Worth getting SSL if I have a closed installment account already?

[Anonymous]

I'm looking to apply for an auto loan around July-August and was wondering if it's still worth it for me to open a SSL installment account right now. I currently have 3 open cards with a AAoA of 5.2 years and a closed car loan (closed 6/16). How many points am I being penalized right now for only having a closed installment account versus an open one?

[Anonymous]

Do you have any derogs?  (Lates, collections, etc.)  If your profile is clean the penalty for FICO 8 is probably about 30 points. 

I think your idea is great.  Are you familiar with the strategy of immediately paying the loan down to under 8.9%?   Your lender may require you to keep making the same monthly payment, in which case the loan will pay off in Sept, but I don't see that as an issue, since you will already have your car by then.

[HeavenOhio]

Welcome, @Anonymous.

What are your scores right now? My thought is if they're high enough, it might not be worth the bother.

[Anonymous]

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@Anonymous wrote:

Do you have any derogs?  (Lates, collections, etc.)  If your profile is clean the penalty for FICO 8 is probably about 30 points. 

I think your idea is great.  Are you familiar with the strategy of immediately paying the loan down to under 8.9%?   Your lender may require you to keep making the same monthly payment, in which case the loan will pay off in Sept, but I don't see that as an issue, since you will already have your car by then.

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I have one charge off (early 2015, does not report as collections, PIF) and a 30 day (2016) late on my record. Aside from that, I will be AZEO once the next reporting cycle hits mid May.

Yes, I've read all about the SSL <8.9% strategy.

So even though I have an installment loan on my report, I'm still getting hit with pretty much a full penalty since it's already closed?

[Anonymous]

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@HeavenOhio wrote:

Welcome, @Anonymous.

What are your scores right now? My thought is if they're high enough, it might not be worth the bother.

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I'm still waiting for my scores to update as I have been very aggressively paying off my CC debts in the past month (went from 75% util down to 1% as of today).

Scores today are 678/670/672 (EQ/TU/EX) with a ~22 point boost today from one of the cards reporting a 99% to 0% utilization change.

[Anonymous]

A chargeoff is a serious derog, as I understand it, though a CO with a $0 balance is much better than a CO with a positive balance.

People with significant recent derogs will likely belong to a scorecard that imposes a ceiling on how high their score can go.  It's not certain how the SSL Technique works for such a person.  If the person is very close to that ceiling, then doing other scoreboosting things (like SSLT) may not help.  If the person is not close, it should help.

If a person had a clean profile, reasonable utilization, and a score < 820 with a past closed loan, the typical benefit is around 30 points.  We saw some people reporting much better results (e.g. 44 points) but I suspect that those were people who had both luck and no prior loans of any kind, closed or open.

[Anonymous]

Gotcha. I guess I will wait until the score update comes in to see how close to 700 I am before deciding whether to try a SSL or not. Thanks!

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@Anonymous wrote:

A chargeoff is a serious derog, as I understand it, though a CO with a $0 balance is much better than a CO with a positive balance.

People with significant recent derogs will likely belong to a scorecard that imposes a ceiling on how high their score can go.  It's not certain how the SSL Technique works for such a person.  If the person is very close to that ceiling, then doing other scoreboosting things (like SSLT) may not help.  If the person is not close, it should help.

If a person had a clean profile, reasonable utilization, and a score < 820 with a past closed loan, the typical benefit is around 30 points.  We saw some people reporting much better results (e.g. 44 points) but I suspect that those were people who had both luck and no prior loans of any kind, closed or open.

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[Anonymous]

Another thing to consider with the potential addition of a SSL is what your AoYA is currently.  For someone with an AoYA of < 1 year, opening the SSL will result in a greater point net gain than someone with an AoYA of > 1 year.  Most people report the score drop from AoYA crossing the 1 year mark to be around 15 points (with 10-20 being the broader range) which would effectively cut into roughly half the gain that the SSL would achieve for someone.  That being said, if someone has an AoYA of > 1 year and is going to be dropping it to 0 from the opening of the SSL, their net gain may only land around 15 points, not the 30 typically expected [by someone with < 1 year AoYA].

[Anonymous]

BBS raises a good point about Age of Youngest Account.  The tough thing here is that AoYA is important in scorecard assignment for clean profiles.  Crossing from 11 to 13 months may matter a lot, for people with no derogs given the possible scorecard change.

AoYA is not a factor in scorecard assignment for dirty profiles (e.g. people with chargeoffs).  Or that's my understanding.

That doesn't mean that the 12 month threshold doesn't matter, but it may matter less.  Really hard to know, though BBS has followed this issue more than I have.

There are other conjectured thresholds for AoYA too -- like 3 months and 6 months.

[Anonymous]

CGID, good point regarding clean vs dirty profiles and AoYA.  Your understanding to my knowledge is correct that the impact of this factor would be greater on a clean profile rather than a dirty one.  Since the OP possesses a dirty profile, no doubt the adverse impact of opening a new account (SSL) even if his current AoYA is > 1 year would be lesser than suggested in my previous post, which would apply to someone with a clean file.