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Established Member
Posts: 13
Registered: ‎02-27-2013
0

Paying Down Installment Loan - as Effective as Paying Down Credit Cards?

After doing some research, it looked like it would be beneficial to my credit score to get the balance on an installment loan to be less than 50% of the original loan amount.  So, I made a payment to get the principal less than 50% of the original amount.  My scores didn't really seem to change one way or the other.

 

On the other hand, when I made a similar payment on a credit card to get it under 50%, my scores went up by a notable amount.

 

So, I guess that you don't get as much "bang for the buck" with an installment loan payment.  Does that make sense?

 

It's all good - paying down balances is a good thing making me a much more relaxed person, but I was just curious about the score implications.  

Moderator Emeritus
Posts: 32,869
Registered: ‎08-04-2007
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Re: Paying Down Installment Loan - as Effective as Paying Down Credit Cards?

[ Edited ]

Revolving util far outweighs installment util. In fact, installment util is a teeny tiny part of FICO scoring. The only experience I had was paying off a car note from 25% to 0%. I saw a gain on EQ, but I think most of that was due to adding another $0 balance.

 

ETA....and I'll add that this is a good thing. If you add a $500k mortgage you won't see a large score ding for staying at or near 100% util while the balance slowly goes down.

Established Member
Posts: 13
Registered: ‎02-27-2013
0

Re: Paying Down Installment Loan - as Effective as Paying Down Credit Cards?

Thanks for the response.  So, if I were to pay off the installment loan, I might get a bump in my score, but it would be more from adding a zero balance than anything else.  Also, how much of a bump is it?  Minor?

 

I find the whole process fascinating.  It is like trying to decipher a mystery.

Moderator Emeritus
Posts: 32,869
Registered: ‎08-04-2007
0

Re: Paying Down Installment Loan - as Effective as Paying Down Credit Cards?

It's a YMMV-thing. Single digits tops. Depends on if you are carrying other balances on other loans, CCs, etc.

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