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paying off car loan. will score raise?

New Contributor

paying off car loan. will score raise?

I am about to pay off my four year car loan in a little under 2 years. After it is paid off will I see an increase in my fico score or a decrease because it'll be another a closed account
Message 1 of 14
13 REPLIES
Frequent Contributor

Re: paying off car loan. will score raise?

Closed accounts still count for your score as much as open accounts.

 

Your score should improve a little since your installment utilization would be down.

 

In any case do what makes the most financial sense. Paying off a loan early, assuming there is no catch like a prepayment penalty or anything like that, will save you money in interest so that should be what you go for regardless of effect on a score.

FICO Scores: TU: 768 (Jan 2012), EQ: 755 (Jan 2012 Lender pull)
Message 2 of 14
Moderator Emeritus

Re: paying off car loan. will score raise?


Dadaluma83 wrote:

Closed accounts still count for your score as much as open accounts. Closed accounts still count as part of your credit mix but open, active accounts are weighed more heavily.

 

Your score should improve a little since your installment utilization would be down. Installment loan utilization is looked at a part of your score but is such as small part it can virtually be ignored. I wouldn't expect any score difference when this is paid off. As always YMMV (Your Mileage May Vary).  

 

In any case do what makes the most financial sense. Paying off a loan early, assuming there is no catch like a prepayment penalty or anything like that, will save you money in interest so that should be what you go for regardless of effect on a score. I agree that paying off debt is always a good thing and should be the #1 priority with consideration of a score a very distant #2.


 

Message 3 of 14
Frequent Contributor

Re: paying off car loan. will score raise?

+1 to above; pay it off just to have less debt.

 

If you're paying off over the next two years, then you should expect the only score increase to be the result of a longer AAoA, and not because of the installment util and/or installment being closed v.s open. I paid off a $3500 note in one month and got zero FICO movement.

"Credit is purely a cash flow tool. Thinking of credit as extra money you didn't have before makes it an EXPENSIVE cash flow tool."
Message 4 of 14
New Member

Re: paying off car loan. will score raise?

My score stayed exactly the same, as did my spouse's. But, like PPs say, it saved us money to pay them off early, so we did. 


Starting Score: TU FICO: 684 12/30/12, EXP FAKO: 698 12/8/12,
Current Score: TU FICO: 693, EXP FAKO: 727, EQ FAKO 723
Goal Score: 800 across the board


Take the FICO Fitness Challenge
Message 5 of 14
New Visitor

Re: paying off car loan. will score raise?

When I paid off my car, my score dropped pretty significantly ~15 points. I would still recommend paying it off though. It's a great feeling Smiley Happy

Message 6 of 14
New Visitor

Re: paying off car loan. will score raise?

I like to lease car and rent a house.

 

Message 7 of 14
Valued Member

Re: paying off car loan. will score raise?

I recently paid my car loan off early and my myFICO DROPPED 75 Points.... still can't figure out why... it was only myFICO and only the Equifax version... everyone else went up a few points....for whatever it is worth


Starting Score: EQ 740, EX 792 (lender pull), TU 772 (lender pull)
Current Score: EX 850, EQ 835, TU 755
Goal Score: all over 800


Take the myFICO Fitness Challenge

Message 8 of 14
Regular Contributor

Re: paying off car loan. will score raise?

My score dropped 1pt when I paid off a car loan that was about 12 months old

Current 3B scores Dec 2016: EQ: 794 TU: 785 EX: 755
Mortgage scores Dec 2016: EQ: 744 TU: 748 EX: 743
2017 Goal: reduce debt and purchase first home
Total credit lines: 112K
Message 9 of 14
Established Member

Re: paying off car loan. will score raise?

Finish paying off an installment loan won't increase your score; it's paying it and having less debt overtime that will raise your score.

Message 10 of 14