11-30-2012 07:59 AM
I am new to this board and fairly new to the credit game. I had a quick couple of questions about how paying off an auto loan would affect my credit score and apping for a new card.
The auto loan I paid off was co-signed with my dad as it was my first form of credit, it was opened in 2009. I still had 2 years left on the loan, but I had the cash and was tired of paying interest. I opened my first credit card through my credit union 10/2011 and then a Banana Republic card 11/2011 (which I have used twice). I recently (before I paid my car off) checked my score on this site and it was 743 TU, so I decided to apply for 2 more credit cards. I was approved for Chase Freedom and Amex BCE on 11/15/2012 (also before I paid my car off). Amex pulled Experian and my score was 776. Amount of credit available is $15,600 between 4 cards and I have always PIF. So that's my credit history.
So my question is, how many points will my score drop since I paid off my car loan? I know it will affect my average AAoA. I am also looking into apping for Discover More soon. How long should I wait on that since I just apped for 2 cards in Nov?
11-30-2012 08:37 AM
Sometimes you lose a few points when you make the last payment on an installment loan. I recently made the last payment and had zero effect but I have lots of non-installment accounts open.
With 2 years of balance left your score might be slightly less than it would be when you have only one payment less. That might offset any score loss from having your only installment loan paid off. I'm guessing you will see very littile score change, if any.
11-30-2012 09:50 AM
And it also will not affect your AAoA. The loan SHOULD continue to report as a positive tradeline for up to 10 years after it reports as closed. Some people have seen accounts hang in much longer and some have seen them disappear fairly rapidly after account closure. I believe as long as the account is showing on your credit report that it satisfies the minor point gain for having a mix of credit (installment / revolving) even in a closed status. But someone will be along to correct me if I am wrong in that assumption. Just keep taking care of what you have and your credit score will take care of itself over time.
11-30-2012 09:56 AM
I agree that you may lose a couple initial points or so, but not paying that interest if you don't have to is the wiser financial decision. Plus it will continue to add to your AAoA for 10 years or so after paid off. Just continue to build new credit and garden what you have. You've made a good decision.