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Contributor
pat0812
Posts: 91
Registered: ‎09-10-2012

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 ?

 


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Current Score: EQ 683 TU 714
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Contributor
pat0812
Posts: 91
Registered: ‎09-10-2012

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 ?


Starting Score: EQ 683 TU 714
Current Score: EQ 683 TU 714
Goal Score: EQ 740 TU 740


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Established Contributor
CribDuchess
Posts: 571
Registered: ‎09-12-2011

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.

 

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Shogun
Posts: 11,100
Registered: ‎04-15-2011

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.


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