Questiion about fico score simulator.

[MostlyAwake]

The sim is showing a 60 point increase if I pay off $100 worth of balance that I have on my overdraft protection on my checking account which reports as a "line of credit". Its the only revolving credit I have reporting at the moment. Does this sound accurate? It seems like a large jump but since its also the difference between 100% utilization and 0%, I think maybe it is.

Also, I have an "installment loan" with my credit union with a $3k limit and a balance of $3k. Even though its an installment loan its essentially a line of credit for usability purposes since I can use the available balance as I could if it were revolving credit. I would like to know what affect paying this off would have score wise and cannot run a simulation on it. I also have a $3800 balance on an auto loan that I am about to pay off in full. How much would this affect my score as well?

I have the funds to pay off the car and the  $3k installment accountt if both would be worthwhile score wise. I need as much of a bump in the next month as possible for an upcoming auto loan I planned to apply for.

I was slightly worried that paying off the installment loans entirely would negatively affect my score but Im not sure.

Thanks.

[Anonymous]

For maximum FICO scoring benefit you need to have an open installment loan at all times and ideally you want the utilization percentage of that loan to be relatively low.

[HeavenOhio]

It seems to me that the OP wins big by having an installment loan that acts like a revolver. FICO loves installment loans that show utilization between 1 and 8.9%. I'd pay it down but not pay it off. Borrow from it occasionally but keep the balance low.

[MostlyAwake]

So I should pay my $3k balance down to around $200 and try to have it stay around there correct?

About the auto loan. It was a new car and the loan originated in 2012. The balance is $3800 at the moment and I would prefer to pay it off but I don't know which would look better to a lender. I don't want to pay it off and have it negatively affect my aaoa or otherwise cause a score drop but I also don't want the lender to be reluctant to loan me money because I already have a car payment.

Would it be better to pay it off now before I apply for the new auto loan or wait until I have finished financing the new car and then pay it off?

I'll be paying it off 11 months early in a 60 month term and really know nothing about what to expect score wise after it reports as a zero balance. Does it disappear immediately or stay on there as a $0 balance for a certain time?

Thanks!

[Anonymous]

Mostlyawake,  my husband paid off his car the same month we applied for a mortgage loan.  When his car losn updated to a zero balance, he lost 24 points.  The account is still on his report 3 years later showing paid and a zero balance.  

For scoring purposes,   I would suggest waiting to pay off your loan until after you finance the new car. The drop in score isn't worth the risk of a higher interest rate.   Most people buying a car have a current loan and a married couple could have 2 car notes.  I don't think it will affect you at all.  Your balance is low enough that even if it was considered a factor with underwriting, it would only be short term.

By the way, I think the simulator still has some kinks.  I played with the simulator 1 - if I pay $200 a month for 1, 2, and 3 months, I would gain 5-10 points.  Month 4 of $200 a month payments my scores increased 90 points on EQ, 70 pts on EX and 20 pts on TU.  Quite a difference.  My reports are 4 months old.  My scores were a bit lower which allowed the 90 pt difference.  I definitely don't have the scores of 810 to 820 it predicted and I have been in the garden just paying down my vacation balance.

[DollyLama]

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@MostlyAwake wrote:
So I should pay my $3k balance down to around $200 and try to have it stay around there correct?

About the auto loan. It was a new car and the loan originated in 2012. The balance is $3800 at the moment and I would prefer to pay it off but I don't know which would look better to a lender. I don't want to pay it off and have it negatively affect my aaoa or otherwise cause a score drop but I also don't want the lender to be reluctant to loan me money because I already have a car payment.

Would it be better to pay it off now before I apply for the new auto loan or wait until I have finished financing the new car and then pay it off?

I'll be paying it off 11 months early in a 60 month term and really know nothing about what to expect score wise after it reports as a zero balance. Does it disappear immediately or stay on there as a $0 balance for a certain time?

Thanks!

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1) You want to pay down <8.9 on the loan HIGH not your current balance. Since it will be an early pay off, be careful as you want the account to still report, early payoff will take some interest off, and you don't want to accidentally hit payoff level resulting in a zero balance. Ie, car loan was 24k, you want a balance of less than around 2300 reporting. 

2) It will not affect AAoA, payoff or not paying off. It will remain on your report for around 10 years, only applying for and obtaining new credit will bring down the AAoA.