Preventing a Score tank

[Lucid08]

Hi again all!

Over the next 3 months I will be paying off 2 of my 3 outstanding installment loans as the final payments come due. The 3rd loan is a motorcycle loan that I still have 40 monthly payments left to pay. So that will leave me with one active installment loan and 4 loans all showing as paid with -zero- balances and no lates.

Now, over the next couple of months my CR's will start reporting on 3 new CC's that I just recently got approved for. I got 2 NFCU cards(Nrewards Visa and MC) each with 2500 limits, and an Orchard card with a 500 limit.

According to what I've read on this board I'm thinking about using each card for less than 9 percent utilization of their respective CL's and letting that balance report for the first month and then PIF'ing before the due date.

I realize that I will take a hit initially for the balances when they report, but my scores should bounce back after PIF'ing and keeping total and individual utilization below 9 percent in the months that follow.(if I understand what I've learned correctly).

My questions: If I decide to pay off the motorcycle loan(my only remaining installment loan) early, what is the earliest I should consider doing so in order to pevent a big score hit? From what I understand, I will likely take a hit in mix points if I no longer have an active installment loan reporting, so it is wisest to pay the full 48 months on the loans, or will my 3 new CC accounts offset the loss of mix points if I pay off the motorcycle early?

[GFer]

I've asked this question before, as have others. From my understanding, you will take a hit simply bc of the 'mix factor'.

Revolving accounts are scored seperately (and more points for these). Just the fact that they are new will bring your Average Age of Accounts down and you will most likely take a hit from that. But having more positive tl's in the revolving category will give you more points in the long run!

Paying down the installment may cost you points now, but your scores will rebound for the most part. Also, (like someone else said on the forums...can't remember who), saving money makes it worth it.

Depends on what you plan on doing with your credit in the next year or even more recently. If you don't plan on applying for say, a mortgage or any other credit--you'll be fine. Your accounts will age and score will climb.

[Anonymous]

When you have the opportunity to pay a loan off early, I say go for it. Several reasons:

1) You're not going to take THAT big a hit on your FICO score for losing an installment account. Paying your revolving accounts on time and keeping balances under 10% does the heavy lifting.

2) Anytime you can pay a loan early, you'll save interest.

3) For mortgages, car loans and even some credit card approvals, a manual review is part of the process, and a paid loan always looks good on a CR.

[Lucid08]

So is there any reason to show more than 12-24 months of actual 'payment' history on an installment loan if a person can pay one off early? There hasnt really been any concrete proof that paying on an installment loan for more than 12-24 months does anything beneficial to your credit scores over the long haul(from the posts I see elsewhere). I do realize that the longer a person pays on an installment loan, the longer the 10 year reporting period gets extended with each payment. but beyondf that I havent come across any positives other than the stated 10 percent for credit mix by maintaining an open installment account.

I'm thinking in terms of maximizing my credit score moreso than I am about getting a mortgage or new auto loan anytime soon.

[haulingthescoreup]

I've seen reports of a 10-point drop when the last loan is paid off, but I'll bet that's really variable.

You probably can't do this on your bike loan, but some people pay off the bulk of their loan immediately, then paying back the balance at $5/month or something. That minimizes the interest, but it keeps the loan alive.

[Lucid08]

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@haulingthescoreup wrote:
I've seen reports of a 10-point drop when the last loan is paid off, but I'll bet that's really variable.

You probably can't do this on your bike loan, but some people pay off the bulk of their loan immediately, then paying back the balance at $5/month or something. That minimizes the interest, but it keeps the loan alive.

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Well, the motorcycle oan is a simple interest loan, and the terms allow me to either pay on the front side(of which I'm doing- currently paid ahead until October), or I can make a monthly payment and anything above and beyond the payment is applied to principle. I -could- technically pay the loan off in about 10 more months(18 total months instead of 48), but that's where my questions about credit mix come into play. I've not seen any definitive proof that making all 48 payments would benefit my score or, if paying it off within, say, 18 months would hurt my score other than losing the active TL and the associated 'credit mix' point loss.

I'm in a unique position, as my oldest installment account is only 4 months older than the motorcycle loan, and as of October the motorcycle loan will be my only remaining active installment TL. By then all 3 of my new CC revolving TL's will have reported and I'm hoping to see a big score jump once they do report and my paid off installment loans hit the 1 year mark starting in Octoboer. The other -plus- is that my only baddie, a med CA, is due to drop off sometime in sept or october as well.

[Anonymous]

You can't find this info as The number of payments on an installment loan has zero affect on scoring. 

Except:

Open or closed- over 1 year no longer a new account

10 years after close it will drop off- (sooner you pay i off sooner it will drop off)   

So, you are 100% correct- other than MIX Pay it off.

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@Lucid08 wrote:

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@haulingthescoreup wrote:
I've seen reports of a 10-point drop when the last loan is paid off, but I'll bet that's really variable.

You probably can't do this on your bike loan, but some people pay off the bulk of their loan immediately, then paying back the balance at $5/month or something. That minimizes the interest, but it keeps the loan alive.

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Well, the motorcycle oan is a simple interest loan, and the terms allow me to either pay on the front side(of which I'm doing- currently paid ahead until October), or I can make a monthly payment and anything above and beyond the payment is applied to principle. I -could- technically pay the loan off in about 10 more months(18 total months instead of 48), but that's where my questions about credit mix come into play. I've not seen any definitive proof that making all 48 payments would benefit my score or, if paying it off within, say, 18 months would hurt my score other than losing the active TL and the associated 'credit mix' point loss.

I'm in a unique position, as my oldest installment account is only 4 months older than the motorcycle loan, and as of October the motorcycle loan will be my only remaining active installment TL. By then all 3 of my new CC revolving TL's will have reported and I'm hoping to see a big score jump once they do report and my paid off installment loans hit the 1 year mark starting in Octoboer. The other -plus- is that my only baddie, a med CA, is due to drop off sometime in sept or october as well.

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