My only installment is about to close - score damage?

[llecs]

My only open installment loan (car) is scheduled to be paid off in April. Has anyone concretely seen any point loss due to the loss in the mix of credit? If so, how much of a loss was it? If it matters, my FICOs are currently low to mid 600s.

[CreditAble]

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@llecs wrote:
My only open installment loan (car) is scheduled to be paid off in April. Has anyone concretely seen any point loss due to the loss in the mix of credit? loss was it? If it matters, my FICOs are currently low to mid 600s.

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I didn't see much change when I paid off ny last car loan. Paying off an earlier installment loan made my TU score plunge a lot. I think it was a utilization thing because my remaining open auto loan had a relatively high balance at the time..

Having the installment loan paid off in your credit file will probably help (your score) when you apply for another car loan in the future.

My point is that obtaining or paying off car loans doesn't seem to help or hurt the credit scores much, as long as you have two paid off installment loans in your file prior to applying for a subsequent installment loan.. Your first two installment loans might hurt scores for a while because you have no history of making payments on loans that can not be used to borrow more money (the way a credit card can).

Once you have two paid off installment loans with a minimum duration of two years repayment each, future loans will cause almost no impact, positive or negative.

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[haulingthescoreup]

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llecs wrote:
My only open installment loan (car) is scheduled to be paid off in April. Has anyone concretely seen any point loss due to the loss in the mix of credit? If so, how much of a loss was it? If it matters, my FICOs are currently low to mid 600s.

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llecs, are you saying that this is your one and only open installment account, and therefore you're worried about losing installment in your mix?

Because I'm sure that I've read repeated posts about drops after the last installment account was paid off, but there's no way that I can drag them up from my memory.

Any readers: has anyone paid off their one-and-only open installment account? What if anything happened to your FICO scores?

Message Edited by haulingthescoreup on 03-31-2009 06:13 PM

[Junejer]

I was briefly without an installment loan for a short while last May. But, I had so much going on at the time (apping and new accounts posting) that I can't pinpoint what the damage (or not) was.

[llecs]

Thanks guys.

Yep, Hauling, I'm curious if I will lose points when my last installment closes. Thanks for translating.

[CreditAble]

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haulingthescoreup wrote:

Any readers:

has anyone paid off their one-and-only open installment account?

What if anything happened to your FICO scores?

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With one prior paid off installment loan in file

I paid off my second installment loan.

My score went up 2 points not down.

As I have said before there doesn't seem to be much

if any dings for not having an open installment loan.

Needing an installment loan for mix is a myth period! 

Again, as I have said before  there is a difference in the way FICO treats installment loans if one doesn't have any prior loans in file.

From my experience I have concluded that the second pay off of an installment loan causes no real neg score change. The pay off of the first loan might.

Paying of my first loan did cause a score drop but the pay off had drastically increased my total installment balance utility because the second loan still was at 80% or so.

 One cannot make a blanket statement about installment loan pay offs causing a score to go up or down. I also had a score of 790 at the time my own second (last) installment loan was paid off. I don't know if lower scores might behave differently.

I do know for a fact that one's first installment loan will behave very differently (score wise) from his second.

My conclusion or "rule of thumb" is to strive to have two paid off installment loans of two years or more in file. Then forget about having an open installment loan for "mix".

From that point on a person can open subsequent installment loans without much thought about credit score. The only possible score reduction might take place as a result of high initial balance to original amount ratio.

The one stipulation I want to add is that paid off installment loans might fall off from one's report at the end of ten years. That is why I will be opening a small installment loan in five years or so to make sure that I am never without two paid installment loans in file.

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[CreditAble]

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@llecs wrote:
Thanks guys.

Yep, Hauling, I'm curious if I will lose points when my last installment closes. Thanks for translating.

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If you have prior paid installment loans in file, I predict no score drop. 

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[llecs]

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CreditAble wrote:

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@llecs wrote:
Thanks guys.

Yep, Hauling, I'm curious if I will lose points when my last installment closes. Thanks for translating.

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If you have prior paid installment loans in file, I predict no score drop. 

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I shall place my scores in your hand, CreditAble.

This loan is set to mature tomorrow but I had a couple payments deferred from back in my dark credit days. I might just PIF this month to see what will happen. It won't report again until May 1, though. I do have one other paid installment loan reporting.

[CreditAble]

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@llecs wrote:
I shall place my scores in your hand, CreditAble.

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There is chance that you are in a different bucket that might actually need open installment loans to be able to score higher. I doubt very much that it will be the case though.

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llecs wrote: 

I might just PIF this month to see what will happen. It won't report again until May 1,

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Whatever you do, I would ask that you take care to do so in such a manner that we can absolutely confirm a direct relationship of score change to the loan pay off. That would mean making your last payment in such a manner that other changes in your files will not cloud the reasons for any possible score change.

My 2 point increase was an exact confirmed cause effect data point taken from Equifax Score watch Alerts.

One alert was for a 2 point increase.

On the same day there was an additional alert that

The following changes were reported for your (Auto Loan) account-

The "Balance Amount Changed from $XXX to $0"

I have verified that no balance changes, birthdays, number of accounts with balances change, etc had taken place for three weeks prior and one week after the alerts.

If you can come up with a clear correlation of score change it will definitely help with our current endeavors to accurately predict future score changes generated by installment loan pay offs.

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[haulingthescoreup]

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CreditAble wrote:

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@llecs wrote:
I shall place my scores in your hand, CreditAble.

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There is chance that you are in a different bucket that might actually need open installment loans to be able to score higher. I doubt very much that it will be the case though.

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This would be my guess. I'm assuming that you have long, clean history? That score bucket doesn't seem to "need" an open mortgage, either.

Thanks llecs for taking a bullet for the team! --and I'd be delighted if it turns out that you don't have to have an open installment loan for mix.