@Anonymous wrote:My only suggestion for the above situation would be to pay off the 3 lowest balance accounts which would be the $800 balance auto loan and 2 student loans. That way you'd reduce your number of accounts with a balance by 3, a factor that could help your mortgage scores. I wouldn't look at utilization percentage at all. Like literally at all, as it's not a significant factor when looking at bang for your buck. Just make sure your revolving utilization is in an ideal place, AZEO etc. People often worry too much about installment loan utilization when quite often when it comes to "bang for the buck" it's very insignificant. For example, one could pay down $15k in installment loan utilization and pick up (say) 15-20 points at best, where a smart $5k revolving debt paydown on that same profile could be worth (say) 50-60 points.
Ohhh wait!! I left out a key piece that may shoot me in the foot!
my Students loans are 3 individual accounts and they start in 2002. So they have 18 years of history!!! If I pay them off.. Won't I lose all that history?
Starting Score: 614
No you won't because closed accounts in good standing stay on your credit report 10 years after they are closed. So you should be fine.
Starting Score: 494 503 521
@Anonymous wrote:That's correct above. There is no harm in closing those loans.
How many total accounts do you have on your credit report? How many of them currently have [non-zero] reported balances?
The others in this thread can weigh in on the potential impact on your mortgage scores by lowering your number of accounts with a balance by 3. My general instinct would say that the fewer accounts total accounts you have, the greater the impact of bringing 3 [more] of them to zero.
I have 52 accounts. 36 closed and 16 open. Of the open, 10 have ZERO balance and 6 have balances. Of the 6 that have balances, 3 are Student Loans, 1 is Credit Card and 2 are auto loans. I did find this blurb..."FICO High Acheivers have an average of 3 accounts carrying a balance." What I DONT know is if that applies to Installments, Credit Cards, or a combination of both?? This is purely in reference to FICO 2,4,5
@Mortgage-Specialist @Anonymous @Anonymous @Anonymous @Anonymous @SouthJamaica
@Anonymous wrote:
Also make sure you’re AZEO card has a credit limit of $31,000 or less.
Thanks!
My AZEO can be:
Discover $1000
Chase $1000
Apple Card. $1500
Cap 1. $700
Cap 1. $1000
NFCU. $1000
SubPrime(Credit One, Merrick ,Amazon, PayPal)
I choose to use Discover and keep a small balance on it.
@Anonymous
Last month I was crying about new card thresholds and 3O late thresholds. This month all my new accounts turned 6 months old and the 30 day aged to a year. Mortgage score rose 15 points. So you were spot on! Lol.. Now I have my eye on 720. Hence the above! THANK YOI!!!!!
@UpAndComing74 wrote:
@SouthJamaica wrote:
@ibebarrett wrote:So I know there are thresholds for different util % of loans, but is that overall or each account?
I have 5 student loans all at between 90 and 97%, ranging from 1k to 3.5k in original principal balance. Would it help more to just work down the total or take both 1k loans down to around $100 thenfocus on bringing down the big ones?
I'm on REPAYE so I would be able to keep the small ones at ~8.9% for almost another year until me new payment plan updates.
Thanks!
1. It's overall.
2. It's best not to pay down to zero if you can help it, because once it gets to zero then you lose that loan from the denominator.
Example:
Starting point:
Let's say you have 5 loans average 2500 each for total 12,500; already paid down to 2000 each; installment utilization percentage is 10,000/12,5000 = 80%.
Now you have a total of $2000 available to pay towards the loans.
Example A: Pay off 1 loan, percentage is now 8,000/10,000 = 80%
Example B: Pay $400 towards each of the 5 loans, percentage is now 8,000/12,500 = 64%
BTW
(a) this overall installment loan utilization percentage is a big deal in FICO 8's and 9's, not so much in the older mortgage scores, which often do not react at all
(b) even in FICO 8's and 9's you don't get any really big score gains until you get down to 9% or thereabouts.
Question please. I have $13K reserves to pay on my Auto Loan below to maximize my Mortgage FICO scores.
1. Do Student loans factor into Installment util for the threshold percentages. I currently have 3 Student loans and 2 Auto Loans.. Using whole numbers the breakdown of Owe/Original Balance is:
SL-7000/13000-(Interest has it upside down)
SL-1100/1750---37%
SL-1700/2600--35%
Auto-800/18000-95%
Auto-21000/39000-45%
2. Can you confirm that FICO 2,4,5 do not care about Installment Balances? I could save my $$ and use it for the new house.
I am currently at a midscore of 712 and I am trying to push it to 720. Credit pull is next month. Closing is August 2021.
1. Yes, student loans factor in.
2. FICO 2, 4, and 5 care less, but they do sometimes move. E.g. I have detected slight movement in my FICO 4, while @Revelate has detected slight movement in his FICO 2.
BTW, in closing out loans, there may be factors other than utilization percentages at play. E.g., I believe a recent 11 point gain in my EX FICO 2 may have been attributable to my closing out 2 of my 6 open loans. Utilization percentage wasn't a factor because all 6 were at low utilization. But the algorithm may have been rewarding me for reducing the number of accounts with a balance.
@SouthJamaica wrote:
@UpAndComing74 wrote:
@SouthJamaica wrote:
@ibebarrett wrote:So I know there are thresholds for different util % of loans, but is that overall or each account?
I have 5 student loans all at between 90 and 97%, ranging from 1k to 3.5k in original principal balance. Would it help more to just work down the total or take both 1k loans down to around $100 thenfocus on bringing down the big ones?
I'm on REPAYE so I would be able to keep the small ones at ~8.9% for almost another year until me new payment plan updates.
Thanks!
1. It's overall.
2. It's best not to pay down to zero if you can help it, because once it gets to zero then you lose that loan from the denominator.
Example:
Starting point:
Let's say you have 5 loans average 2500 each for total 12,500; already paid down to 2000 each; installment utilization percentage is 10,000/12,5000 = 80%.
Now you have a total of $2000 available to pay towards the loans.
Example A: Pay off 1 loan, percentage is now 8,000/10,000 = 80%
Example B: Pay $400 towards each of the 5 loans, percentage is now 8,000/12,500 = 64%
BTW
(a) this overall installment loan utilization percentage is a big deal in FICO 8's and 9's, not so much in the older mortgage scores, which often do not react at all
(b) even in FICO 8's and 9's you don't get any really big score gains until you get down to 9% or thereabouts.
Question please. I have $13K reserves to pay on my Auto Loan below to maximize my Mortgage FICO scores.
1. Do Student loans factor into Installment util for the threshold percentages. I currently have 3 Student loans and 2 Auto Loans.. Using whole numbers the breakdown of Owe/Original Balance is:
SL-7000/13000-(Interest has it upside down)
SL-1100/1750---37%
SL-1700/2600--35%
Auto-800/18000-95%
Auto-21000/39000-45%
2. Can you confirm that FICO 2,4,5 do not care about Installment Balances? I could save my $$ and use it for the new house.
I am currently at a midscore of 712 and I am trying to push it to 720. Credit pull is next month. Closing is August 2021.
1. Yes, student loans factor in.
2. FICO 2, 4, and 5 care less, but they do sometimes move. E.g. I have detected slight movement in my FICO 4, while @Revelate has detected slight movement in his FICO 2.
BTW, in closing out loans, there may be factors other than utilization percentages at play. E.g., I believe a recent 11 point gain in my EX FICO 2 may have been attributable to my closing out 2 of my 6 open loans. Utilization percentage wasn't a factor because all 6 were at low utilization. But the algorithm may have been rewarding me for reducing the number of accounts with a balance.
Nice! So what I may do then is take my 6 down to 4. I can pay off 2 small ones and bring one down to 9%. Then I would have one with 9%, one with 63% and 1 with 100%. (The other is a revolver with a small balance) That would bring my util of installment loans to 48% remaining. Question is on a student loan that is reporting a Balance almost twice the Original amount...is that calculated as 100% util or 200% util.