Strategy opinions.

[lordofentropy]

Hi folks, wanted to get some opinions here. I realize that noone truly knows the exact effect some actions will have on scores from individual to individual, but I'm hoping for general experience and observations.

One of the positive factors listed on for my scores is "high number of accounts reporting current and paid as agreed." This is counter-balanced by a negative factor for "too many installment accounts." Using a simulator, it estimates that if I can get the number of my installment accounts to 3 to 4, instead of 6, I could see around a 40 point score increase.

So looking at my installment accounts to find the two with the lowest balances, thus faster to pay off, I calculated the effects of paying them off on AAoA. After the first one is paid off, my AAoA drops about 2 months. After the second one is paid off, the AAoA increases about 10 months.

So the question comes down to, should I expect more score gain from:

A. Paying down two installment loan TLs, dropping my number of installment accounts to 4. Doing this, I take care of the negative "too many installment accounts", while possibly affecting the positive "number of current accounts." I get a 10 month AAoA increase this way as well.

or

B. Don't pay down two loans any faster thus keeping a larger number of positive current accounts, perhaps at the expense of "having too many installment accounts."

I only have 1 revolving account so both positive and negative references to the number of accounts is certainly related to the installments (student loans).

Thanks!

[llecs]

...as we say...YMMV.

Are your scores/simulator from myFICO.com? While "too many installment accounts" is a FICO reason code, I don't think the other is one. PLUS scores have something ver similar with "high number of accounts reporting current and paid as agreed". Let us know. There's never a correlation between a FICO and FAKO. One can go up and the other down for the exact same event.

Proceeding on the assumption that it is from myFICO, if a positive factor lists "high number of accounts reporting current and paid as agreed", where on the 1-4 score does that lie? Always remember that in FICO scoring, and due to scoring buckets, that positive item will always change position.

In terms of FICO scoring, AAoA factors in ALL OC accounts, whether they are opened or closed, good or bad. Paying off a loan will have no impact on your AAoA. I'd consider paying off one or more to save interest, though.

If you only have one CC, you'd benefit by adding another.

[RobertEG]

I am trying to figure out the direct connection between the perceived number of installment accounts you have open and your risk of delinquency, which is what FICO basically is.

Maybe it is tied more to the monthly installments due than the number of accounts.  Or maybe it is pegged to the % of original loan balance still due.

You definately want a mix of credit, so keeping at least one or two is beneficial.  So retaining a mortgage and a longer term installment, such as an auto, would in my opinion be desirable.  Which others to pay first would seem to me to be dependent upon the real issue that FICO perceives.  I am not sure what that issue is.

Maybe others with more extensive installment loan usage can offer their experiences.....

[lordofentropy]

Thank you for the input. I misunderstood AAoA, I thought it was based solely on open accounts so I'll remove that from consideration. The information is certainly FAKO as I am getting the information from the Experian website service; also why I didn't bother posting specific score information. I was looking for general guidelines/experience, as I know it changes from person to person. The simulator I used was also from the Experian site.

The exact negative factor listed for the installment loan number is:

• Although having installment loans, such as auto loans, on your credit report can help you build a solid credit history, having too many installment loans can bring your score down because they carry fixed monthly payments. Fixed payments are sometimes viewed by lenders as negative because they may affect your ability to meet other loan obligations.

I don't have the exact positive factor—something along the lines of "high number of accounts reporting current and/or paying as agreed"—I mentioned available anymore, as it was on my report from myfico.com's trial and that ended, but it was close to what I mentioned.

But taking some of the tidbits you folks offered, it sounds like the decision to pay a couple of the installment lines off faster is likely purely financial, i.e. saves money in interest, versus really affecting my credit scores. Another CC isn't in the cards at the moment as I don't have the scores for approval, so I'll just have to let time pass and raise the scores the old fashioned way.

[llecs]

There are some FAKOs out there, like TransRisk, Vantage, and now PLUS appearantly, where AAoA is calculated on open accts only. But in the realm of FICO, they are included so as long as they report. 

Also, ignore their advice. A lot of it is counter-productive to FICO's advice. In some cases, taking their advice can actually hurt your FICO score.