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Established Contributor
Lasardo
Posts: 745
Registered: ‎04-26-2012
0

Paying off car/limited credit history.

Well I exceeded my goal of 700, I hit 704 from 554 in January. 

I did this by removing 27 items, 3 judgments, most were medical but  they were all from 2008-2009 so when I disputed them they were inclined to remove. I still have 2items left, one will drop off at the end of this month, the other one will drop off at the end of December leaving me with no negative items.. 

My question is this... My credit history only goes back to 2008, with a car loan that will be paid off in February, (February will be my last payment) after that what happens to the account? Because if it closes I am in trouble. I only have credit cards going back to Dec 2011 and I am an authorized user on 1 card. I am trying to buy a house, finally. 

Do I really need to close on the house before this account is paid off?What kind of a hit should I expect when I do not have much credit history? 

Any, I mean any ideas/suggestions are welcome...

Thanks in advance.

 

CS 728- 01/13 from 554-12/11
Goal: 800
Moderator Emeritus
llecs
Posts: 32,881
Registered: ‎08-04-2007
0

Re: Paying off car/limited credit history.

Once the last payment is made it'll update to $0 and FICO will score it as closed (regardless of open or closed status). YMMV on the score impact. If you have zero loans including mortgages, other car loans, SLs, etc., then it's possible you can see a score change. YMMV based on your credit. I paid off my last loan and EQ increased by 7 and TU dropped by 5, and was measured by pulling the day before and the day after it reported, with no other reported changes. Once paid, the loan will still factor into AAoA, length of history, mix, etc.

 

 

Established Contributor
guydiver
Posts: 540
Registered: ‎08-30-2007
0

Re: Paying off car/limited credit history.


Lasardo wrote:

Well I exceeded my goal of 700, I hit 704 from 554 in January. 

I did this by removing 27 items, 3 judgments, most were medical but  they were all from 2008-2009 so when I disputed them they were inclined to remove. I still have 2items left, one will drop off at the end of this month, the other one will drop off at the end of December leaving me with no negative items.. 

My question is this... My credit history only goes back to 2008, with a car loan that will be paid off in February, (February will be my last payment) after that what happens to the account? Because if it closes I am in trouble. I only have credit cards going back to Dec 2011 and I am an authorized user on 1 card. I am trying to buy a house, finally. 

Do I really need to close on the house before this account is paid off?What kind of a hit should I expect when I do not have much credit history? 

Any, I mean any ideas/suggestions are welcome...

Thanks in advance.

 


Do you need help with your DTI to get the house?  If so, closing the account and not having the payment will help you on your house purchase.  As Ilecs said, YMMV on how your score will respond.  Could go up or down, but my guess is not much either way.  Installment loans don't have any or very little effect on your Fico score if they are kept in good standing, except in the long run to increase your AAoA and credit mix. Closing it could possibly drop you a little.  My advice is, if you need help with your DTI, then pay it off and close it.  If not, then keep it open, especially if you are borderline on your Fico for qualifying purposes/interest rate.

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Established Contributor
Lasardo
Posts: 745
Registered: ‎04-26-2012
0

Re: Paying off car/limited credit history.

I also opened a "credit builder" account in may
Of 2k.. This WAS boosting my scores but because BMO bought out M & I bank they closed the account, I lost 34 points because if this .. I know this because I pulled my report Oct 03,2012 then Oct 16,2012, nothing had changed other than the account was CLOSED
I am very upset over this.
They tell me it will re-open but I have yet to get in contact with the right person.
As far as debt this will be all I have which helps because my income is only $1765 a month because I am disabled.
I also wonder how this works.. My LO told me they would figure in a higher income because I do not pay taxes (under 25k)
But with the FHA loan do I have to have a down payment ? I was told that I could receive 5% but is this going to make the whole process harder to qualify?
I have a lot of questions, I know, but I am just getting started, I have been stuck for the last year rebuilding ..
Any ideas are appreciated!
CS 728- 01/13 from 554-12/11
Goal: 800
Moderator Emeritus
webhopper
Posts: 7,230
Registered: ‎09-16-2011
0

Re: Paying off car/limited credit history.

Hi! 

 

I see that you are looking at the possibility of a mortgage in the future...   since that is the case, I highly recommend that you check out the MyFico Mortgage Loan forum.

 

Below is a short list of helpful mortgage loan related links that may help you prepare for the process:

Guide to Common Abbreviations - Barry


Mortgage Acronyms & Abbreviations (what does PITI mean?) - ShanetheMortgageMan

Good Faith Estimates Explained - ShanetheMortgageMan

 

The Mortgage Pre-Approval Process - ShanetheMortgageMan

 

Evaluating Conventional vs. FHA (VA & USDA) - ShanetheMortgageMan

 

Definately feel free to post any questions you have about DTI and Pre-Approval Odds over there!  In addition, you may qualify for downpayment assistance as well as other programs to help you get into a new home!

 

Best of Luck to you!


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Valued Contributor
tooleman694
Posts: 2,297
Registered: ‎08-25-2011
0

Re: Paying off car/limited credit history.

2 things I see here.

 

1 - I paid off my auto loan and my score didn't move, I checked my Fico before and after. But I do have other installment loans. I have heard if you don't have an open installment loan it can cost you some points.

 

2 - When getting a mortgage they like to see open tradelines, I believe its 3 of them that have a year of history. Closing this auto may thin out your file.


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