topic Impact of Loan Payoff in Understanding FICO® Scoring

Impact of Loan Payoff

sterl1002 — Sun, 25 Aug 2019 18:07:39 GMT

Hello all,

I’m entering the final stages of my aggressive debt payoff plan, taking my $23k in CC and loan debt over the last 6 months down to $0 in the next two. My goal is to get everything paid off and boost my scores so I can refinance my student loans and remove my mother as a co-signer. My specific question is I have an installment loan from my local CU, $3k for 18 months @ 4.5% interest currently sitting at about $1700 remaining on the balance. Other than this loan, I have a $1k (balance $0) line of credit, and my aforementioned student loans. Other than those I have no other installment loans. If I pay off this low interest CU loan early, will I get dinged by FICO for credit mix/lack of installment loans, or will my student loans suffice and count as an installment loans for credit mix? I do have other higher interest debt to put the $1700 towards such as about $2k in PayPal credit debt (still not reporting), but as I mentioned I’m trying to boost my scores in the short term. MyFICO EQ currently sits at 734. Thanks in advance for the advice!

Re: Impact of Loan Payoff

Anonymous — Sun, 25 Aug 2019 18:50:28 GMT

Your student loans fulfill the installment portion of the credit mix on their own. You don’t also need the CU loan.

Re: Impact of Loan Payoff

malicej — Sat, 12 Oct 2019 10:53:47 GMT

I just paid off my mortgage from 21 years ago thru a house sale and my credit went down 26 points! OUCH! How long will it take to recover...I did notice one of my reports went up 5 points the next day after I paid down a cc

Re: Impact of Loan Payoff

SouthJamaica — Sun, 13 Oct 2019 22:54:12 GMT

@sterl1002 wrote:
Hello all,

I’m entering the final stages of my aggressive debt payoff plan, taking my $23k in CC and loan debt over the last 6 months down to $0 in the next two. My goal is to get everything paid off and boost my scores so I can refinance my student loans and remove my mother as a co-signer. My specific question is I have an installment loan from my local CU, $3k for 18 months @ 4.5% interest currently sitting at about $1700 remaining on the balance. Other than this loan, I have a $1k (balance $0) line of credit, and my aforementioned student loans. Other than those I have no other installment loans. If I pay off this low interest CU loan early, will I get dinged by FICO for credit mix/lack of installment loans, or will my student loans suffice and count as an installment loans for credit mix? I do have other higher interest debt to put the $1700 towards such as about $2k in PayPal credit debt (still not reporting), but as I mentioned I’m trying to boost my scores in the short term. MyFICO EQ currently sits at 734. Thanks in advance for the advice!

1. The line of credit is not an installment loan, it's a revolving account, scored as such, just like a credit card.

2. Paying off the loan will not cost you points on credit mix, since you have the installment loans.

3. It won't boost your scores at all to pay off the loan; you're much better off applying the money to revolving accounts.

Re: Impact of Loan Payoff

Vandevere321 — Fri, 04 Sep 2020 07:43:54 GMT

Thx for the info!