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Paying off an auto loan early and FiCO scores.....

Super Contributor

Re: Paying off an auto loan early and FiCO scores.....


irunfromcredit wrote:

Another update:  My experian score dropped 16 points. Yowza!   Kind of shocking to see, but again my whole reason for paying off early is to reduce my debt and start paying off my student loans. Despite the major drop I went from mid 700's to lower 700's... So I shouldn't wig out. 😋


Thanks for the updates, very much appreciated.

FICO8 EQ 721 TU 772 EX 777 Total revolving credit 500k
Message 11 of 19
Established Member

Re: Paying off 35% auto loan early and FiCO scores…..

I secured a PenFed loan for a car I had only seen in pictures.  I was so happy that they gave me an incredibly low rate that I wanted to quickly pay for it.  My Experian was jacked up to 700 because I was fighting a Visa Charge off and the window to get that rate was closing in on me. When it was unloaded off the truck, I was not going to buy it as it looked like it had been treated pretty rough.  So I called PenFed and told them I needed to change the car.  Long story short, I found another car that I thought I wanted, got PenFed to send me a new check and changed my mind AGAIN!  I took that check to the same Dealership thinking and hoping that PenFed would let that check go towards a different car on their lot (keeping the financing exactly the same).  When I started signing papers there was a problem and I had to talk to PenFed on the phone.  They said NO WAY. I would possibly have to have another hard-pull and start over.  At that point my score had plumented and there was no way I was willing to let them possibly pull again.  I thought all weekend about what to do and on Monday i called PenFed and explained the whole thing to a CSR.  She said that most likely it wouldn't be a hard pull so I crossed my fingers and let them do it.  I am now driving my "new to me" car.  Now, 4 months later I need to get my score up.  Is it true that if I pay off 35% of the loan amount that my score will go up???

Message 12 of 19
Valued Contributor

Re: Paying off 35% auto loan early and FiCO scores…..


biggywynn wrote:

I secured a PenFed loan for a car I had only seen in pictures.  I was so happy that they gave me an incredibly low rate that I wanted to quickly pay for it.  My Experian was jacked up to 700 because I was fighting a Visa Charge off and the window to get that rate was closing in on me. When it was unloaded off the truck, I was not going to buy it as it looked like it had been treated pretty rough.  So I called PenFed and told them I needed to change the car.  Long story short, I found another car that I thought I wanted, got PenFed to send me a new check and changed my mind AGAIN!  I took that check to the same Dealership thinking and hoping that PenFed would let that check go towards a different car on their lot (keeping the financing exactly the same).  When I started signing papers there was a problem and I had to talk to PenFed on the phone.  They said NO WAY. I would possibly have to have another hard-pull and start over.  At that point my score had plumented and there was no way I was willing to let them possibly pull again.  I thought all weekend about what to do and on Monday i called PenFed and explained the whole thing to a CSR.  She said that most likely it wouldn't be a hard pull so I crossed my fingers and let them do it.  I am now driving my "new to me" car.  Now, 4 months later I need to get my score up.  Is it true that if I pay off 35% of the loan amount that my score will go up???


In my experiece NO, in general balances on installment loans (especially vehicles) have little effect on scoring assuming they are paid as agreed. The balance does become part of your DTI stats, but a starting $30k car loan paid down to $15k in a year will maybe if you are luckly up your acores a few points, more so because you are paying on time for a year than the remaining balance. 

Message 13 of 19
Moderator

Re: Paying off 35% auto loan early and FiCO scores…..


pipeguy wrote:

biggywynn wrote:

I secured a PenFed loan for a car I had only seen in pictures.  I was so happy that they gave me an incredibly low rate that I wanted to quickly pay for it.  My Experian was jacked up to 700 because I was fighting a Visa Charge off and the window to get that rate was closing in on me. When it was unloaded off the truck, I was not going to buy it as it looked like it had been treated pretty rough.  So I called PenFed and told them I needed to change the car.  Long story short, I found another car that I thought I wanted, got PenFed to send me a new check and changed my mind AGAIN!  I took that check to the same Dealership thinking and hoping that PenFed would let that check go towards a different car on their lot (keeping the financing exactly the same).  When I started signing papers there was a problem and I had to talk to PenFed on the phone.  They said NO WAY. I would possibly have to have another hard-pull and start over.  At that point my score had plumented and there was no way I was willing to let them possibly pull again.  I thought all weekend about what to do and on Monday i called PenFed and explained the whole thing to a CSR.  She said that most likely it wouldn't be a hard pull so I crossed my fingers and let them do it.  I am now driving my "new to me" car.  Now, 4 months later I need to get my score up.  Is it true that if I pay off 35% of the loan amount that my score will go up???


In my experiece NO, in general balances on installment loans (especially vehicles) have little effect on scoring assuming they are paid as agreed. The balance does become part of your DTI stats, but a starting $30k car loan paid down to $15k in a year will maybe if you are luckly up your acores a few points, more so because you are paying on time for a year than the remaining balance. 


There's some breakpoint on installment utilization if we are talking FICO 98 or FICO 8/9 north of 50%, but it's small; the money shot is under 10% (or maybe under 9% with rounding, I still have yet to see awesome data on that but maybe I missed it). 

 

Paying off 35% or even 80% of aggregate installment loan balances isn't generally enough to be worth it unless the money is irrelevant anyway... which I'd suggest for the vast majority of people, if it were, why not just pay cash for the car anyway?

Starting Score: EQ 5 561, TU 98 567, EX 2 599 (12/30/11)
Current Score: EQ 5 771, TU 4 758, EX 2 758, EQ 8 795, TU 8 762, EX 8 786 (7/28/17)
Goal Score:    EQ 5 750, TU 4 750, EX 2 750, EQ 8 800, TU 8 Blah, EX 8 800 (01/01/18)


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Message 14 of 19
Established Member

Re: Paying off an auto loan early and FiCO scores.....

Yes, I will update.  We decided to pay DOWN (not pay off) the Land Rover.  The loan is 3 months old and approx 30K.  Will give you exact numbers when it hits with a credit boost!

Message 15 of 19
New Member

Re: Paying off an auto loan early and FiCO scores.....

I'll be curious to see what happens to mine in the next few months.  I sold one of my vehicles 2 weeks ago, and it showed up on my credit score today.  My total balance on my installment loans went from $102k to $83k, and score wise I took a 18 point hit on Equifax, 9 point hit on Experian, and 5 point hit on Transunion.

 

I didn't expect such a huge hit since I was only knocking about 20% off my total balance, but hey the scores never make sense (like why such a variation between the 3 companies when all 3 were sitting relatively about the same ~ 760).  I hope that in the next month or two they will rebound.

 

Maybe it has to do with the length of the loan as well?  When I paid it off this loan was only 16 months old.

Message 16 of 19
New Visitor

Re: Paying off an auto loan early and FiCO scores.....

Hmm, not what I came here to see. In the process of getting a mortgage and need to get my DTI ratio down, and payign off the car would be the easiest route, but a 20 point would really hurt in that regards especially since I am trying to up the score by 20 in time for closing. 

Message 17 of 19
Valued Contributor

Re: Paying off an auto loan early and FiCO scores.....

"Tell me what someone with a 720 enjoys that someone with a 700 score won't?"

 

I would say a potentially better interest rate? Every lender has their own scoring Tiers and even a single point can make a difference.

 

 

Message 18 of 19
Contributor

Re: Paying off an auto loan early and FiCO scores.....

I've found fico to drop hard and fast but usually gains the loss slowly. I'm in the process of getting a home equity loan so was careful to monitor my credit. My fico ranged from 720-750. I've always carried a lot of cc dept but never missed a payment. To make a long story short, my better half had made an 800 purchase on one of my cards. Every one of the scores dropped 30 points, bammm. So smart me looked at what cards I had that would be cutting my next statements and paid off 2000$. Waite for it....my fico shot up.......waite for it.....a whopping 3 points after the cards reported. So in my experience you have a better chance guessing the next bull and bear market than your fico.


Starting Score: 625
Current Score: EX 725 TU 665 EQ 689
Goal Score: 700


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EXP(669) EQ(637) TU(625)
Message 19 of 19