Very early payoff on installment. Will it help or hurt?

[Phoenix-rising]

DH & I are joint on his truck and my car loan.  We got both vehicles about a year ago.  DH is considering trading in his truck and getting a new auto loan in his name only.  If we do that I will have one less TL with a balance on my CR.

The terms were originally 60 months, but we would be closing the loan after only 10 months. 

I thought I read somewhere that credit scores suffer when you pay an installment loan early.  Is that true?  How much can it hurt?

[Anonymous]

Do you have any other installment loans open on your CR? You may lose mix points (but you wouldn't lose those if you were joint on the new loan). An open installment loan on your report may be up to 10-10 points. If you are happy with your current scores though and have room to take a small drop I wouldn't worry about it. Financial sense almost always trumps FICO sense.

[Phoenix-rising]

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debtisgood wrote:
Do you have any other installment loans open on your CR? You may lose mix points (but you wouldn't lose those if you were joint on the new loan). An open installment loan on your report may be up to 10-10 points. If you are happy with your current scores though and have room to take a small drop I wouldn't worry about it. Financial sense almost always trumps FICO sense.

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I have two open installment loans on my report right now.  One for each auto.  If one is closed the other one is still there.

I just thought FICO frowned on paying off installment loans early for some reason.  I could swear I read something about that on these forums.

[Anonymous]

Not hurt, just might not gain extended points. It's really small. I sometimes get confused when giving good credit score advice -vs- advice needed to hit a perfect 850 credit score. So knowing you might not gain a point needed for the 850 score my advice would be on how to gain maximum amount of points.

So I will consider that and say that you have had it long enough to be counted properly. Closing it early while another installment open should not hurt. While you may not gain every point possible. "Most" of the points I believe have been gained.

But all in all if closed your debt will be lower, which does look better.

Message Edited by ilovepizza on 08-16-2008 04:54 PM

[RobertEG]

IMHO, you made the right decision, both from a financial and FICO point of view to pay it off early.

From a FICO perspective, you gained by reducing installment % util, but this is not a major FICO scoring factor. Install %util is scored much lower than revolving %util, so not a biggie.   Since you still have other active install loans, the credit mix part of your FICO will be insignificant. So I dont see any significant FICO impact.

And financially,  you have more $$ in your pocket at the end of the month!

[Phoenix-rising]

Thanks for the reassurances that paying an installment loan early is generally NOT a bad thing in FICO's crazy calculations.  I don't know what gave me that idea, but I'm glad to hear I must have been suffering from temporary insanity.  I already have enough TLs on my report.  One less auto installment shouldn't hurt.

I think this will be the 3rd auto loan since 2005 that I pay off well before it's time.

Message Edited by Phoenix-rising on 08-16-2008 09:31 PM

[Anonymous]

Just an example. My current bucket (different from other buckets) would only ding me "less than 1%" for no open installment. If you have no other active accounts other than maybe 1 CC then the loss of this open installment could be greater since most people need some active accounts in some situations. But anyway you have another open installment besides this loan so I don't believe it will affect you either way.