topic Re: About to pay off an RV Loan - Possible score bump? in Understanding FICO® Scoring

About to pay off an RV Loan - Possible score bump?

krielly — Thu, 01 Dec 2016 12:22:10 GMT

We've had our RV on consignment for a little over 2 years now, and finally have a sale in process.

Should everything go through, this loan will obviously be paid in full. The original loan balance was almost $50K, and the current is around $22K. I'm wondering if I might see a score bump due to this?

The important piece is getting out of the $546.00/month payment, but any score bump would be an added bonus

Thanks

Re: About to pay off an RV Loan - Possible score bump?

Anonymous — Wed, 30 Nov 2016 22:13:14 GMT

We can't answer your question without knowing whether you have any other open installment loans and if so what they are. Without knowing the details, the answer is that the payoff could hurt your score or it could help it.

Here what we'd need:

Loan 1. Balance currently owed = ________. Original amount of loan = _________.

Loan 2. Balance currently owed = ________. Original amount of loan = _________.

Loan 3. Balance currently owed = ________. Original amount of loan = _________.

etc.

Let us know for each loan whether it is a car loan, a mortgage, a personal loan, a student loan, a finance company account, etc.

Re: About to pay off an RV Loan - Possible score bump?

SouthJamaica — Wed, 30 Nov 2016 22:30:18 GMT

@krielly wrote:
We've had our RV on consignment for a little over 2 years now, and finally have a sale in process.

Should everything go through, this loan will obviously be paid in full. The original loan balance was over $50K, and the current is around $22K. I'm wondering if I might see a score bump due to this?

The important piece is getting out of the $546.00/month payment, but any score bump would be an added bonus

Thanks
K

Would need to know if you have any other open installment loans. If not, your score will take a hit, rather than experience a bump.

If you do have one or more others, let us know the original balance(s) and the current balance(s), and we'll be able to predict what happens to your score when the RV loan gets paid off.

Re: About to pay off an RV Loan - Possible score bump?

SouthJamaica — Wed, 30 Nov 2016 23:00:06 GMT

@Anonymous wrote:
We can't answer your question without knowing whether you have any other open installment loans and if so what they are. Without knowing the details, the answer is that the payoff could hurt your score or it could help it.

Here what we'd need:

Loan 1. Balance currently owed = ________. Original amount of loan = _________.
Loan 2. Balance currently owed = ________. Original amount of loan = _________.
Loan 3. Balance currently owed = ________. Original amount of loan = _________.
etc.

Let us know for each loan whether it is a car loan, a mortgage, a personal loan, a student loan, a finance company account, etc.

Wow CGID, you even supply forms

Re: About to pay off an RV Loan - Possible score bump?

Anonymous — Wed, 30 Nov 2016 23:05:16 GMT

Yeah, I know. :-)

It's just that, having been through this a dozen times before, my experience is that if I show somebody exactly what they need to say, it will save me time later. Otherwise they often leave stuff out. As you will know, we need all of that, otherwise it's just pure guesswork as to what might or might not happen after the payoff.

Re: About to pay off an RV Loan - Possible score bump?

SouthJamaica — Wed, 30 Nov 2016 23:07:26 GMT

@Anonymous wrote:
Yeah, I know. :-)

It's just that, having been through this a dozen times before, my experience is that if I show somebody exactly what they need to say, it will save me time later. Otherwise they often leave stuff out. As you will know, we need all of that, otherwise it's just pure guesswork as to what might or might not happen after the payoff.

Maybe I should get you to help me with my taxes

Re: About to pay off an RV Loan - Possible score bump?

Anonymous — Wed, 30 Nov 2016 23:19:33 GMT

@SouthJamaica wrote:
Maybe I should get you to help me with my taxes

Sure. If you want to be wearing an orange jumpsuit in a year, that's a GREAT idea. :-)

Re: About to pay off an RV Loan - Possible score bump?

Anonymous — Wed, 30 Nov 2016 23:27:21 GMT

OP, if this is your only open installment loan your scores will drop, not increase. If you have other installment loans, depending on overall installment loan utilization I would think that paying down > $20k could result in an increase.

CGID & SJ, don't you think certain topics on here that we address almost on a daily basis at this point should be stickies? I feel like certain topics such as this one, 1 card reporting a small balance, CK vs FICO scores, etc. are so commonly discussed that there should perhaps be a thread that goes over them. It would be cool if the mods allowed us to all give input on a "The Top 10 Most Commonly Asked Topics" type thread where we could compile some info all into one place that would address a vast majority of the concerns that are posted about on the forums.

OP, I'm in no way suggesting that you shouldn't have asked your question so please don't take it as such... it's just that I had this thought as I was reading your thread so my question to CGID and SJ just happened to end up being posed here rather than elsewhere.

Re: About to pay off an RV Loan - Possible score bump?

SouthJamaica — Thu, 01 Dec 2016 00:41:58 GMT

@Anonymous wrote:
@SouthJamaica wrote:
Maybe I should get you to help me with my taxes
Sure. If you want to be wearing an orange jumpsuit in a year, that's a GREAT idea. :-)

Sounds good to me. I'm not very fashionable.

Re: About to pay off an RV Loan - Possible score bump?

SouthJamaica — Thu, 01 Dec 2016 00:43:24 GMT

@Anonymous wrote:
OP, if this is your only open installment loan your scores will drop, not increase. If you have other installment loans, depending on overall installment loan utilization I would think that paying down > $20k could result in an increase.

CGID & SJ, don't you think certain topics on here that we address almost on a daily basis at this point should be stickies? I feel like certain topics such as this one, 1 card reporting a small balance, CK vs FICO scores, etc. are so commonly discussed that there should perhaps be a thread that goes over them. It would be cool if the mods allowed us to all give input on a "The Top 10 Most Commonly Asked Topics" type thread where we could compile some info all into one place that would address a vast majority of the concerns that are posted about on the forums.

OP, I'm in no way suggesting that you shouldn't have asked your question so please don't take it as such... it's just that I had this thought as I was reading your thread so my question to CGID and SJ just happened to end up being posed here rather than elsewhere.

I don't really feel that way, because I don't find the site to be so easily searchable.

Re: About to pay off an RV Loan - Possible score bump?

Anonymous — Thu, 01 Dec 2016 01:21:06 GMT

@SouthJamaica wrote:
I don't really feel that way, because I don't find the site to be so easily searchable.

But by having it a sticky, the point is searching wouldn't be necessary as it would always be readily accessible.

Re: About to pay off an RV Loan - Possible score bump?

krielly — Thu, 01 Dec 2016 11:59:48 GMT

Thanks everyone. I actually realized later on last evening that I should have included more info:

Current Installment Loans Orig/Current balances:

Mortgage: 292,000/272,000

Truck Loan: 14,423/2,200

Motorcycle: 25,100/10,000

Personal Loan: 6,388/1,050

Personal Loan: 16,144/6,900

RV Loan: 47,953/22,600 (to be paid off)

I have several cc cards with approx 124K in available credit and usage is below 1%

Thanks

Re: About to pay off an RV Loan - Possible score bump?

Anonymous — Thu, 01 Dec 2016 13:11:46 GMT

Krielly,

It is doubtful that you'll see any score increase from paying off your RV loan.

Your current total loan balances are $314,750 against $402,008 in original balances, or 79% installment loan utilization.

By paying off the RV loan, your numbers drop to $292,150 / $354,055 which results in 83% installment loan utilization.

If there's a threshold at 80% (which is debatable, I believe it to be 70%) you could actually lose a couple of points. Keeping the loan open with a small balance IMO wouldn't do anything for you either, as it would bring your installment loan utilization down to about 73% which wouldn't cross any threshold either.

Re: About to pay off an RV Loan - Possible score bump?

krielly — Thu, 01 Dec 2016 13:36:45 GMT

oh well. Either way, the important thing is this puts $546 more per month in my pocket. That much more to put towards paying down the other loans

Additionally, I'll be done paying 9.49% interest on that 22K balance. For a 5th wheel that we haven't used in 2 years. It's all good!

Thanks!

Re: About to pay off an RV Loan - Possible score bump?

newhis — Thu, 01 Dec 2016 14:35:03 GMT

That's the spirit, with that money you can pay your loans faster and maybe save on interest.

Not everything in life is score related, less payments is great too.

Re: About to pay off an RV Loan - Possible score bump?

Anonymous — Thu, 01 Dec 2016 16:01:54 GMT

+1 to everything that was said today.

Hope this discussion has given our OP the tools he needs to assess the score impact of loan payoffs moving ahead (and he'll have many more of these). Basically, add up the total amounts currently owed on your open loans (Current) and the total amounts his loans were originally for (Original). Then divide Current by Original, getting a percent. Do that before the proposed payoff and then after the payoff. (But after the payoff you don't get to include the paid off loan in the calculation, because it is no longer open.)

FICO will like it better when that percent goes down rather than up. But the only way it tends to really hurt your score is when that percent goes from a low number to a high number (5% to 85% say, or 5% to no open laons at all).

The most important things to do is to act in your financial interest -- by paying off debt, keeping spending much lower than the income you bring in, saving toward retirement, etc. That's more important than your score.

Re: About to pay off an RV Loan - Possible score bump?

krielly — Thu, 01 Dec 2016 19:28:52 GMT

@Anonymous wrote:
+1 to everything that was said today.

Hope this discussion has given our OP the tools he needs to assess the score impact of loan payoffs moving ahead (and he'll have many more of these).

Or "HER" in my case

Re: About to pay off an RV Loan - Possible score bump?

krielly — Thu, 01 Dec 2016 21:55:15 GMT

I've read in some places that the percentage remaining balances on mortgage loans are not weighed as heavily as other installment loans? Is that not accurate?

thanks

Re: About to pay off an RV Loan - Possible score bump?

Anonymous — Thu, 01 Dec 2016 22:29:30 GMT

Yeah, I know, sorry about the him/her thing. English lacks a gender-neutral pronoun. Officially that pronoun is He and HIs. Every student brought his lunch is the official construct, for example, when you have a bunch of students of both sexes. Saying his or her every time just gets ugly. Their has become a popular alternative in recent years, but their is plural and it grates against my ear to refer to what is clearly a single person as if he or she were several people at once (unless of course that person has mutliple personal disorder).

So, in short, there's no good solution. But now that I know that you are a She I can can use the right word.

Re: About to pay off an RV Loan - Possible score bump?

Anonymous — Thu, 01 Dec 2016 22:39:22 GMT

@krielly wrote:
I've read in some places that the percentage remaining balances on mortgage loans are not weighed as heavily as other installment loans? Is that not accurate?

thanks
K

There is some sound evidence that, in the case of a mortgage, a person may be able to get maximum scoring point for this "installment utilization" piece that we have been talking about with a smaller paydown than what you might need for (say) a personal loan.

In your case it won't matter though. Just keep paying off all your loans in the order that makes the most financial sense. Eventually you will end up five years from now with a mortgage on which you still owe a fair amount (but less than you do now). Because that mortgage has such a big original loan amount it will continue to dominate your installment utilization even if you get a new car, say. Eventually in 15-20 years you'll pay the mortgage off entirely. A year before you think that ALL your loans will be paid off (mortgage included) you can circle back with the folks here and see if there is anything clever you need to do to create the illusion of a mostly paid off installment loan. That won't be for a long time, however.