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Mistake to pay an installment loan off early?

Established Member

Mistake to pay an installment loan off early?

Is there ever a situation when it's wrong to pay off an installment loan early?

 

For example if I have only 1 small ($750) installment loan and pay it off do I get dinged because I have no active installment loan in my credit mix.  My AAoA would be effected in the long run but I wonder if there may be other negatives to paying off early.  I paid $250 or 1/3 of my balance my first month and tempted to pay the other 2/3 next month but maybe that is a mistake.

 

Thanks 

 

 

Message 1 of 4
3 REPLIES
Moderator Emerita

Re: Mistake to pay an installment loan off early?

If it's your only open installment account, then yes, your scores will be hurt.

Normally I'd say that financial sense trumps credit sense, and to pay it off if it helps your peace of mind and saves interest, but there can't be much interest expense associated with a $500 balance. I would drag it out, myself, but this is your call.

If you still had at least one other open installment account, then I'd say kill this one off.
* Credit is a wonderful servant, but a terrible master. * Who's the boss --you or your credit?
FICO's: EQ 781 - TU 793 - EX 779 (from PSECU) - Done credit hunting; having fun with credit gardening. - EQ 590 on 5/14/2007
Message 2 of 4
Moderator Emeritus

Re: Mistake to pay an installment loan off early?


haulingthescoreup wrote:
If it's your only open installment account, then yes, your scores will be hurt.

Normally I'd say that financial sense trumps credit sense, and to pay it off if it helps your peace of mind and saves interest, but there can't be much interest expense associated with a $500 balance. I would drag it out, myself, but this is your call.

If you still had at least one other open installment account, then I'd say kill this one off.


Ditto to Hauling. My last open installment (auto) account is set to be paid off and closed within the next couple of months. We are a little nervous as we are set to buy our first home later this year.
Message 3 of 4
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Established Member

Re: Mistake to pay an installment loan off early?

Thank you for the wisdom.  I do have one other installment loan for $2250 but it is in deferrement and I assume it does not count as an active account.  I went ahead and paid 1/3 of it off also.

 

If it does count as an active account than maybe I would be better off having a paid installment loan on my report.

Message 4 of 4