topic Re: Scores Drop After Lending Club, P2P payoff? in Understanding FICO® Scoring

Scores Drop After Lending Club, P2P payoff?

DollazSense — Tue, 08 May 2018 21:40:28 GMT

Hello!

I have two Lending Club and Prosper loans that will be paid off this fall. I'm very excited but I am also a little nervous.

I've read credit score horror stories about installment loan payoffs and it made me curious. I know every person's situation and credit profile is different but I'd like to hear about other folks' experiences.

What happened when you paid off your P2P loan or even a personal loan through a traditional bank or credit union?

I should note that my P2P loans are the only installment loans I have on my report. I don't have a mortgage and my car is paid off. I never had student loans. There's a slight chance I may have to get a new car via auto loan or lease later this year but I'm hoping I can delay that 'til 2018.

Re: Scores Drop After Lending Club, P2P payoff?

Anonymous — Tue, 08 May 2018 22:05:12 GMT

FICO 8 likes it when you (a) have open loans and (b) they are almost but not entirely paid off. Having open accounts where your balance is much lower than it could be has a scoring factor for both credit cards and loans. In credit cards it is called CC utilization. Because the factor is so similar in principle with loans, it is often called installment utilization.

The first two posts in this thread may help you. It will tell you about a nice technique for preventing a score loss when a loan is paid off (called the Share Secured Loan Technique). And in the second post, it will explain how installment utilization works.

Re: Scores Drop After Lending Club, P2P payoff?

DollazSense — Thu, 10 May 2018 19:37:25 GMT

Thanks for the links. Depending on how high I can get my credit score by the time these are paid off, I will likely be applying for a new Lending Club loan.