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How much is my loan going to hurt?

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Anonymous
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How much is my loan going to hurt?

I took out a 7500.00 personal loan last month. I'm guessing on the 20th of April this month is the 1st payment is when it's going to hit my credit files. Nothing has showed up yet since the inquiry last month. Anyways I know it's going to dent my scores but as I pay each month bringing down the principal. Will work towards getting my scores back to where they were? I have no other installment loans and only 3 CC in perfect payments and 1% utilization. So how bad is this going to hurt?
TU 640 EX. 645 EQ. 768
35 REPLIES 35
Anonymous
Not applicable

Re: How much is my loan going to hurt?


@Anonymous wrote:
I took out a 7500.00 personal loan last month. I'm guessing on the 20th of April this month is the 1st payment is when it's going to hit my credit files. Nothing has showed up yet since the inquiry last month. Anyways I know it's going to dent my scores but as I pay each month bringing down the principal. Will work towards getting my scores back to where they were? I have no other installment loans and only 3 CC in perfect payments and 1% utilization. So how bad is this going to hurt?
TU 640 EX. 645 EQ. 768

It's very possible that the loan will help your scores, rather than hurt them.  Do you have any closed installment loans on your report?  Or is this your first installment loan of any kind, closed or open?

 

Also, do you know how to compute your AAoA (Average Age of Accounts)?   That's another factor that will be affected.  Credit Karma will give you a false reading of your AAoA, but there are other free tools out there that will not.  (For example, credit.com.)  If you can tell us your AAoA now and your total number of accounts (closed and open) we can tell you what your AAoA will be once the new loan shows up.

Message 2 of 36
SouthJamaica
Mega Contributor

Re: How much is my loan going to hurt?


@Anonymous wrote:
I took out a 7500.00 personal loan last month. I'm guessing on the 20th of April this month is the 1st payment is when it's going to hit my credit files. Nothing has showed up yet since the inquiry last month. Anyways I know it's going to dent my scores but as I pay each month bringing down the principal. Will work towards getting my scores back to where they were? I have no other installment loans and only 3 CC in perfect payments and 1% utilization. So how bad is this going to hurt?
TU 640 EX. 645 EQ. 768

It will hurt your scores but I don't know how much. When I added an auto loan which was paid down to 87% by the time it reported my scores dropped 20-25 points. Of course I got all the points back as I paid the loan down.

 

You can optimize your credit card utilization by letting 2 of the cards report zero balance, while the 3rd card reports a low balance.


Total revolving limits 741200 (620700 reporting) FICO 8: EQ 701 TU 704 EX 685

Message 3 of 36
Anonymous
Not applicable

Re: How much is my loan going to hurt?

SJ, did you already have an open installment loan though?  If so I could understand the drop, but if not like the OP as CGID suggested the presence of the open installment loan IMO would more than likely offset the utilization ding associated with it... something like +30 points then -20 points for the sake of numbers resulting in a net of +10.

Message 4 of 36
Anonymous
Not applicable

Re: How much is my loan going to hurt?

We'll know more when the OP tells us whether he has any closed installment loans on his report.  (And also the feedback about his AAoA.)

 

If not, my guess is that this will help him, since he'll get a benefit from Credit Mix.  (Going from no installment loans of any kind, closed or open, to the presence of an installment account.)

 

If he does have a closed I-account in good standing, then he may get no Mix help but also no harm due to Installment Util -- I am guessing that having an open loan with a very high IU is not any worse than no open loans altogether (as touches IU).  In this scenario, the effect on his AAoA may be the greater driver.

 

Curiously, Sarge mentioned the other day that when a new loan first appears (assuming it takes your total IU to 100%) there can be a scoring penalty that goes away once you have made a couple payments, i.e. lowering the amount owed to maybe 98% say.  He had an experience like that.

 

So it will be interesting to see if that happens with our OP as well.

Message 5 of 36
SouthJamaica
Mega Contributor

Re: How much is my loan going to hurt?


@Anonymous wrote:

SJ, did you already have an open installment loan though?  If so I could understand the drop, but if not like the OP as CGID suggested the presence of the open installment loan IMO would more than likely offset the utilization ding associated with it... something like +30 points then -20 points for the sake of numbers resulting in a net of +10.


Yes I already had a paid down share secured loan, and did not gain any points by improving the 'credit mix'. So you are right that my negative was not offset, as OP's would be, by the addition of an installment loan to the 'credit mix'. Whether the positive will outweigh the negative is of course problematic.

 

 

 


Total revolving limits 741200 (620700 reporting) FICO 8: EQ 701 TU 704 EX 685

Message 6 of 36
Anonymous
Not applicable

Re: How much is my loan going to hurt?


@SouthJamaica wrote:

@Anonymous wrote:

SJ, did you already have an open installment loan though?  If so I could understand the drop, but if not like the OP as CGID suggested the presence of the open installment loan IMO would more than likely offset the utilization ding associated with it... something like +30 points then -20 points for the sake of numbers resulting in a net of +10.


Yes I already had a paid down share secured loan, and did not gain any points by improving the 'credit mix'. So you are right that my negative was not offset, as OP's would be, by the addition of an installment loan to the 'credit mix'. Whether the positive will outweigh the negative is of course problematic.

 


Hi SJ.  Looks like two things made your situation different.  You already had an installment loan on your reports, so as you say you definitely got nothing additional from the Credit Mix category.  But you also lost all the points from the Installment Utilization factor -- which is from the much more heavily weighted Amounts Owed group (not Credit Mix).  So you failed to get a bonus and also took a loss in two different areas.

Message 7 of 36
Anonymous
Not applicable

Re: How much is my loan going to hurt?

I have no installment loans open or closed. . I have just 3 credit cards which I have 0 balance I show on 2 of them and leave small 10 dollars balance on the 3rd. EQ. 768 no collections. TU 640 two medical collections EQ. 645 two medical collections. And a closed credit card account in good standing from wells Fargo. Opened 2012 and closed 2014. And that's the whole ball game. I had 8 collections and one judgement but I either paid for delete or was disputed and deleted. My score started at 511 six months ago to where it is now. I'm really greatful for all the advice and info
Message 8 of 36
SouthJamaica
Mega Contributor

Re: How much is my loan going to hurt?


@Anonymous wrote:
I have no installment loans open or closed. . I have just 3 credit cards which I have 0 balance I show on 2 of them and leave small 10 dollars balance on the 3rd. EQ. 768 no collections. TU 640 two medical collections EQ. 645 two medical collections. And a closed credit card account in good standing from wells Fargo. Opened 2012 and closed 2014. And that's the whole ball game. I had 8 collections and one judgement but I either paid for delete or was disputed and deleted. My score started at 511 six months ago to where it is now. I'm really greatful for all the advice and info

Camelot, please update us when the loan hits your reports.


Total revolving limits 741200 (620700 reporting) FICO 8: EQ 701 TU 704 EX 685

Message 9 of 36
Anonymous
Not applicable

Re: How much is my loan going to hurt?

I will thank you
Message 10 of 36
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