How Does A Paid Off Loan Affect FICO scoring?

[Anonymous]

I've got a share secured loan through my local CU that's going to be paid off in January (UW wouldn't grant a longer term). At that point, I'll take out another one through Alliant with a much longer term. I've read all about the sub-9% balance for maximizing FICO scoring, but does a loan that's paid as agreed affect scoring at all? 

Assume:

- My CR with one paid as agreed loan, and another open loan reporting a sub-9% balance.

- My CR with no history of installment loans, other than an open loan reporting a sub-9% balance.

I imagine that item (assuming it's my only installment loan on record) would help me out during a manual review, but I haven't come across an answer regarding closed loans and their affect on scoring. At the very least, lenders won't be able to as easily cite "lack of history with installment loans" in their denial letters.

[JLK93]

The loan won't continue to benefit FICO 8 once it is closed. You'll lose the points you gained.

Closed loans due benefit FICO 4.

When did you open the loan?

[Anonymous]

Here's how my paid off loan - also a secured loan - impacted my score:

Before:

After:

[RonM21]

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@Anonymous wrote:

Here's how my paid off loan - also a secured loan - impacted my score:

Before:

After:

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Good data Captool. And a 33 point drop is somewhat significant. 

[Anonymous]

I also saw exactly the same 33 point drop on TU, from 821 to 788.

[Anonymous]

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@oilcan12 wrote:

The loan won't continue to benefit FICO 8 once it is closed. You'll lose the points you gained.

Closed loans due benefit FICO 4.

When did you open the loan?

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Ah ha. Unfortunate that FICO 8 doesn't it into account.

10 days ago, first payment's not due until the 1st of August. 

@ CAPTOOL: Thanks for the datapoint! 

[SouthJamaica]

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@Anonymous wrote:

I've got a share secured loan through my local CU that's going to be paid off in January (UW wouldn't grant a longer term). At that point, I'll take out another one through Alliant with a much longer term. I've read all about the sub-9% balance for maximizing FICO scoring, but does a loan that's paid as agreed affect scoring at all? 

Assume:

- My CR with one paid as agreed loan, and another open loan reporting a sub-9% balance.

- My CR with no history of installment loans, other than an open loan reporting a sub-9% balance.

I imagine that item (assuming it's my only installment loan on record) would help me out during a manual review, but I haven't come across an answer regarding closed loans and their affect on scoring. At the very least, lenders won't be able to as easily cite "lack of history with installment loans" in their denial letters.

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From my experience the closed installment loans seem to have no effect at all on FICO 8. It's rumored that FICO 9 takes the wiser view that paid off loans are in fact a plus.

[Anonymous]

In order of FICO scoring positive impact:

1.  An installment loan that's nearly (<10%) paid off but not paid off yet.

2.  An installment loan that's fully paid off with no other installment loans (open or closed) on your report.

3.  No installment loans at all, open or closed on your report.

[Anonymous]

I'm pretty sure you will lose points.  Right now, myfico is stating that my installments loans are at a great % to loan which must keep making my score go up right now.  I think they will drop me in another bucket beforelong!  

Have moto loan which is getting low and I know that will have a negative effect on my score once it's pif.  I'm looking for something else, maybe 2003 H2, (my golf cart & moto all in one) so that my installment loans stay at 2.  Plus mtg.  You can also take out a PLOC and pay back most of the loan with the funds and then pay back a little each month just to keep the loan.  I'm just buying some toys right now but will also take out a PLOC if I need too.  

Or live with the drop and wait for your scores to go up after a while.

[JLK93]

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@Anonymous wrote:

I also saw exactly the same 33 point drop on TU, from 821 to 788.

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CAPTOOL,

Do you have any FICO 9 data from when your installment loan was paid off?