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FICO scores and Installment Loans - A debate?

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llecs
Moderator Emeritus

FICO scores and Installment Loans - A debate?

I've always been under the assumption that paying off car loans or installment loans would have no impact at all to your scores, assuming these loans were never late and paid on schedule.
 
Question: Upon paying off your loans, and excluding outside factors like adding new accounts, lates, collections, or others that affect your score at the same time, what impact did you experience on your scores?
 
What type of impact was it and what type of loan did you have? Also, after paying it off, did it say closed, open, etc.?
 
Finally, how many other accounts did you have? Maybe having a few accounts open and one that just closed might have a positive impact, whereas only having one and that one closing may have a negative impact.
 
Thanks for your thoughts. I'm looking to clear any misconceptions on my end so I can post more accurately in the future.
Message 1 of 7
6 REPLIES 6
Anonymous
Not applicable

Re: FICO scores and Installment Loans - A debate?

Unfortunately I experienced a score drop after paying off my auto loan.  The reasons are as follows.  Although FICOdoes not consider utilization of installments in the classic sense, it does consider the outstanding balance on open loans compared to original amount owed.  This being said, and this being the only open installment on my profile at the time, FICO had no open loans to consider (a recency factor) so it no longer became a really viable factor except adding to the age of the file.
 
HTH
Message 2 of 7
llecs
Moderator Emeritus

Re: FICO scores and Installment Loans - A debate?

Did you have any closed accts in your CRs at the time?
 
 
Message 3 of 7
Anonymous
Not applicable

Re: FICO scores and Installment Loans - A debate?

Yes.  but understand. FICO looks at installments basically as long as they are open.  Once closed they do not factorinto open accounts.  I was VERY disappointed thinking I would get a score boost for being a good girl and paying it off prior to the agreement.
Message 4 of 7
Anonymous
Not applicable

Re: FICO scores and Installment Loans - A debate?

FICO = Scam

It truly is the I love debt score..

My story, I paid off everything, CC (left open), SL, car, medical debt etc. Took me a while but once I was done, yup you guessed it, my score dropped.

More debt = higher scores
Even the so called experts on here can't dispute this.

Don't worry about your score, just know you got more cash in your pocket. More cash down is always much better than a higher score.

Your score will drop, but slowly creep up over time. I gain like 1 -2 pts a month.. But if you use the Fico simulator it would have you believe it should go up more a month. The whole thing is just a scam.
Message 5 of 7
llecs
Moderator Emeritus

Re: FICO scores and Installment Loans - A debate?



Brammy wrote:
Yes.  but understand. FICO looks at installments basically as long as they are open.  Once closed they do not factorinto open accounts.  I was VERY disappointed thinking I would get a score boost for being a good girl and paying it off prior to the agreement.


I get you. I never thought that scores would increase once the loan is PIF, but it seems like it should factor both the fact that it is closed (therefore resulting in no score change) and also kept as a factor into one's credit mix (closed status shouldn't offset the points gained when the account was opened). IMHO.
 
There was a post where someone asked if their score would change as a result of paying a loan (?) note off early. I responded by saying there wouldn't be any change. Someone interjected by saying that their score dropped as a result of paying off their loan early. So that got me wondering. I spent a couple of hours in here looking for cause and effect and only found 6 concrete stories. Ironically, 2 had a score increase, 2 had no change, and 2 had a score decrease. All three cannot be true. I'm sure some or all had other events happing to their CRs that may have explained their score change, but as a poster who wants to post accurate info and someone who is about to pay off a car loan this time next year, it would be great to get other example to draw from.
Message 6 of 7
llecs
Moderator Emeritus

Re: FICO scores and Installment Loans - A debate?



barbarino wrote:
More debt = higher scores
Even the so called experts on here can't dispute this.

Don't worry about your score, just know you got more cash in your pocket. More cash down is always much better than a higher score.

Not true on the debt leading to higher scores. There have been several posts of people paying in full every month who have scores in the 700-800s with zero debt. Conversely, there have been others who have boatloads of debt and high util% with very low scores. I remember reading a post here or elsewhere where this guy had a score of 830, I believe. He had over $1M in available credit but only had a small balance on a HELOC. Again, low debt, high score.
 
I agree on the cash. Why use a credit card when you can pay with cash. Other than two car loans, prior to this past August, I did NOT use any credit cards for 7 years. It was great. No debt, no envelopes with the picture windows. However, I didn't have the $25k in cash to buy our last car. Our credit score stunk because we didn't have any credit history and we got stuck with a high interest loan. Fast forward to this year, we are going to buy our first home. I definately don't have the $500k+ in cash (we are outside DC) to buy a 5 bedroom home for us and our kids. While we can put a large chunk of it as a down payment, we don't want to be caught in a loan of 8%+++.
 
As per the simulator, it is not entirely accurate; there are too many variables that can change a score.
 
Thanks for contributing.
Message 7 of 7
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