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I have 2 installment loans thru my local CU. One is a max of $500 (bal $399) (I was cosigner for my fiance) and the other is mine. Max is $3500 and balance is $3300. When I look at my CCT, one of the things that shows to hurt my score is "installment balances too high". My question is, is it better to keep these trade lines open and pay on them monthly or just pay them off and close them? What will hurt worse?
I don't suggest that you close them. I would pay them down. You need to have a credit history, so the positive trade lines are needed. I suggest paying more than the minimum so that you can get the balances down and helping your score increase.
@Anonymous wrote:I have 2 installment loans thru my local CU. One is a max of $500 (bal $399) (I was cosigner for my fiance) and the other is mine. Max is $3500 and balance is $3300. When I look at my CCT, one of the things that shows to hurt my score is "installment balances too high". My question is, is it better to keep these trade lines open and pay on them monthly or just pay them off and close them? What will hurt worse?
Most people (On my fico anyway) pay 50 to 65% of their loans off when they first open them and then auto payments till the loan is done. I guess that avoids that pesky "installment balance to high" message. Maybe you should consider that tactic.
Thanks for that insight.
Edited
TBH I would ignore that message and just pay them down. When I was rebuilding, a negative was not having an installment loan and when I got one then it was the same loan balances too high comment that see. I still get the message but ignore it. Also paying off an installment loan has resulted a drop in scores according to reports in the Fico scoring and general credit forums. So...
@Anonymous wrote:I have 2 installment loans thru my local CU. One is a max of $500 (bal $399) (I was cosigner for my fiance) and the other is mine. Max is $3500 and balance is $3300. When I look at my CCT, one of the things that shows to hurt my score is "installment balances too high". My question is, is it better to keep these trade lines open and pay on them monthly or just pay them off and close them? What will hurt worse?
If you dont have an auto loan, it would be good to have at least one of them to satisfy the 'credit mix' portion of the Fico scoring.
I just started an installment loan with SDFCU for 3000 and they reported it before the first payment as 3007 with a max of 3000. I didnt notice any ill effects on my scores and now it shows like 2924 out of 3000.
I would suggest keeping them and paying at least the scheduled amount.
In my case, paying my new 3k loan down to about 2k was a luxury I couldnt afford. I needed the full amount. It would be a great practice to get it down low after opening it, if possible.
HTH