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NewSurrender
Posts: 81
Registered: ‎05-06-2012
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How an auto loan affects your FICO score?

Tried looking around before asking, but I couldnt really find any answers to this question. What Im wondering is how an auto loan affects your credit score, bith negatively and positively.

Im sure that when it first starts reporting, itll affect it negatively as the new account will drop your AAoA. Is the amount owed as significant as utilization is, when it comes to credit cards? From what I read, auto loans start to become a positive tradeline after six months, is that true? Also, how much of the loan needs to be paid off before its a tradeline that boosts your score instead of bringing it down?

Sorry if this is a stupid question, couldnt find an answer to it.
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Revelate
Posts: 9,155
Registered: ‎12-30-2011
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Re: How an auto loan affects your FICO score?

[ Edited ]

NewSurrender wrote:
Tried looking around before asking, but I couldnt really find any answers to this question. What Im wondering is how an auto loan affects your credit score, bith negatively and positively.

Im sure that when it first starts reporting, itll affect it negatively as the new account will drop your AAoA. Is the amount owed as significant as utilization is, when it comes to credit cards? From what I read, auto loans start to become a positive tradeline after six months, is that true? Also, how much of the loan needs to be paid off before its a tradeline that boosts your score instead of bringing it down?

Sorry if this is a stupid question, couldnt find an answer to it.

It's an installment loan, and for probably 90 or even 100% of  things relating to an auto loan, just treat it as such.

 

As such it isn't factored into the revolving utillization metric which is what everyone here pays the most attention to.  It may factor in a much smaller percentage, but it's not "critical" to FICO scoring.  Just pay on the tradeline like everything else, never miss a payment, never pay late, never pay less than the minimum, and you'll be OK as far as that goes.  

 

As to when it becomes beneficial, that depends on what the rest of your profile looks like and as such I can only make a general statement.  In my case it was my first installment loan, and when it hit my reports it was a straight boost according to FICO, even including the inquiry that was then only a month old or so.  If you have a thicker file than I did, YMMV, and then the six months is usually pretty reasonable for any penalty associated with the new tradeline to fade.

 

 

Starting Score: EQ 561, TU 567, EX 599* (12/30/11, EX lender pull 12/29/11)
Current Score: EQ 04 673, EQ 8 707, TU 720, EX 702* (09/02/14, EX older)
Goal Score: 700 on EQ '04 (01/01/15)


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pakman92
Posts: 650
Registered: ‎03-01-2012
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Re: How an auto loan affects your FICO score?


Revelate wrote:

NewSurrender wrote:
Tried looking around before asking, but I couldnt really find any answers to this question. What Im wondering is how an auto loan affects your credit score, bith negatively and positively.

Im sure that when it first starts reporting, itll affect it negatively as the new account will drop your AAoA. Is the amount owed as significant as utilization is, when it comes to credit cards? From what I read, auto loans start to become a positive tradeline after six months, is that true? Also, how much of the loan needs to be paid off before its a tradeline that boosts your score instead of bringing it down?

Sorry if this is a stupid question, couldnt find an answer to it.

It's an installment loan, and for probably 90 or even 100% of  things relating to an auto loan, just treat it as such.

 

As such it isn't factored into the revolving utillization metric which is what everyone here pays the most attention to.  It may factor in a much smaller percentage, but it's not "critical" to FICO scoring.  Just pay on the tradeline like everything else, never miss a payment, never pay late, never pay less than the minimum, and you'll be OK as far as that goes.  

 

As to when it becomes beneficial, that depends on what the rest of your profile looks like and as such I can only make a general statement.  In my case it was my first installment loan, and when it hit my reports it was a straight boost according to FICO, even including the inquiry that was then only a month old or so.  If you have a thicker file than I did, YMMV, and then the six months is usually pretty reasonable for any penalty associated with the new tradeline to fade.

 

 


Also, if this is going to be your only installment loan, it will help with 'mix of credit' portion of how your score is determined.


My Starting Score: EQ: 691 (11/30/11) TU98: 726 (11/30/11)
My Current Score: EQ: 779 (04/22/13) TU08: 835 (06/03/13)
DW Starting Score: EQ: 742 (03/02/12) TU98: 748 (03/02/12)
DW Current Score: EQ: 784 (03/11/13) TU08: 775 (06/03/13)

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