cancel
Showing results for 
Search instead for 
Did you mean: 

Effect of paying off installment loan

New Member

Effect of paying off installment loan

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?

 

Thanks

Message 1 of 5
4 REPLIES
Valued Contributor

Re: Effect of paying off installment loan

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.

Message 2 of 5
Valued Contributor

Re: Effect of paying off installment loan

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.

Best financial advice I ever got: "Just imagine what an adult would do and do that."

Starting Score: 500's
Current Score: EQ 701 (FICO) TU 721 (FICO) EX 715 (Quizzle)
Goal Score: 760 ALL


Take the FICO Fitness Challenge

Message 3 of 5
Moderator Emeritus

Re: Effect of paying off installment loan

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.

Starting Score: 504
July 2013 score:
EQ FICO 819, TU08 778, EX "806 lender pull 07/26/2013
Goal Score: All Scores 760+, Newest goal 800+
Take the myFICO Fitness Challenge

Current scores after adding $81K in CLs and 2 new cars since July 2013
EQ:809 TU 777 EX 790 Now it's just garden time!

June 2017 update: All scores over 820, just pure gardening now.
Message 4 of 5
New Member

Re: Effect of paying off installment loan

Thanks for the responses. Some very useful information about AAoA's.

Message 5 of 5