly one of TU or EQ got a boost while the other one remained unchanged.  Given that the two mortgage scores both use FICO 04 that seemed really weird.  Now I realize that it was possible that both EQ/TU did behave the same way, but the specific loan did not report to both so you couldn't tell.

To summarize, as touches the OP's question, we don't know.    We have incomplete and conflicting data.  It remains one of the questions about FICO scoring that would be great to get an answer to, but which we have never found 4-5 people to carefully test. 

---

Yeah, I just don't know what EQ would have done, had it known