@iv wrote:
@Revelate wrote:
What I mean by prepayment results in something looking like this:
New Balance: $42.85 / $500
Next Due date: 10/21/18 - $9.16
They applied your payment to both principal and as fufilling the next X months payment requirements?
That's... an interesting sort of broken.
I wonder if that would still happen if the expected accrued interest over that period would exceed the minimum payment - would they allow effectively negative amortization?
Just be careful - it's easy to forget things over three years. Even though I assume you'll have it set to autopay in 2018, if you change banks, account numbers, etc... could be very easy to have that auto payment fail to go off. And missing that $9.16 could wipe whatever gains you may have made from having an installment account reporting. (For that matter, will it report during those three years, with no payments being made?)
To add what Jamie already said, most lenders actually do this to my knowledge, I was incredibly surprised when DCU brought me up short on that... might've continued my fast-track paying of my 19.35% APR auto loan with WFDS - they had no problem with my doing that, and it did still report every month. I will see next week if USAA reported this month after my doing the same with them recently.
You do bring up some good points but at least at this stage of my life I'm frankly pretty compulsive about checking my accounts non-trivially often. Auto pay for a loan like this for me is always, always with the local bank and it's just a matter of keeping the account active as Jamie suggests. Alliant for example starts imposing a fee on accounts that aren't active within a year. Either dumb $1 recurring transfers from my primary institution, or dumb $1 recurring payments to the loan should be good enough to finagle that... I didn't get flagged as inactive in the year and small change I've had the Alliant accounts and it ever does is autopay my secured loan until just today.
Regarding interest, the payment explicitly in a simple interest loan is bring interest to zero, rest is applied to principal. In this case the minimal interest got cleared, and a whole lot (comparitively, small balance / numbers) went to principal. Interest resumes ticking immediately after that but on a far smaller principal dollar amount.
I don't know how that would play in the case that the interest accrued in excess of the minimum payment: I think nearly by regulation it'd work the same was as before - interest paid first, any remaining goes to principal. If that remaining amount is zero, then keep trucking forward. They can't mark me late, though they could reset my payment due date presumably since DCU did it.
I don't think in the scenarios we're describing (taking out a loan, and paying ~95% back nearly immediately... not sure if I have to hide this from a lender, might need to break it up by a few payments) that the interest on the airstruck now trivial balance would ever accrue over the minimum payment in the time window allowed; I think that might be mathematically provable even but I'm not in the right frame of mind to focus enough to try to figure that part out.
@Anonymous wrote:So here is my situation, currently in process of building a house and will have to have my credit pulled again some time between July and August. I have only 1 installment loan that had an inital balance of $11,500 from Nov. 2014. Today the balance is at $6,980. I am going to be paying off the car prior to the house purchase as well. However the question I have is what should be balance be to maximize credit without paying it off in full prior to that credit pull. I am assuming paying it off now would lower my score a little bit as a result of not having an installment loan.
Would likely hurt EX 98, may or may not hurt EQ 04 or TU 04 appreciably to pay it off though probably it'd be incredibly tiny if at all, they just don't seem to use the metric much based on recent or historical data. What's your mid-score currently? If it's not EX I wouldn't even bother playing with it personally especially if you're not right on a tier boundary: when I got my data point at roughly 60% installment utilization, I gained only a handful of points on EX 98. Other mortgage trifecta scores didn't move.
If you want to pay it off anyway for financial reasons, then by all means pay it down to like 10 or 5% or whatever, but I wouldn't do it from a FICO perspective necessarily unless you were a couple of points short and the resulting tier boundary over the loan term is appreciably different than paying 6K or whatever now.
You could probably get a rate reduction for much cheaper than that when it came to discount points anyway.
@taxi818 wrote:I'm just wondering at what point does the installment loan stop reporting as negative to fico. I think I will pay 30% of it off. As I would like it to be long term. Loan is 4 years. I already made 3 payments. No early payoff penalty.
I just airstruck my USAA and Alliant loans to some small balance. When I next pull my reports I'll see if that's still a negative for me, it was previously albeit with my dirty file not in a high order slot.
@Anonymous wrote:More anecdotal evidence of the same.
Using experian credit check total I get my ex 08 score and report daily.
only change is my auto loan just dropped to 79.33% and my ex08 went from 719 to 725, no other report changes
I did a 3b pull on Sunday to set a benchmark for some more revolving testing
I'm tempted to pay the $20 to pull an ex report and see if the ex 98 changed any just for the sake of providing more anecdotal evidence
Question for you, do you have any other installment loans? If so what current vs. original balance? Thanks for the datapoint!