Looked at my EX report today and the fourth reason code for my score being lower is "installment loan other than a mortgage". I thought I was supposed to have a mix of credit? Granted, EX's score is not a true FICO score but I found that reason bizarre. Unless I have $25,000 laying around to buy a car, how else am I supposed to get a new set of wheels?
Basically that reason code doesn't include secured loans (like a home or car loan), nor does it include unsecured revolving credit lines (like credit cards). They should state that particular reason code more clearly -- something like "presence of an unsecured installment loan"... By the way, you're right in thinking that a mix of credit types will add to your score -- SO LONG AS YOU DON'T HAVE A DREADED UNSECURED INSTALLMENT LOAN, THAT IS. Argh. Why FICO takes away points for unsecured installment loans is open to debate. Basically, their thinking -- wrongly or rightly, but probably wrongly -- is that financially secure people don't simply walk into the bank and ask for an installment loan. Also, many such loans are "consolidation" loans, and those are similarly regarded as products frequented by people who are struggling to manage their credit. Sadly, the presence of STUDENT LOANS are the most common reason why that FICO code appears. I guess they figure that people who simply have the money to pay for college are more financially secure, and are therefore better credit risks, than those who have to borrow money to go to school. Because of student loans, that particular reason code usually appears as my #3 or #4 as well. Hope some of this information helps. Keep in mind that I don't necessarily agree with this line of thinking, LOL, so don't shoot the messenger here. Doc
That reason code has nothing to do with your car then. I obviously can't tell you what it *does* have to do with, but I can tell you that if you have a conventional secured auto loan, then that reason code doesn't refer to it. Any ideas what it could have to do with? Doc
Let me cut and paste what they say. I only have one installment loan showing on my entire report (both paid and unpaid). Presence of an installment loan (other than a real estate loan) Installment loans can negatively affect your credit score because they carry fixed monthly payments, which some lenders feel may hamper your ability to meet other loan obligations. Reducing your existing installment loan(s) and carefully assessing your need for future installment loans should improve your credit score. Trust me, my score is not so hot that they'd be digging the bottom of the barrel to come up with that one! It's the 4th reason so it's small but nonetheless.......
I should add that the balance is $22,500 on a $25,000 loan that I got in November. Maybe it's the high balance as compared to the original amount?
Hmm, now I'm asking what you were asking... could it be the car loan? I didn't realize car loans counted against you, but you learn something new every day here! Can anyone confirm this? Doc
PsychDoc | 1811 posts since Jun 2001 24.181.88.153 | 05.18.2002 @ 20:55 Hmm, now I'm asking what you were asking... could it be the car loan? I didn't realize car loans counted against you, but you learn something new every day here! Can anyone confirm this? Doc ============ That's because they keep changing the rules .
