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How does a loan affect your credit score ?

Regular Contributor

How does a loan affect your credit score ?

Hello,

 

Let's say  I have a credit score of 720 before I get an auto loan

I have 3 credit cards and that's it, no mortgages. payed always everything on time. under 10% UTI. no negative items on my report

 

How will the loan affect my score ? will it go down ? if I get a 15k loan, does that count as UTI ? (because right now i only have a 1200 CL)

Will my score go down because I owe money ? Or will it go up every month when I pay on time ?

 

If after a year i want to pay off the loan in 1 payment will that hurt my score ? or improve ?

 

FICO 8's EX 770 EQ 751 TU 771 (1/16/17)
Amex Gold Premier rewards ( Charge Card)
Amex Blue cash - $47,800 Wells Fargo - $15,000 Citibank Simplicity - $13,800 Barclays Apple - $13,000 Walmart Mastercard - $8000 Chase Slate - $7,200 Discover It - $5,500 Capital One - $5,250
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Regular Contributor

Re: How does a loan affect your credit score ?

another thing

i understand that it will help my score to have a loan, because it gives you a good mix of different credit lines.

Is that the case only while the loan is still actual ? let's say in 3 years when the loan is fully paid, will that stay in my credit report forever and give me the extra points of a good mixture ?

FICO 8's EX 770 EQ 751 TU 771 (1/16/17)
Amex Gold Premier rewards ( Charge Card)
Amex Blue cash - $47,800 Wells Fargo - $15,000 Citibank Simplicity - $13,800 Barclays Apple - $13,000 Walmart Mastercard - $8000 Chase Slate - $7,200 Discover It - $5,500 Capital One - $5,250
Message 2 of 4
Established Contributor

Re: How does a loan affect your credit score ?


pat0812 wrote:

Hello,

 

Let's say  I have a credit score of 720 before I get an auto loan

I have 3 credit cards and that's it, no mortgages. payed always everything on time. under 10% UTI. no negative items on my report

 

How will the loan affect my score ? will it go down ? if I get a 15k loan, does that count as UTI ? (because right now i only have a 1200 CL)

Will my score go down because I owe money ? Or will it go up every month when I pay on time ?

 

If after a year i want to pay off the loan in 1 payment will that hurt my score ? or improve ?

 


An auto loan does not factor into your UTIL.  UTIL is based on revolving, not installment loans.

 

If this is your first installment loan, your score may get a slight boost from adding an installment loan.  Of course, YMMV.  I just added a new auto loan and my score did not change at all.  No effect.  However, I had two paid auto loans on my reports as well as a mortgage that has been reporting for almost 19 years.

 

FICOs: TU08 850 EQ08 850 EX08 849

My Wallet: Amex Gold NPSL; Amex Optima Platinum $25K; Amex BCE $12K; BofA Visa $10.1K; BofA TR Visa $18K; Cap1 Quicksilver Visa Sig $10K; CSP $28.2K; Chase Freedom $13K; Citi Costco Visa $19.3K; Citi Double Cash $13.5K; Citi Simplicity Visa $23.3K; Discover IT $50K; Fidelity Amex $25K; PenFed Plat Rewards Visa Sig $50K; Sallie Mae WMC $17.5K; Sears MC $10.1K; US Bank Cash+ Visa Sig $26K; Walmart Discover $10K; Wells Fargo Rewards Visa Sig $14K
Message 3 of 4
Moderator Emeritus

Re: How does a loan affect your credit score ?

You will take an initial hit due to AAoA and a HP.  However this will fade over a little time.  Installment accounts don't factor into you Util.  If you age it for a year and pay it off, it will stay as a positive TL for about 10 years so no problem there.

Starting Score: 504
July 2013 score:
EQ FICO 819, TU08 778, EX "806 lender pull 07/26/2013
Goal Score: All Scores 760+, Newest goal 800+
Take the myFICO Fitness Challenge

Current scores after adding $81K in CLs and 2 new cars since July 2013
EQ:809 TU 777 EX 790 Now it's just garden time!

June 2017 update: All scores over 820, just pure gardening now.
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