Shocking increase on loan utilization

[Gregory1776]

I had my loan @ 28% for a few months and prior just managing it. Always ahead. 
tax return and paid down to 8½% and got an enormous jump. More than expected.

22 points on experian, which is my lowest score of the 3 and I'm waiting and looking forward to seeing the increase on the other two.  MyFICO subscription is extremely slow updating and it's annoying. I am expecting to exceed 800

if you have any other questions on my profile feel free.

[Realist]

Utilization is a pretty big portion of the FICO score.  Upwards of 30% in which affects a positive or negative score.  To achieve the best score, try to target 1% to 10%.

For others reading, how does this play out?

Credit line total is:

1.   $1000.  You exceed 10% at $100 dollars.  Easy to exceed.

2.  $10000.  You exceed 10% at $1000 dollars.  Still easy to exceed.

3.   $100,000.  You exceed 10% at $10,000 dollars.  Now it becomes more difficult to manage the payments on $10k.  Unlikely to max out.

4.   $1 million.  You won't likely exceed 10% at $100,000.  Affordability issues.

This is why the more credit you hold, the less utlization matters.

If you hold $500,000 in credit line totals, do people think they'll realistically hold $50k in debt?  Maybe $5k per month, but that's a 1% utilization ratio, and yet the debt is still servicable.  This means your FICO score is golden.  It's too much credit to use in your daily life, but too little in percentage, to matter to your FICO score utilization formula.

Abuse your credit to your advantage, by understanding the scores in which you are graded.  Use credit responsibly.

[JoeRockhead]

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@Realist wrote:

Utilization is a pretty big portion of the FICO score.  Upwards of 30% in which affects a positive or negative score.  To achieve the best score, try to target 1% to 10%.

For others reading, how does this play out?

Credit line total is:

1.   $1000.  You exceed 10% at $100 dollars.  Easy to exceed.

2.  $10000.  You exceed 10% at $1000 dollars.  Still easy to exceed.

3.   $100,000.  You exceed 10% at $10,000 dollars.  Now it becomes more difficult to manage the payments on $10k.  Unlikely to max out.

4.   $1 million.  You won't likely exceed 10% at $100,000.  Affordability issues.

This is why the more credit you hold, the less utlization matters.

If you hold $500,000 in credit line totals, do you realistically think your going to hold $50k in debt?  Maybe $5k per month, but that's a 1% utilization ratio, and yet the debt is still servicable.  Which means your FICO score is golden.  It's too much credit to use in your daily life, but too little in percentage, to matter to your FICO score formula.

Abuse your credit to your advantage, by understanding the scores in which you are graded.  BUT, borrow, create, and use credit responsibly.

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Revolving utilization (30% of your score) and loan balances are two completely different metrics.  Loan balances aren't factored into one's credit utilization.  They're looked at, and scored separately, such as aggregate balances to loans ratio.  The most significant threshold for scoring with loans is when the only open loan someone has goes below a 9% B/L ratio.  There's usually a significant score boost at that time of around 20 to 30 points.  

[Realist]

I read this one snippet not long ago.  I thought it was pretty noticeable in it's reply, in which is why I'll post it here now.

FICO scoring and these forums

As users of this forum have or will come to learn, there are certain observations that can be said about FICO scoring:

- we have come to know GENERALLY how FICO scoring works,

- we have come to know A LOT about how certain aspects of scoring works, BUT

- we have come to know that we do not know EXACTLY how all of FICO scoring works.

FICO's approach to performing credit scoring is proprietary, meaning that it is private. The folks at FICO knows how their scoring systems work. The rest of us take increasingly educated guesses at learning the finer points of those scoring models, and we come to forums like this to learn for ourselves how to understand, improve and manage our scores, and to help others to learn as well.

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It is logical that utilizaton and total available credit are two different metrics, but it's not logical to suggest that they don't factor into a FICO score collectively.  Through a series of many impactful inputs and events, you end up with a monthly FICO score.  We shouldn't look at this only through one lens, unless that lens is all we have available to us.

In a scenario where an individual holds five, (5) credit card lines of $100,000 each, their total available credit amounts to $500k.   Now, should this same individual go out and acquire a Home Depot or Lowes card card (for a project, and this is very doable), and place well over half or more of the balance onto these cards limit, the individual utilization score gets blown out of the water specific to that card.  They are now well over the 10-30% threshold on that credit card alone, but much less than 1-3% in overall total utilization in this ultilization event.

In this scenario above, it suggests that by merely acquiring one or two cards in this fashion, you should be able to temporarily crater a well established, thick credit profile, simply by acquiring a few meager or lower limit credit lines, and pushing those balances too high.  This seems insincere to me, and not a real representation, nor reflection on what will actually occur to your FICO score - especially if you are well established.

I mention this scenario above, because something like this had occurred - without the drastic effect some might anticipate.  It actually wasn't much of anything at all.  I mentioned in prior posts, yes it's possible to hard inquiry six times, and still increase your FICO credit score.   Everyone believes they know, that your FICO score should only drop in those scenarios, so I will reference the snippet above.

It may be true that certain metrics are captured at the time of a new credit line acquisition, and again captured when certain metrics are arrived at, depending on the debt load on that specific card.  But do you know who sees the larger picture of all individuals debt, of all active balances, among all available credit, and formulates one simple monthly score from all of that information?  FICO.  Everyone's weighted profile is going to be different.  For some, some credit moves will hurt, a lot.  For others, you may come to find not so much at all.  A negative event may not affect others in the same way.

I've used this example before to reference a point.  How do we not know FICO doesn't operate in a similar type fashion?   It's plausible.

Buy a new car, and your average MPG guage will bounce up and down like crazy.  But in time, it will solidify and reflect a more accurate picture.  Season that same mpg without reset, without doing something silly or worse, for ten, twenty, thirty years, and then you can floor it for miles, and that average mpg won't move much at all.  That number is mostly locked in, short of anything severely drastic.  Now substitute mpg for credit profile, in which impacts FICO score.

[GZG]

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@Gregory1776 wrote:

I had my loan @ 28% for a few months and prior just managing it. Always ahead. 
tax return and paid down to 8½% and got an enormous jump. More than expected.

22 points on experian, which is my lowest score of the 3 and I'm waiting and looking forward to seeing the increase on the other two.  MyFICO subscription is extremely slow updating and it's annoying. I am expecting to exceed 800

if you have any other questions on my profile feel free.

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this is why SSLs are a thing 

https://ficoforums.myfico.com/t5/Personal-Finance/SSL-Share-Secured-Loan-Technique/td-p/6371294 

[Gregory1776]

@JoeRockhead Exactly what I experienced. 22 Pts Experian I'm just very surprised.
29%->8.5%. I wish I could have gotten more of it paid off sooner. Apr is 7% so never too worried about it. Focused on CC & savings.

I currently have two cards with balances that will be reporting, not PIF, rolling.

Next, I'll look forward to seeing the score changes at 29% (or whatever my card is at) & 8% on a cc with discover. 

[Gregory1776]

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@GZG wrote:

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@Gregory1776 wrote:

I had my loan @ 28% for a few months and prior just managing it. Always ahead. 
tax return and paid down to 8½% and got an enormous jump. More than expected.

22 points on experian, which is my lowest score of the 3 and I'm waiting and looking forward to seeing the increase on the other two.  MyFICO subscription is extremely slow updating and it's annoying. I am expecting to exceed 800

if you have any other questions on my profile feel free.

---

this is why SSLs are a thing 

https://ficoforums.myfico.com/t5/Personal-Finance/SSL-Share-Secured-Loan-Technique/td-p/6371294 

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Yes! I've had one with alliant FCU(?).

im trying to get one with a local credit union which is geo-fenced, small and I guess very tough to get into, considering opening too many savings accounts is not good in their eyes. 🫩

[GZG]

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@Gregory1776 wrote:

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@GZG wrote:

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@Gregory1776 wrote:

I had my loan @ 28% for a few months and prior just managing it. Always ahead. 
tax return and paid down to 8½% and got an enormous jump. More than expected.

22 points on experian, which is my lowest score of the 3 and I'm waiting and looking forward to seeing the increase on the other two.  MyFICO subscription is extremely slow updating and it's annoying. I am expecting to exceed 800

if you have any other questions on my profile feel free.

---

this is why SSLs are a thing 

https://ficoforums.myfico.com/t5/Personal-Finance/SSL-Share-Secured-Loan-Technique/td-p/6371294 

---

Yes! I've had one with alliant FCU(?).

im trying to get one with a local credit union which is geo-fenced, small and I guess very tough to get into, considering opening too many savings accounts is not good in their eyes. 🫩

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penfed, while not a great CU IMO, does offer a working SSL and it's open to all if you can't get into nfcu

https://ficoforums.myfico.com/t5/Personal-Finance/Successful-PenFed-SSL-Loan/td-p/6773999 

[Gregory1776]

@GZG @Yes I am in with them, but I'm considering closing all my accounts with them as I cannot grow them. I should have asked for a CLIs on my PCR years ago to something more usable - it's stuck at 2.5kSL and I was maxing it out frequently.

last time I went over my limit I PIF and locked it. I want it for the age and hopefully they'll change policy's but paying the card in app is extremely annoying, leading to frustrations for me... 

[FicoMike0]

I was turned down by penfed for their pathfinder card, ba$tards! In their letter, they explained one factor was my fico9 score of 850. I decided their cards are not for me.

Still, they give good ssl. A little tricky, but works fine, no payment due until late 2030 for me. The app is slow, but I only make a payment twice a year. As far as using other cus, as far as I know, only pen and nfcu allow prepayment without accelerating the loan term. This is the trick which makes the ssl work! Otherwise, you get maybe a six month score boost, then the loan is paid. Penfed will go as long as 142 months.