topic Re: paying off car loan? in Understanding FICO® Scoring

paying off car loan?

Anonymous — Sat, 13 Dec 2008 21:39:56 GMT

I signed for my daughters car. My name is on top of the loan. She is trading the car today and does not need my name any more! We have paid in good standing for 2 years. The balance is $10,000. When it pays off, should my score go up?

Re: paying off car loan?

Anonymous — Sat, 13 Dec 2008 22:14:03 GMT

So she is buying a car when the car she has now has now a 10k left to go? I do not recommend rolling over car loans like that, it can get to be quite a mess. Or is she paying the 10k off, then getting another?

I am not sure about your score, installment util. only counts ~5 points max.

Re: paying off car loan?

haulingthescoreup — Sat, 13 Dec 2008 22:14:49 GMT

If it is currently your only open installment loan, you score might actually go down, because you would lose that element of your credit mix. Strange, but true.

Also, you will now have one fewer open tradeline (credit product), so if you carry balances on other TL's, especially credit cards, you might get dinged for "too many accounts with balances."

And finally, util counts very little on installment products.

That being said, congrats on getting out from a co-signed loan. Those sometimes blow up in pretty spectacular ways.

Re: paying off car loan?

Anonymous — Sat, 13 Dec 2008 22:30:54 GMT

she is trading her car. I just hoped my score would go up since the loan will be paid out. Oh well....back to plan A(paying off cards)

Re: paying off car loan?

haulingthescoreup — Sat, 13 Dec 2008 23:24:50 GMT

There's no telling; it might give you a few points. But my guess is that it will be a wash or or slight loss. Whichever way it goes, I wouldn't expect it to be a bunch of points, one way or another.

But please let us know how it affects you! This issue affects a lot of people here.

Re: paying off car loan?

CreditAble — Sun, 14 Dec 2008 04:45:00 GMT

@Anonymous wrote:
she is trading her car. I just hoped my score would go up since the loan will be paid out. Oh well....back to plan A(paying off cards)
Could you please answer two questions? I could possibly share some insight into how the loan might affect your Fico scores in the short and long run.

#1. Has the loan been paid on time for at least two years? That is at least two years, not almost two years. The two year mark is significant. In any event I don't recommend paying the loan off before two years, if you don't have any other prior installment loans.

Since you had to co sign for your daughter, I assume that she doesn't have any prior installment loans with two years history. She therefore should benefit by making sure the loan stays open at least two years.

#2. How many closed installment loans do you personally have in your credit files? Were they open for at least two years? Do you have any open installment loans? What are the original amounts and current balances? How long have they been open?

If you have open installment loans, what was the original amount of your daughter's loan? It could be possible that you might get a score hit under certain circumstances.

Generally you will not receive much of a benefit from paying off the loan. You will have one less account with a balance and that might help your score.

Depending upon the answers to my questions I have an Idea that might improve your Fico scores. Your own installment history would be important however.

Are you paying high interest rates on your outstanding credit card balances?

Message Edited by CreditAble on 12-13-2008 11:45 PM