Pay off the entire balance or leave some?

[Anonymous]

I had about $100,000 in student loans for both undergrad and grad school.  I've now pretty much paid off the full balances, but I left a few hundred dollars as a balance on one of the loans that was originally $48k.  The reason I did this is because I was told by someone that having the very small balance ($600 versus an original loan amount of $48,000) will actually raise my score relative to having a zero balance and a closed account.  The loan was a 10-year term and does not need to be fully paid off until 2017.

Was I informed correctly?  Or would I be better off just paying the last $600 and calling it a day?  The reason I'm asking about this is because I'm probably going to be purchasing my first home within the next year, so I really need all the credit points I can get when I start this process.

The other thing I'm worried about is on my credit report it's listing my minimum payment for this loan as around $300 per month.  Would a lender use this total amount of $300 per month in calculating how much I can afford / borrow even though it would only take two payments of $300 per month in order to pay off the balance?

Last piece of information is that my FICO score range is 849 through 865, which according to my score reports puts me in the 70th percentile in terms of credit worthiness.

Any guidance would be greatly appreciated. Thanks in advance. 

[laz98]

wherever you got your scores from, they are wrong.  those are not accurate FICO scores, since the highest you can go is 850.  get your scores here for TU & EQ.

[Travis-84]

The first thing I would do is buy your score from this site.  It will give you your true FICO score. (search for a discount code first)

As for paying it off.  When you pay it off, it will close your account, but it will stay on your credit report for 10 years.  I doubt you will see a major increase or decrease either way.

It it was my account, I would buy a bottle of champaign, send in the final payment, and celebrate.  Even if the interest rate is low, getting out of debt is always the best solution.  Plus if you pay if off, you don't have to worry about forgetting it, and missing a payment.  Just remeber that interest accrues daily, so if you pay off todays amount, it will be a bit more tommorow. 

[Tazman81]

I agree with Travis.  It will not make any significant difference in your score whether you pay off the loan or leave it open.  I would recommend going ahead and paying the loan off.  That way the account will be closed and you don't have to worry about providing the mortgage broker with additional documentation that shows you don't have that $300 a month payment.

[Anonymous]

what your friend described is utilization on revolving accounts.. ie. credit card accounts.  having a small balance like that on an installment loan like your student loan makes no difference to fico. pay that baby off!

search the forums for 'credit card utilization' and read thru the 'understanding fico scoring' subforum.

[Anonymous]

That's great that you're already able to pay off such major loans.  I would definitely suggest paying everything, not having to worry about making a payment in the future etc, and as a bonus I think that's viewed more favorably on your credit report.  Also agree with some of the other posts on here that you need to get your real FICO score! This site is probably your best bet, but maybe not the cheapest.  There's a list on http://www.creditreport.org of where you can get your true score from - but be careful because so many companies offer a different type of score.  Hope that helps mate!