topic Re: Impact of paying off loans/cards in Understanding FICO® Scoring

Impact of paying off loans/cards

jrdenver — Mon, 13 Apr 2009 15:40:46 GMT

Good morning. I just paid off all my loans and cards, and am trying to determine two things:

a) How long will it take to improve my score

b) How much of an impact it will make

I am trying to get my scores high enough to refinance my house.

Here is the short history: Went through a divorce, racked up ~$15k CC, $10k loans. Util was ~80-90%, FICOs hung in the range of 580s to 660s. Never had a day late, however I had a BK in 2004 (long story) which will still report for another 4-5 years =(. Most of the derogs associated with that have fallen off (1-2 left, not currently reporting, nor have they in 4-5 years).

I have a 1st & 2nd mort (never a day late)

I have a car loan (and several PIF car trades) - never a day late

I paid off all credit cards and loans (2 loans @$10k, 6 cards @$15k).

Now my util is well under 10% - $1000 out of $20000 (just the rewards card I use for cash back, PIF every 2 weeks)

I only closed one of my open cards (not my oldest trade, but it was the only one with an annual fee).

All of this stuff happened within the last couple of weeks, so I suspect it will take 2-3 billing cycles for everything to report. I just don't know how much of an impact it will make, or how long it will take.

Message Edited by jrdenver on 04-13-2009 08:40 AM

Re: Impact of paying off loans/cards

MizzB — Mon, 13 Apr 2009 18:56:23 GMT

jrdenver....I wish I could help but I have no idea.I actually have a similar question....

I have recently paid the balances down on three credit cards and I'm wondering how much of a score increase will I receive? The utilization on my three cards went from 209%, 95% and 73% to 0% on all three. I'm also wondering when the increases will kick in and if my utilization on my three remaining cards affect how much score will raise?

I've read the information on credit scoring but I'm still really confused. Hoping someone can help both of us.

Re: Impact of paying off loans/cards

Anonymous — Mon, 13 Apr 2009 21:56:47 GMT

@MizzB wrote:
jrdenver....I wish I could help but I have no idea.I actually have a similar question....

I have recently paid the balances down on three credit cards and I'm wondering how much of a score increase will I receive? The utilization on my three cards went from 209%, 95% and 73% to 0% on all three. I'm also wondering when the increases will kick in and if my utilization on my three remaining cards affect how much score will raise?

I've read the information on credit scoring but I'm still really confused. Hoping someone can help both of us.

Me 3...

Snowballing??? mine down card by card. Overall decrease from 101 to 55%. I have 6 cards overall, three down. All will be PIF by July with only my Student Loans and 5k remaining on my car. If I could crack 600 by then I might pass out! If the time comes where I'm instantly approved for something PRIME I could hit the floor as well!

Message Edited by tiffj on 04-13-2009 02:56 PM

Re: Impact of paying off loans/cards

Anonymous — Tue, 14 Apr 2009 15:17:58 GMT

bumping as I am in a similar situation

Re: Impact of paying off loans/cards

jrdenver — Mon, 04 May 2009 15:51:55 GMT

FYI -

I pulled my reports on Thursday. Not everything is showing paid off, however the "score estimation" tool doesn't show a big change in scores by dropping my util from 19% to <~5-10%.

TransUnion 678 4/30/2009
Equifax 686 4/30/2009

Experian xx/xx/xxxx

Looking over my score histories, my FICOs were all closer to the 600-620 mark 90 days ago. The utilization looks to have improved them ~10-15% overall.

Without knowing my Experian, I am concerned about where my "mid" score will end up. If it is the highest, that is good! If not, it will put my mid <680 .

According to the "estimator," there isn't much I can do except to get the last couple of BK-related derogs to fall off (not reporting recently, so minimal impact), get the BK itself to fall off (2014 ), and keep paying on time (24-month estimate shows another 20-30 points tops).

I guess this is where I am stuck until the BK/related stuff is gone.

Any other suggestions?

Re: Impact of paying off loans/cards

Anonymous — Mon, 04 May 2009 16:51:02 GMT

If you've paid off all credit cards you might want to try having one card report a small (less than 9% balance). Some here say they obtain higher scores that way.

Concerning your BK...was this a Chapter 7?

Re: Impact of paying off loans/cards

jrdenver — Mon, 04 May 2009 17:02:36 GMT

@Anonymous wrote:
If you've paid off all credit cards you might want to try having one card report a small (less than 9% balance). Some here say they obtain higher scores that way.

Concerning your BK...was this a Chapter 7?

Yes, it was. Everything was discharged (and the only remaining trades are reporting zero balance). They weren't reporting zero balances last year, & I disputed the balance. Unfortunately, now they have an "updated" date of mid 2008.

I have one card (1% cash back with Chase) that I use for EVERYTHING ($3-5000/mo). I pay it off weekly so that the util is <10%. Rarely (i.e. business trips & big purchases) does it spike over 25%, but usually for no more than a couple of days.

I am also an auth user on my Fiance's chase card ($10k limit, balance ~$500-$1500 depending on when it reports). She pays hers off several times a month as well. I know the auth user doesn't report the same, but I assume the util could hurt me if it were to be a high %.

As far as the impact on scores over time, the monthly reporting of <9% I am assuming will still take quite a while to make any significant impact, correct?

Re: Impact of paying off loans/cards

Anonymous — Mon, 04 May 2009 17:05:26 GMT

Generally, your score should be updated within one or two billing cycles, depending on the card (AMEX is notoriously slow). You might want to make sure that you pay in full before the statement closing date so that the cards report with their zero balances.

Re: Impact of paying off loans/cards

Anonymous — Mon, 04 May 2009 17:16:28 GMT

Just like JESMONT said above. Pay before the statement date to allow your CCs to report 0-9%. You should see results that month on credit reports. They usually report a few days after statement date.