topic Re: Do closed accounts contribute to credit mix? in Understanding FICO® Scoring

Do closed accounts contribute to credit mix?

folks19 — Tue, 06 Oct 2020 20:59:36 GMT

When a loan is paid off, does it continue to contribute to my credit mix as long as it's on my report (up to 10 years)?

Re: Do closed accounts contribute to credit mix?

Slabenstein — Tue, 06 Oct 2020 21:06:05 GMT

Strictly speaking, a closed installment should still count as having an installment for credit mix. But, iirc, there are still score benefits to having an open installment loan.

Re: Do closed accounts contribute to credit mix?

folks19 — Tue, 06 Oct 2020 21:09:39 GMT

Thanks. I don't really have a choice about the account closing since it's not a revolving account and it needs to get paid down...

Re: Do closed accounts contribute to credit mix?

Slabenstein — Tue, 06 Oct 2020 21:18:55 GMT

Not owing on the loan is probably going to a be of a bigger benefit in your life than anything the score difference would give you anyway. If the loan is close to paid off now, you'll probably see some score drop from losing the < 9% installment util bonus, but for credit mix it should help you until it falls off your reports in (up to) 10 years.

Re: Do closed accounts contribute to credit mix?

SouthJamaica — Tue, 06 Oct 2020 21:55:51 GMT

@folks19 wrote:
When a loan is paid off, does it continue to contribute to my credit mix as long as it's on my report (up to 10 years)?

Yes it still counts toward credit mix.

Re: Do closed accounts contribute to credit mix?

Anonymous — Tue, 06 Oct 2020 22:57:01 GMT

@Slabenstein wrote:
Strictly speaking, a closed installment should still count as having an installment for credit mix. But, iirc, there are still score benefits to having an open installment loan.

Yes it still counts toward credit mix. The benefit you are speaking of above comes from the Amounts Owed sector of the Fico pie.

Re: Do closed accounts contribute to credit mix?

TGG_1976 — Wed, 07 Oct 2020 03:38:14 GMT

I just paid off a car loan and my scores dropped about 25 points. Do the scores "recover" over time, factoring in aging of credit cards and dropping off inquiries? I am really hesistant to open another installment loan right now, as I am looking to get a morgage next year. I also do not want another inquirie on my report. I currently only have revolving cards as open accounts.

Re: Do closed accounts contribute to credit mix?

Anonymous — Wed, 07 Oct 2020 18:44:51 GMT

If your car loan was almost paid off prior and you had no other open installment loans, a 25 point drop is pretty standard for paying it off.

Re: Do closed accounts contribute to credit mix?

SouthJamaica — Wed, 07 Oct 2020 20:59:49 GMT

@TGG_1976 wrote:
I just paid off a car loan and my scores dropped about 25 points. Do the scores "recover" over time, factoring in aging of credit cards and dropping off inquiries? I am really hesistant to open another installment loan right now, as I am looking to get a morgage next year. I also do not want another inquirie on my report. I currently only have revolving cards as open accounts.

Unfortunately, there's nothing you can do at this point, because you are right to avoid inquiries or new accounts in the runup to a mortgage application.

I can't honestly answer your question about whether your scores will recover over time, but I suspect they will, gradually.

Re: Do closed accounts contribute to credit mix?

Anonymous — Wed, 07 Oct 2020 22:15:45 GMT

@TGG_1976 wrote:
I just paid off a car loan and my scores dropped about 25 points. Do the scores "recover" over time, factoring in aging of credit cards and dropping off inquiries? I am really hesistant to open another installment loan right now, as I am looking to get a morgage next year. I also do not want another inquirie on my report. I currently only have revolving cards as open accounts.

@TGG_1976 It depends on how you define recover. What you lost were bonus points that you were awarded for having a loan nearly paid off. If you in the future have another loan nearly paid off, or in the aggregate a collection of loans nearly paid off, then you'll recover those bonus points again.

You will over time gain points as inquires become unscoreable and as aging thresholds are crossed. Those have nothing to do with the points you lost here, so I don't know if you would qualify that as "recovering," because you're simply gaining points for different things, which you would've also gained had you still had the loan nearly paid off in addition to those bonus points.