topic Re: Paying off Auto Loan vs Paying it down to a tiny amount? in Understanding FICO® Scoring

Paying off Auto Loan vs Paying it down to a tiny amount?

Tiggr — Tue, 22 Apr 2025 11:38:49 GMT

I currently have the money to pay off my car loan and it's at 6.5% I believe. There is about 24.5k left and it is my only auto loan on my report. It is a 5 year loan and I am only about 6 months of payments into it. Obviously, the financially smart thing to do would be to pay it off.

But, would it benefit me at all to just pat down 99% of it? My credit union that gave me the loan applies extra balance to future payments which means I could just pay all but one payment (or all but 1$) and not worry about that payment until 4+ years from now.

Is there any benefit to this? Will it make a large difference on my fico 8 or fico auto score versus paying it off completely or even versus paying it down as expected? Is it worth doing this to avoid the hit from paying off the account entirely as my credit ages?

Re: Paying off Auto Loan vs Paying it down to a tiny amount?

FlaDude — Tue, 22 Apr 2025 12:43:24 GMT

If this is your only installment loan, then paying it off entirely will cause a smallish Fico score drop. In that case keeping it open with a small balance might be worth it. Of course, you would be paying interest on the remaining balance but if it's only a few cents a month, then not much of a factor. As far as aging metrics, closed accounts stay on your report for (generally) 10 years so would still contribute to average age of accounts for that time.

Re: Paying off Auto Loan vs Paying it down to a tiny amount?

Tiggr — Tue, 22 Apr 2025 13:06:00 GMT

I have very many installment accounts (10+ student loans), and they will not be paid off for a very long time. Does the auto score not care about the difference between the auto loan and my student loans? I mean it would make sense that fico 8 wouldn't discriminate there, but would your point of keeping it still be true for fico auto since it's my only auto loan?

Re: Paying off Auto Loan vs Paying it down to a tiny amount?

Thomas_Thumb — Tue, 22 Apr 2025 15:01:06 GMT

The Auto and BC industry options incorporate an industry targeted overlay on top of the Classic Fico scoring algorithms. In the case of Auto Fico, the overlay does offer a few bonus points (perhaps 5 points) for having an open auto loan. I would not prolong paying off and closing the auto loan for a few token points that only benefit Fico Auto scores.

Re: Paying off Auto Loan vs Paying it down to a tiny amount?

SouthJamaica — Tue, 22 Apr 2025 20:29:04 GMT

@Tiggr wrote:
I currently have the money to pay off my car loan and it's at 6.5% I believe. There is about 24.5k left and it is my only auto loan on my report. It is a 5 year loan and I am only about 6 months of payments into it. Obviously, the financially smart thing to do would be to pay it off.

But, would it benefit me at all to just pat down 99% of it? My credit union that gave me the loan applies extra balance to future payments which means I could just pay all but one payment (or all but 1$) and not worry about that payment until 4+ years from now.

Is there any benefit to this? Will it make a large difference on my fico 8 or fico auto score versus paying it off completely or even versus paying it down as expected? Is it worth doing this to avoid the hit from paying off the account entirely as my credit ages?

Since you have lots of other installment loans, paying the auto loan off shouldn't affect your score much, if at all.

No point in holding yourself up from getting a clean title on the car.

Re: Paying off Auto Loan vs Paying it down to a tiny amount?

pizzadude — Tue, 22 Apr 2025 20:39:49 GMT

Moved to Understanding FICO Scoring