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Valued Member
Posts: 34
Registered: ‎08-23-2010
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How soon can I pay off a loan?

Quick story - I need new heating and air. I went all summer without air and there were plenty of times my house got over 90 degrees during the day. I ran a window unit in my bedroom so I could sleep. I am 90% of the way there as far as fundage goes for paying for a new HVAC system and installation. Obviously, with winter coming up soon, I will need heat. I can live without air but I can't live without heat. :-)


I can take a home equity loan out now for the entire amount (approx $6000) but don't think it will help my score if I end up paying it off in less than six months. The only score I've pulled is EX and it's 658 with perfect payment history on two credit cards for four years and a perfect mortgage for three. My baddies is a medical collection that will drop off this time next year and 7 (before I consolidated) 90 day lates on Sallie Mae 4.5  years ago. I got "gazelle intense" and paid them off in 2009. I thought that paying more than $8000 in student loans in one year would have helped me a lot but it did not.


I seriously only need about $1000 to pay for my HVAC system, the rest is already in the bank waiting. I have no other debt other than my house. Everything else is paid including the car. I'm quite positive I could pay this loan off in less than 90 days but don't think it will be worth it creditwise. 


How long do I need a loan for it to reflect positively on my credit?  

Valued Contributor
Posts: 1,065
Registered: ‎05-26-2010
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Re: How soon can I pay off a loan?

When you say you can take out a home equity loan for $6K - if that's a LOC, you can pay it off as you suggest but I believe  the revolving line remains to help reduce utilization (as long as the limit is under a large number, $35K sticks in my mind).  Or, pay the last $500 off at $100 a month to keep it going six months.


But as others have said, you reach a point where you need to do what makes financial sense and not totally focus on your score. 


In the past I thought I've seen low or zero percent loans from vendors like Lennox.  You've estimated the cost, have you looked at what the contractor can do to help bridge the gap?  They might take the last $1K as a 90 day receivable.  The economy is still pretty chilly out there...

BK7 Filed 8/11/2009 Discharged 11/23/2009. Purchased new home 4/11/2012
Starting Score:11/16/2009 EQ 566 11/16/2009 TU 538
Interim Score: 12/27/2012 EQ 683 09/17/2012 EX (lender) 670 1/01/2013 TU 701
Current Score: 11/06/2013 EQ 708 11/06/2013 EX 702 11/16/2013 702 11/06/2013 TU 729
Goal Score: EQ 740 EX 740 TU 740
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Posts: 32,865
Registered: ‎08-04-2007
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Re: How soon can I pay off a loan?

chasmith wrote:

But as others have said, you reach a point where you need to do what makes financial sense and not totally focus on your score. 

+1. If it ever came to avoid being a popsicle or gaining a couple of FICO points, most would aim for the former. A few might aim for the points. Smiley Happy


BTW, IMO, gaining that loan would hurt your FICO score more than it would help, but not by too much...certainly nothing to worry about. Loans only help if there's a balance. Once paid it is removed from your mix of credit per your FICO score. However, as said, if you need the loan, then get it, or furiously save before winter.


To add, I got a loan over the summer via Lending Club, a P2P loan. It doesn't report and, IMO, if a loan is needed and you don't want it to report, then that's certainly something to consider.

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