Revolving debt & auto loans

Anonymous · ‎03-20-2008

So new revolving debt & revolving debt w/ high limits are negatives on your credit score...

What about new auto loans? Once it's a year old, it's not so "new" anymore, but still has a pretty high am't due.

I see lots of talk about people paying down cc's but not much mention of them paying down auto loans to increase scores.

CreditBob · ‎03-20-2008

Once your account is twleve motnhs old (1 year) it is no longer considered a new account. It takes four years for an account to become well established. So pay on your auto loan for a minimum of four years. Pay down your balance by at least 20%. So if the original amount of the loan was $ 20,000 pay it down to $ 16,000 to see what happens. Keep in mind that the new balance will not reflect the score right away. So wait at least a month after you bring the balance down.

tonsers · ‎03-22-2008

@Anonymous wrote:
So new revolving debt & revolving debt w/ high limits are negatives on your credit score...
What about new auto loans? Once it's a year old, it's not so "new" anymore, but still has a pretty high am't due.
I see lots of talk about people paying down cc's but not much mention of them paying down auto loans to increase scores.

Balance on CCs and installment loans are seen completely differently. Installment loans on things like a car or house have collateral so are not as risky as CC debt.

Just before I found these forums, I was in a rush to pay off my car. I made extra payments, paid a 4 year loan off in just over 2 years. What happened to my score? Went down 10 points....

haulingthescoreup · ‎03-22-2008

@Anonymous wrote:

So new revolving debt & revolving debt w/ high limits are negatives on your credit score...
What about new auto loans? Once it's a year old, it's not so "new" anymore, but still has a pretty high am't due.
I see lots of talk about people paying down cc's but not much mention of them paying down auto loans to increase scores.

I just got dinged for a new (new loan, old car, lol) which is so new that it still shows $12K due on a $12K loan. I'm going to do an early paydown on it to see if it will stop being cranky. Once that happens, I'll just pay it at the regular rate.

But it is very true that revolving util and installment util are calculated separately. You can have a higher util on installment without being punished, and even then, it is a much lower fraction of your score.

* Credit is a wonderful servant, but a terrible master. * Who's the boss --you or your credit?
FICO's: EQ 781 - TU 793 - EX 779 (from PSECU) - Done credit hunting; having fun with credit gardening. - EQ 590 on 5/14/2007

MidnightVoice · ‎03-22-2008

haulingthescoreup wrote:

I just got dinged for a new (new loan, old car, lol) which is so new that it still shows $12K due on a $12K loan.

I think it really depends on your overall credit picture. Before Xmas I got an Amex. After Xmas I got a car loan. In January they all posted and zero score change. So I chug along in the 780s and wait for everything to get over a year old

The slide from grace is really more like gliding
And I've found the trick is not to stop the sliding
But to find a graceful way of staying slid

haulingthescoreup · ‎03-22-2008

@MidnightVoice wrote:
@haulingthescoreup wrote:
I just got dinged for a new (new loan, old car, lol) which is so new that it still shows $12K due on a $12K loan.
I think it really depends on your overall credit picture. Before Xmas I got an Amex. After Xmas I got a car loan. In January they all posted and zero score change. So I chug along in the 780s and wait for everything to get over a year old

I'm sure you're right. And my poor picture is so messed up that there's no way that I can isolate what score change resulted from what. I just got this flag on one of my reports --maybe TU? but not all three, now that I think about it.

----------
Nope, it was Experian. And once the rest of the new accounts hit, it stopped displaying:

The remaining balance on your non-mortgage installment loans is too high.

Your FICO score weighs the balances of your non-mortgage installment loans (such as auto loan or student loans) against the original loan amounts. In general, when you first obtain an installment loan your balance is high, and as you pay this loan down, the balance decreases.

This is my only non-mortgage installment loan. (I paid off the student loans.)

* Credit is a wonderful servant, but a terrible master. * Who's the boss --you or your credit?
FICO's: EQ 781 - TU 793 - EX 779 (from PSECU) - Done credit hunting; having fun with credit gardening. - EQ 590 on 5/14/2007

RobertEG · ‎03-22-2008

Revolving util counts 4-5 times more on your credit score than install util. So, of the total of 30% of overall score that FICO uses for %util, install util is minimal in comparison to revolv util. Remember also that FICO is not a one-category algorithm. Credit mix also counts. Install %util is less than 10% of your FICO score. Credit mix is the same %. So if you have only one install loan, and pay it off first rather than using the same $ towards revolving % util, you have lost the higher bang for the buck in the % util category, and also may harm your credit mix category by no longer having that install loan included within your mix.