AAoA

[longtimelurker]

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@Shock_ wrote:

Thanks for the clarification folks. Is there any bad that can come from paying off a loan early, credit report wise? I read on here somewhere about how paying it off over time is better than paying it off quickly. Not sure ifit gives you a better FICO or what..but I also ready that an installment loan on a credit report is exactly that; an installment loan. Makes no difference if you pay it off in one month or five years...it will look the same on the credit report.

I plan to pay it off in a year and not 5 years 

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If you pay it off earlier, then it becomes closed earlier, and so will eventually fall off your credit report earlier.  This is roughly ten years out though, so it's hard to make good predictions as to if or how much that will matter that far in the future.   And, just guessing, paying it off quickly might look better to other future creditors as it shows some reliability (at a cost of reduced profitability to them.)

[Shock_]

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@longtimelurker wrote:

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@Shock_ wrote:

Thanks for the clarification folks. Is there any bad that can come from paying off a loan early, credit report wise? I read on here somewhere about how paying it off over time is better than paying it off quickly. Not sure ifit gives you a better FICO or what..but I also ready that an installment loan on a credit report is exactly that; an installment loan. Makes no difference if you pay it off in one month or five years...it will look the same on the credit report.

I plan to pay it off in a year and not 5 years 

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If you pay it off earlier, then it becomes closed earlier, and so will eventually fall off your credit report earlier.  This is roughly ten years out though, so it's hard to make good predictions as to if or how much that will matter that far in the future.   And, just guessing, paying it off quickly might look better to other future creditors as it shows some reliability (at a cost of reduced profitability to them.)

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If that's the case, wouldn't it be better to finance something..like say..a car for example? Rather than paying the cash and buying it outright, you could finance it, let it report to the bureaus and just pay it all off in cash the next month? 

[ezdoesit]

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@kkapdolee wrote:

I also have a school loan and an auto loan.

I think they do count towards your AAoA.

I've read about people whose credit scores have gone down significantly when they paid off their loans too early.

I plan to pay mine off slowly.

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The only reason your account goes down when you pay off your account is the mix of credit for FIco scoring purposes.

Also the reason your score goes up when you pay it slowly is because all things being equal during your loan you never apply for and was approved for any credit your AAOA would go up with time across all your accounts inqs would age off

That being said if during that same time you just keep getting approved for credit your score would go down because of AAOA and Inqs. 

[parakleet]

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@Shock_ wrote:

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@longtimelurker wrote:

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@Shock_ wrote:

Thanks for the clarification folks. Is there any bad that can come from paying off a loan early, credit report wise? I read on here somewhere about how paying it off over time is better than paying it off quickly. Not sure ifit gives you a better FICO or what..but I also ready that an installment loan on a credit report is exactly that; an installment loan. Makes no difference if you pay it off in one month or five years...it will look the same on the credit report.

I plan to pay it off in a year and not 5 years 

---

If you pay it off earlier, then it becomes closed earlier, and so will eventually fall off your credit report earlier.  This is roughly ten years out though, so it's hard to make good predictions as to if or how much that will matter that far in the future.   And, just guessing, paying it off quickly might look better to other future creditors as it shows some reliability (at a cost of reduced profitability to them.)

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If that's the case, wouldn't it be better to finance something..like say..a car for example? Rather than paying the cash and buying it outright, you could finance it, let it report to the bureaus and just pay it all off in cash the next month? 

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Only if you're completely desperate for some type of positive payment history. It is not required to finance a car when you don't need to just for the sake of your fico score. If you have positive payment history and a clean credit history, i.e., no baddies of any kind, I certainly wouldn't voluntarily pay interest in hopes of a fico score bump. 

[Shock_]

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@parakleet wrote:

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@Shock_ wrote:

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@longtimelurker wrote:

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@Shock_ wrote:

Thanks for the clarification folks. Is there any bad that can come from paying off a loan early, credit report wise? I read on here somewhere about how paying it off over time is better than paying it off quickly. Not sure ifit gives you a better FICO or what..but I also ready that an installment loan on a credit report is exactly that; an installment loan. Makes no difference if you pay it off in one month or five years...it will look the same on the credit report.

I plan to pay it off in a year and not 5 years 

---

If you pay it off earlier, then it becomes closed earlier, and so will eventually fall off your credit report earlier.  This is roughly ten years out though, so it's hard to make good predictions as to if or how much that will matter that far in the future.   And, just guessing, paying it off quickly might look better to other future creditors as it shows some reliability (at a cost of reduced profitability to them.)

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If that's the case, wouldn't it be better to finance something..like say..a car for example? Rather than paying the cash and buying it outright, you could finance it, let it report to the bureaus and just pay it all off in cash the next month? 

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Only if you're completely desperate for some type of positive payment history. It is not required to finance a car when you don't need to just for the sake of your fico score. If you have positive payment history and a clean credit history, i.e., no baddies of any kind, I certainly wouldn't voluntarily pay interest in hopes of a fico score bump. 

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Isn't it best to diversify your portfolio? Theres only so much credit cards can do..

750 club? 800 club? Some sort of installment loan or mortgage is neccessary.

Is there any benefit to have more than 1 showing? FICO bump perhaps?

[gsxrgt]

Getting an installment loan and paying interest for the sole purpose of increasing your FICO score is not a good idea. If all you have is credit cards and you have a good solid history, you're not going to get turned down when applying for a installment loan if/when you actually need it.

[longtimelurker]

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@Shock_ wrote:

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Isn't it best to diversify your portfolio? Theres only so much credit cards can do..

750 club? 800 club? Some sort of installment loan or mortgage is neccessary.

Is there any benefit to have more than 1 showing? FICO bump perhaps?

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I dont think there is any advantage in being in the "800 club", so I certainly wouldn't do anything that costs interest/fees to get my score that high.  Or open accounts I don't need just to diversify (I have no store cards for example).  Now if your score is much much lower, then it might be worth doing some things to try to get extra points, but probably better to expend efforts trying to PFD/GW etc to clean up what is dragging the score down.

[user5387]

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@Shock_ wrote:

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750 club? 800 club? Some sort of installment loan or mortgage is neccessary.
Is there any benefit to have more than 1 showing? FICO bump perhaps?

An installment loan or mortgage are not necessary to have a high score.  If a person is obsessed with actually reaching 850, then they might be important.  But it's possible to hve scores above 800 using only revolving accounts.

Installment loans have several useful purposes, but I wouldn't get one just to bump my score a few points.

[parakleet]

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@longtimelurker wrote:

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@Shock_ wrote:

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Isn't it best to diversify your portfolio? Theres only so much credit cards can do..

750 club? 800 club? Some sort of installment loan or mortgage is neccessary.

Is there any benefit to have more than 1 showing? FICO bump perhaps?

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I dont think there is any advantage in being in the "800 club", so I certainly wouldn't do anything that costs interest/fees to get my score that high.  Or open accounts I don't need just to diversify (I have no store cards for example).  Now if your score is much much lower, then it might be worth doing some things to try to get extra points, but probably better to expend efforts trying to PFD/GW etc to clean up what is dragging the score down.

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+1 I have installment loans in the form of student loans but not by choice. I will most definitely not be getting a mortgage "just because." I've never had an auto/mortgage but my scores are still in the low 700s mostly due to my high UTL (which I'm working on bringing down). But I don't have any baddies of any kind on my account either. 

[Shock_]

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@user5387 wrote:

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@Shock_ wrote:

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750 club? 800 club? Some sort of installment loan or mortgage is neccessary.
Is there any benefit to have more than 1 showing? FICO bump perhaps?

An installment loan or mortgage are not necessary to have a high score.  If a person is obsessed with actually reaching 850, then they might be important.  But it's possible to hve scores above 800 using only revolving accounts.

Installment loans have several useful purposes, but I wouldn't get one just to bump my score a few points.

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I didn't get mine "just because"..and I'm sure nobody does..but for the purpose of debating, I just was wondering if it was beneficial in any way to open an installment loan vs making the purchase outright, merely for diversification, and assuming everything else on your report is clean.

I don't see most people doing it since it seems that a lot of us do not want HP's.