Question on small score increase

[mrsmc]

I had 21k in up to date student loan balance until 12/2011; by 2/2012 my FICO went from 698 to 700. I only have about 1k balance of other accounts so I wonder why my FICO only increased 2 points with such a huge deduction in balance.

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Hi mrsmc and welcome to the forums.

I split your post to form a new one here. It gets very confusing when different questions are asked within the same thread. I had to edit the title, but changed nothing else. If you'd like to change the title, click "Options" and then "Edit Message".

MarineVietVet, myFICO moderator

[Anonymous]

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@mrsmc wrote:
I had 21k in up to date student loan balance until 12/2011; by 2/2012 my FICO went from 698 to 700. I only have about 1k balance of other accounts so I wonder why my FICO only increased 2 points with such a huge deduction in balance.

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Student loans and other installment loans don't count towards utilization.  Utilization is calculated by the amount you owe on revolving accounts (credit cards) over total available credit.  You want this utilization less than 30% for sure, and ideally less than 9%.

[RobertEG]

Installment loans do count in the category of Utilization of Credit, just not in revolving utilization.  FICO perceives balance owed on installment loans to be much less indicative of risk of future delinquency than does % use of discretionary, revolving credit.  But it is obligated credit, affecting your ability to pay, and is scored.

My guesstimate is that revolving accounts for over 90% of your util of credit, so intallment balance on loan is not a biggie. 

[vanillabean]

It's only fair that the utilization of installment loans is considered as well. And I do remember someone mentioning a while back than his scores increased some with an installment loan paid down to 10% compared to when it was at 90%. Everything is relative of course, so maybe ten points or so.

Still, the dilemma is that good credit can bring you some very low interest levels on mortgage and installment loans, so why would you want to pay them off any sooner than already agreed upon? By waiting, you have inflation working for you, and mortgage loans are even tax-deductible.

I do conceed though there's much to be said for being debt-free! A current article, Why Your Credit-Card Debt Won't Die, touches on the psychology of all of this.