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Established Contributor
Lasardo
Posts: 738
Registered: ‎04-26-2012
0

Paying off car/credit score

I am in the process of buying my first home, yay!! I need every point I can get .. ( I'm sure every one else is too )
Anyway, my car will be paid off after February 01,2013, this will be my last payment ( and with only 40k miles!)
BUT is it going to hinder my credit score??
I do not have ANY credit history other than going back to December 2011 with a secured credit card and I am an AU on 2 cards ( which I understand can not be used )
I would LOVE some examples of how much your credit scores changed once you paid it off!
Any advise would be very helpful!!
CS 728- 01/13 from 554-12/11
Goal: 800
Valued Member
wwtthhpp
Posts: 57
Registered: ‎02-12-2009
0

Re: Paying off car/credit score

I was in a wreck that was not my fault a few months ago and still owed about $2500 on my vehicle that was considered a total loss.  The other person's insurance picked up the tab but my credit score has not budged in those months since.

 

I talked to a loan officer at my local credit union shortly after the accident about an auto loan and he advised that I wait until the insurance paid the balance of the vehicle off before applying for another loan.  He said this would help in their (credit union) eyes that it is not a debt that I am paying on and it would help my DTI ratio.  I waited, and applied for $30,000 and was approved.

 

Not sure if any of that helped or not but that's my story.

Senior Contributor
Walt_K
Posts: 3,065
Registered: ‎11-02-2009
0

Re: Paying off car/credit score


wwtthhpp wrote:

I was in a wreck that was not my fault a few months ago and still owed about $2500 on my vehicle that was considered a total loss.  The other person's insurance picked up the tab but my credit score has not budged in those months since.

 

I talked to a loan officer at my local credit union shortly after the accident about an auto loan and he advised that I wait until the insurance paid the balance of the vehicle off before applying for another loan.  He said this would help in their (credit union) eyes that it is not a debt that I am paying on and it would help my DTI ratio.  I waited, and applied for $30,000 and was approved.

 

Not sure if any of that helped or not but that's my story.


Did you have other installment debt reporting?  If so, you wouldn't expect to see much of a score difference because it wouldn't affect your credit mix and while it would affect utilization, installment utilization carries so little weight that it can be ignored.

OP, I can't answer how much of a score difference you'd see.  It is going to depend on a lot of factors.  What is your score now?  Any negatives on the limited items you have on your report?  In any event, as this is the only installment loan you have, you might see some change when it is paid off as opposed to those who have other installment debt reporting.


Starting Score: ~500 (12/01/2008)
Current Score: EQ 681 (04/05/13); TU 98 728 (01/06/12), TU 08? 760 (provided by Barclay 1/2/14), TU 04 728 (lender pull 01/12/12); EX 742 (lender pull 01/12/12)
Goal Score: 720


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Established Contributor
Lasardo
Posts: 738
Registered: ‎04-26-2012
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Re: Paying off car/credit score

I have another installment loan that is a "credit builder" which means that I put money into a CD and as I make on time consecutive payments they report it to the credit bureaus thus "building credit" ..well long story short it WAS building my credit and my bank was bought out by another bank (BMO bank), when I pulled my credit report on 10/03/12 my score was 641 BARELY qualifying for an FHA loan (640) then I pulled my credit again on 10/16/12 and my score dropped 34 points ..the only difference was my credit builder/installment loan was closed and showing current.
I was told that the account numbers are not compatible and I have talked to every supervisor in the bank or at the customer service center and I am not getting anywhere. They are saying it will not likely be corrected until after February. All they need to do is contact the bureaus that I have an open installment loan opened since such and such a date, not that hard. They have stated they will write a letter, that does nothing to help my credit score.
The worst part I was in the process of finding my first house.
I have worked so hard to have this be what is holding me back...something that someone else did, not me.
I am seriously considering contacting a lawyer.
I have my reports printed out from both before and after and no change, only this one item.
Any thoughts? Any are appreciated..
CS 728- 01/13 from 554-12/11
Goal: 800
Senior Contributor
Walt_K
Posts: 3,065
Registered: ‎11-02-2009
0

Re: Paying off car/credit score

I suppose you could dispute the information as it is inaccurate that the loan is closed.  However, they could just decide to stop reporting it.  Given the difficulty you are having with this, and the fact that it is an account they took over from another bank, and that they are already citing difficulties because the account information is supposedly incompatible with their system, I'd be a little concerned that a dispute could lead to deletion from your CR rather than correcting the information. 

 

Also, depending on your timeline, a dispute could prove problematic.  You'll have to have the dispute resolved before you close on the house.  If they resolve the dispute against you, and they place a dispute remark on the account, a lot of lenders will insist on getting the dispute remark removed.  That can be a major headache sometimes.

 

Wish I had better advice.  Maybe someone else will chime in.  I'd probably keep working on the OC to get them to mark the account open. Stay persistent.


Starting Score: ~500 (12/01/2008)
Current Score: EQ 681 (04/05/13); TU 98 728 (01/06/12), TU 08? 760 (provided by Barclay 1/2/14), TU 04 728 (lender pull 01/12/12); EX 742 (lender pull 01/12/12)
Goal Score: 720


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Established Member
hrguy
Posts: 50
Registered: ‎11-06-2012
0

Re: Paying off car/credit score

Installment loans do not really help with Fico scoring that much.  I would say if you could wait - open another credit card and let it report for 6 months to a year whether secured or unsecured.  Revolving lines boost fico scores and two to three is where you get maximum score points added - paying of the installment loan will help with how much house you can afford on the mortgage approval, but won't help boost the scores back up to 640.

Filed BK 7: 2/28/2012 | Discharged: 7/24/2012
POST BK APPROVALS:
NFCU nRewards Secured Visa: $1000 7/12| Apple FCU Secured Visa: $1000 9/12
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Established Contributor
Lasardo
Posts: 738
Registered: ‎04-26-2012
0

Re: Paying off car/credit scoreIn

Installment loans are up there with Mortgage loans, they show more resposiblility as does a Mortgage so a higher credit score.  I am at 704 from 554Since January.  I owe 1500 on my "credit builder" which is listed as ainstallment loan.  

I just need them to open this installment loan back up but I think since talking to the supervisor it should be, I lost 34 points when it closed so should gain that back(

 YMMV) I have so much to worry about... like there was nothing on my TU left and a medical account  hit my report, I paid it immediately and found out today it is listed as a 'charge-off' what to do? My score there is 650 something.  How will they figure that since I am 704 EX &EQ do they add them together and get the average? 

CS 728- 01/13 from 554-12/11
Goal: 800
Established Member
mrmichaelscott
Posts: 22
Registered: ‎12-02-2012
0

Re: Paying off car/credit scoreIn

I'm not sure why you are so worked up over this, considering contacting a lawer, calling supervisors... I'm sorry to burst your bubbles, but you're really really far from getting a mortgage in buying a house, unless if the house is under $30k.  You have collections on your credit report, no credit history, you're probably considered as a ghost.  AU doesn't count, no real tradelines other than the auto.  And is the Auto trade seasoned?(over 24 months).  You need to get few credit cards, maybe another car loans and maybe in 3 years or so after you really built your credit you can apply for a mortgage.  Makes no sense applying for a mortgage now, your credit score jumps so much because you have little credit.  IE. 18 year old kid got a $500 credit line cc and his credit score is 740, that score means absolutely nothing... Sorry if this is harsh, just want to make sure you are educated on this before you wasted too much time on this project

Moderator Emeritus
llecs
Posts: 32,880
Registered: ‎08-04-2007
0

Re: Paying off car/credit scoreIn

OP, I recommend getting rid of those baddies first and adding another secured card. I disagree with adding any more loans. You can easily hit into the 800s with just CCs and some age. And the closed loan will continue to add to your mix. Adding more loans will also cut into your DTI which isn't good. I don't think you need to wait 3 years, but I bet you can hit into the 700s on all 3 with effort and time over the course of 6-12 months. The short history may be an issue though and I'd let that 1-yr old CC turn two before applying, IMO.....I don't know what other accounts you have closed besides the ones mentioned.


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