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Paying off a loan very EARLY impact your CREDIT SCORE ???

Established Member

Paying off a loan very EARLY impact your CREDIT SCORE ???

Hey guys
 
Hopefully some one can shed some light-
 
I would like to take out a loan for $4000 to cover my summer tuition-its due in full on May 20th.
 
I shall have the $4000 together by JulySmiley Happy.
 
What would be the impact on my score if i paid off a 12 month loan in 2 months?
dec 25 2007 EQ 595
feb 25 2008 EQ 627 EX 611
8 REPLIES
Established Contributor

Re: Paying off a loan very EARLY impact your CREDIT SCORE ???

It doesn't really help you opening that loan. It would be better if you paid it off over a year or just didn't take it out at all and instead you put it on a credit card that you paid off over a few months. Opening a loan like that will impact your score as a new account and if you already opened a few CCs or other forms of credit that are reporting it can/will drop your FICO score.
Established Member

Re: Paying off a loan very EARLY impact your CREDIT SCORE ???

Bamf70- thnks for your sugestions! iwill look into thosd ideas.
 
Unfortunaetly I don;t have a credit card with a lemit to support $4000........this is why i wondered about the impact on my credit: will it go up or down when i open it & will it go up or down when i pay it off right away?
dec 25 2007 EQ 595
feb 25 2008 EQ 627 EX 611
Established Contributor

Re: Paying off a loan very EARLY impact your CREDIT SCORE ???

I don't believe opening it and paying it off in 2-3 months will help you any. If it is the only TL you will open in the next 12 months it won't hurt you, but if you already opened a couple or plan on opening a couple more this will help to lower your score.

My suggestion would be to just open it if you have to but be responsible and take the money you will have to pay it off all at once and just set it aside, paying the loan on time for 12-24 months. That WILL help your score in the long run.

Not sure if this is possible for you either but you could also request a CLI from one or more of your CCs and use one of them or a combination of them to pay off the money when you get it. That will help your FICO because your available credit will go up and you will show your creditors an increased usage and payment history.
Established Member

Re: Paying off a loan very EARLY impact your CREDIT SCORE ???

Right now i have a car loan that ends on Jun 1- that will be paid off in full at that time. I was planning to use the same credit union to open this new loan- maybe even do a shorter term than 12mths.
 
I would like to buy a new car in August so i would prefer to show the loan for my school as closed and paid in full- as opposed to revolving until june 2009.
 
I am quite dismayed there are nopayment options for summer classes like there are for fall and spring Smiley Sad. I don't have all the money toghter right now.
dec 25 2007 EQ 595
feb 25 2008 EQ 627 EX 611
Established Contributor

Re: Paying off a loan very EARLY impact your CREDIT SCORE ???

I wouldn't worry about having open installment loans when you go for a new car loan. You have already demonstrated that you can make those payments when you pay off your current loan in June. I would take the loan out for 12-24 months and pay it off on time. You should have no issues trying to get a car loan from them if you do that, especially if you keep the money to pay off your personal loan in your checking/savings account with them.

It seems to me you are on a good track already by paying your bills on time and caring about them. Many people in school just seem to go credit crazy and end up in trouble.
Valued Contributor

Re: Paying off a loan very EARLY impact your CREDIT SCORE ???

Take out the 'loan'... in July put the $ in a savings account or MM account would be even better. Show this on your auto loan app.  Pay on the loan doubling the payments for the first 3 months (should be at less than 50% owed when apping for the car loan) - pay regular paymnets for 3 months, then 1/2 of balance and 1/2 of balance -- 8 months of 'history' always ontime and PIF ahead of time.
 
 
Now a member of the UNOFFICIAL 700 Club - Plus scores of 734-734-747
Established Member

Re: Paying off a loan very EARLY impact your CREDIT SCORE ???

THANKS Bamf70 & Lady Scarlet!
 
Your 2 suggestions sound really sensible.......i will be taking your advice!
dec 25 2007 EQ 595
feb 25 2008 EQ 627 EX 611
Valued Contributor

Re: Paying off a loan very EARLY impact your CREDIT SCORE ???

It may not make a difference, whether good or bad. However some companies may view it as a good sign that you pay off your debts early.
 
In the past I had an auto account with Mazda American Credit. I paid it off in 18 months instead of 5 years. Then when my credit went "south" and I couldn't get approved for a vehicle anywhere else, Mazda gave me a chance because I paid them on time and early previously.
 
It was a goodwill loan IMO.
Try not to become a man of success but rather to become a man of value
Albert Einstein 1879 - 1955

700 Club