Why Do I Have To Have A Loan Or Mortgage?

[Anonymous]

I recently requested an increase on one of my credit cards and received the following turn-down notice:

Score is 726

"

Your FICO® Credit Score is affected by the Key Factor(s) below:

1. 1. % OF BALANCES TO CREDIT LIMITS IS TOO HIGH ON REVOLVING ACCOUNTS:

   Your account balances are too high in relation to your accounts' credit limits.

2. 2. LACK OF RECENT INSTALLMENT LOAN INFORMATION:

   Your report shows no open or recently reported non-mortgage installment loans. People responsibly using different types of credit are generally less risky to lenders.

"

RE: #1 All of my cards have a zero balance, too recent to be evaluated I guess

RE: #2 I don't understand this one as my house has been paid off for many years and both of my cars have been paid off for a long time.

[Gunnar419]

The good news is that you DON'T have to have an active mortgage or auto loan.

When you get denied credit or get approved on less than the best terms, they ALWAYS list some reasons. Sometimes, those reasons are head shakers. However, I can just about promise you that the lack of installment loans was NOT the reason you were denied. It was almost certainly the first reason. So work on that and try again. (BTW, just as they don't like high util, they also don't like zero balances across the board on all cards.)

And don't worry about getting any loans. Enjoy the rewards of getting debt free.

[Anonymous]

That's what I thought, thanks for the reassurance. By "zero balance" I mean that I pay any balance when due as I hate interest - why should I pay 10% more for something than what it's worth, etc.

[HiLine]

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@Anonymous wrote:

I recently requested an increase on one of my credit cards and received the following turn-down notice:

Score is 726

"

Your FICO® Credit Score is affected by the Key Factor(s) below:

1. 1. % OF BALANCES TO CREDIT LIMITS IS TOO HIGH ON REVOLVING ACCOUNTS:

   Your account balances are too high in relation to your accounts' credit limits.

2. 2. LACK OF RECENT INSTALLMENT LOAN INFORMATION:

   Your report shows no open or recently reported non-mortgage installment loans. People responsibly using different types of credit are generally less risky to lenders.

"

RE: #1 All of my cards have a zero balance, too recent to be evaluated I guess

RE: #2 I don't understand this one as my house has been paid off for many years and both of my cars have been paid off for a long time.

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The loans being paid off implies that there is no recent loan information...

[Anonymous]

Yes of course but it implies that it is being held against me or else there would be no reference in the notice.

[NRB525]

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@Anonymous wrote:

Yes of course but it implies that it is being held against me or else there would be no reference in the notice.

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Did you only just pay down the balances on your credit cards? Your comment in the first post implies there was recent payment?

[Anonymous]

There was only one balance - Discover - that I carried for 90 days and therefore utilization was abnormally high. I only have three other cards, a MC through Capital One and a debit card also through Cap One -  Exxon gas card with a $600 limit. This all started as a challenge by my son who has a dozen cards and a FICO over 800. He said mine is lower because I pay CASH and challenged me to request a credit line increase on the Exxon Card. The notice I posted was from Exxon. My house has been paid off since 1988 and both my cars are paid in full. My Honda Van at first had to be financed ( long story ) and was paid off in 6 months, 2 years ago and hence no mortgage or loan info on record I would assume. If I need to borrow money - at 71 yo highly unlikely - I have a 200k LOC on my brokerage account and I can borrow my own money at prime rate, etc.

[CreditDunce]

The reason you were not approved for the CLI on the Exxon card probably didn't have much to do with your credit score.  They may think you aren't using the card enough, etc.  But you can certainly call them to ask for reconsideration.   Personally, I wouldn't worry about CLI's unless you are using more than 30% of the credit limit.  But I am in the minority on this board.  Most people want as big of a credit limit as they can get.

FICO does penalize you if you don't have an open installment loan.  You could get a shared secured installment loan from your local credit union if you needed a higher credit score.  But why bother?   Unless you are planning on buying another house, your FICO score is high enough to be approved for just about anything you want.

Here is a thread about how to go about adding a shared secured loan.  I am not advocating you get a shared installment loan.  However, it would address one of the reasons you FICO score is not higher:

http://ficoforums.myfico.com/t5/Understanding-FICO-Scoring/penalized-for-not-having-installment-loan...

If you just want a higher score, then a higher credit limits do not directly give you a higher score.  FICO scores you based on your credit utilization.  A higher credit limit makes it easier to have a lower utilization.  To game the system, you just need to make sure you have one credit card report a balance between 1-9% of your available credit on that credit card.  All of your other credit cards should report a $0 balance.    Assuming you are using all of your credit cards, this may mean you have to pre-pay before the statement cuts.

Have you ever had an American Express?    If so, getting another one may increase your credit score.  Let's say you had an Amex green card back in 1985.  If you get another one now, it will show up on your credit report as a 30 year old credit card, boosting your credit score.  If so, I would look at the Amex EveryDay or the Amex Blue Cash Everyday cards.  Neither has an annual fee.  If Amex does not show your correct Member Since Date (MSD), then you may need to contact them to correct it.

[Anonymous]

It must have been the FICO score because I use the card at a minimum of twice monthly. I dunno and don't really care as like I said it was basically a challenge from my son. I don't need credit, I have cash available for most anything I want or need via my brokerage account which is quite enough to last for the next 20 or so years. Thanks for all the replies, much appreciated.

[cashnocredit]

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@Anonymous wrote:

It must have been the FICO score because I use the card at a minimum of twice monthly. I dunno and don't really care as like I said it was basically a challenge from my son. I don't need credit, I have cash available for most anything I want or need via my brokerage account which is quite enough to last for the next 20 or so years. Thanks for all the replies, much appreciated.

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Hey, you sound like me!

I used to only pay cash or debit. I liked the convenience but it had the downside that all history of credit usage disappeared. PITA to rent a car.  I had to start off reparing my situation by getting a couple of secured cards with the highest deposits I could find. That worked and my scores are now, 6 years later, in the 800s. Only CCs are reporting.