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Ratio of loans:revolvers

Super Contributor

Ratio of loans:revolvers

So, I saw in a fico slide that the algorithm considers the ratio in the Mix category. 

Any info, DPs, or insights anyone? It's usually said another loan/SSL wouldn't help someone, but if one has many cards, they could be leaving points on the table, if the number of loans is less than the ideal unknown ratio. But I'm wondering if it also includes closed loans. 

Anyway big unknown. Seeking info and feedback. 

-Our Community’s updated scoring wisdom: Link to Scoring Primer.
-For Negative Reason Codes see: CassieCard’s Score Factors thread.
-ccquest’s workbook to calculate metrics for you: Link to Workbook.

Oct 2020 New Account Scorecard.Nov 2020, No New Account Scorecard (reassignment conflated with aging. EX9 not updated yet. Oldest/avg varies. Estimates above.)
Real world mortgage maxes are: EQ5-818, TU4-839, EX2-844.


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(Everything said is JMHO and is not endorsed by FICO or MF. I have no affiliation with either, just a grateful member.)
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Established Contributor

Re: Ratio of loans:revolvers

Re: The below direct from FICO 

Main takeaway from that is someone from FICO said you should aim for 2-3 revolvers per installment. Not definitive that it helps.

 

In the Resilience thread, I think there was talk of the ratio being a thing for that score? Excessive revolvers to IAs bearing a penalty?


IME, I had 11 open revolver, 2 closed IA, 1 open IA; I added 3 more open IAs, no FICO 8 change.

 

Though, I was penalized across the other versions for too many credit accounts with balances, but that's independent of mix.

 

Closed accounts probably contribute to mix ratio if it exists in mainstream FICO vers.


Bust-out by Experian 

It may not be FICO, but internal algos + bust-out watch out for people with lack of or minimal installments.

Smiley Embarassed
Message 2 of 46
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Established Contributor

Re: Ratio of loans:revolvers

Somewhat OT, but that bust-out doc is super interesting.


Message 3 of 46
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Super Contributor

Re: Ratio of loans:revolvers


@Dumbee wrote:

Re: The below direct from FICO 

Main takeaway from that is someone from FICO said you should aim for 2-3 revolvers per installment. Not definitive that it helps.

 

In the Resilience thread, I think there was talk of the ratio being a thing for that score? Excessive revolvers to IAs bearing a penalty?


IME, I had 11 open revolver, 2 closed IA, 1 open IA; I added 3 more open IAs, no FICO 8 change.

 

Though, I was penalized across the other versions for too many credit accounts with balances, but that's independent of mix.

 

Closed accounts probably contribute to mix ratio if it exists in mainstream FICO vers.


Bust-out by Experian 

It may not be FICO, but internal algos + bust-out watch out for people with lack of or minimal installments.


@Dumbee wow great information thank you. I have no doubt that closed loans contribute to satisfying the portion of credit mix of simply having credit types, but I didn't know whether closed loans would also be considered in the separate metric of ratio, but based on reading those documents, I believe it does!

 

And I was aware if Bustout scoring, but that was a very informative white paper! on it. 

@Dumbee had more to say and hit post. Yeah that would make sense that you wouldn't see an increase because you were exceeding the ratio and we're already at the optimal prior to adding them. Also makes sense that you saw too many credit accounts with a balance rather than two many revolvers with a balance.

 

yeah the resiliency score definitely doesn't like a lot of cards. I had heard that ratio before but I'd never read the document and that thread. thank you

-Our Community’s updated scoring wisdom: Link to Scoring Primer.
-For Negative Reason Codes see: CassieCard’s Score Factors thread.
-ccquest’s workbook to calculate metrics for you: Link to Workbook.

Oct 2020 New Account Scorecard.Nov 2020, No New Account Scorecard (reassignment conflated with aging. EX9 not updated yet. Oldest/avg varies. Estimates above.)
Real world mortgage maxes are: EQ5-818, TU4-839, EX2-844.


RIP:
(Everything said is JMHO and is not endorsed by FICO or MF. I have no affiliation with either, just a grateful member.)
Message 4 of 46
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Valued Contributor

Re: Ratio of loans:revolvers


@Birdman7 wrote:

So, I saw in a fico slide that the algorithm considers the ratio in the Mix category. 

Any info, DPs, or insights anyone? It's usually said another loan/SSL wouldn't help someone, but if one has many cards, they could be leaving points on the table, if the number of loans is less than the ideal unknown ratio. But I'm wondering if it also includes closed loans. 

Anyway big unknown. Seeking info and feedback. 


The resiliency score flags individuals for having more than 75% of their accounts as revolvers.

 

Many say the basic (re)build kit includes 3 revolvers and an installment loan, meaning 75% of accounts are revolvers and 25% of accounts are installment products.

 

I wonder if this holds true beyond the resiliency score and baseline credit (re)establishment?

 

So if one were to have 9 revolvers, you would "need" 3 installment products for maximizing scoring?

 

I know it seems silly to require so mamy, but I am wondering outside of fico-land/churners/sub-chasers what the average number of CCs consumers carry?

 

According to EX in 2019, the number is 4 CCs. 

 

Thinking:

1 x mortgage

1 x auto (or other type of installment)

 

4-6 x CCs

 

Or

 

1 x auto

1 x SL

 

4-6 x CCs

 

Does that seem reasonable? Obviously the possibilities are endless that would keep one under the 75% threshold.

 

I guess this theory will need to be tested further.

 

I know once SLs are out of rehab, I will have 12 x SLs and SO will have 7 x SLs with each SL reporting individually (some are already consolidation loans). I guess that would keep us well under the 75% threahold for some number of apps in the future.

 

When the resiliency score came out that got me thinking about this question as well and while 1 satisfies credit mix, maybe it does only to a certain level?

 

I do know from the resiliency score perspective (only thing I have concrete info on) is that closed products do not count.




Starting Score: 2•20 | EQ 550 | TU 498 | EX 505
Current Score: 11•20 | EQ [F8 599] [F9 653] [EQ5 645] [VS3 645] | TU [F8 598] [F9 552] [TU4 563] [VS3 627] | EX [F8 584] [F9 573] [EX2 614] [VS3 631]
Goal Score: 680


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SO Starting Score: 2•20 | EQ 502 | TU 484 | EX 521
SO Current Score: 11•20 | EQ [F8 612] [F9 540] [EQ5 599] [VS3 556] | TU [F8 635] [F9 587] [TU4 608] [VS3 655] [VS4 634] | EX [F8 654] [F9 614] [EX2 634] [VS3 657]
Goal Score: 680


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Message 5 of 46
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Valued Contributor

Re: Ratio of loans:revolvers


@Dumbee wrote:

Re: The below direct from FICO 

Main takeaway from that is someone from FICO said you should aim for 2-3 revolvers per installment. Not definitive that it helps.

 

In the Resilience thread, I think there was talk of the ratio being a thing for that score? Excessive revolvers to IAs bearing a penalty?


IME, I had 11 open revolver, 2 closed IA, 1 open IA; I added 3 more open IAs, no FICO 8 change.

 

Though, I was penalized across the other versions for too many credit accounts with balances, but that's independent of mix.

 

Closed accounts probably contribute to mix ratio if it exists in mainstream FICO vers.


Bust-out by Experian 

It may not be FICO, but internal algos + bust-out watch out for people with lack of or minimal installments.


Well that throws my theory out, making my comparison to resiliency scoring worthless. It is good to know, though, that is comparing apples to oranges.

 

I am guessing Fico scores consider open and closed accounts while Resiliency scoring only factors open accounts.

 

Thx!




Starting Score: 2•20 | EQ 550 | TU 498 | EX 505
Current Score: 11•20 | EQ [F8 599] [F9 653] [EQ5 645] [VS3 645] | TU [F8 598] [F9 552] [TU4 563] [VS3 627] | EX [F8 584] [F9 573] [EX2 614] [VS3 631]
Goal Score: 680


Take the myFICO Fitness Challenge

SO Starting Score: 2•20 | EQ 502 | TU 484 | EX 521
SO Current Score: 11•20 | EQ [F8 612] [F9 540] [EQ5 599] [VS3 556] | TU [F8 635] [F9 587] [TU4 608] [VS3 655] [VS4 634] | EX [F8 654] [F9 614] [EX2 634] [VS3 657]
Goal Score: 680


Take the myFICO Fitness Challenge



Message 6 of 46
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Valued Contributor

Re: Ratio of loans:revolvers


@Birdman7 wrote:

So, I saw in a fico slide that the algorithm considers the ratio in the Mix category. 


You always find the best slides. Smiley Wink

 

My Credit Mix went from Fair to Very Good in the switch from 1 open loan to 1 closed loan and 2 revolving accounts (January 2019 myFICO 3B).

 

It's been at Very Good ever since - 2 additional revolving didn't change anything. The closed loan counts for something.

 

Tommy Lee (Director of Analytics Science at FICO):  "The same FICO analytics and data science team who work on developing the FICO Score also work on the analytics driving the myFICO ingredients."  (Link to his answer to my question)

27 FICO Scores + 3 VS3. MTG (Mortgage), AUT (Auto), and BKC (Bankcard) are scores 5,4, and 2 from the top.

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Message 7 of 46
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Super Contributor

Re: Ratio of loans:revolvers

If a closed loan and open loan count equally toward credit mix (which I believe most agree it does) I don't see why a fluff rating of "fair" or "very good" would change when the loan status changes.

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Community Leader
Mega Contributor

Re: Ratio of loans:revolvers

I've been denied CLIs lately with the ratio being one of the 4 reasons.







Message 9 of 46
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Established Contributor

Re: Ratio of loans:revolvers


@Brian_Earl_Spilner wrote:

I've been denied CLIs lately with the ratio being one of the 4 reasons.


What were your ratios at the times of those denials?


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