topic Re: Payoff in Understanding FICO® Scoring

Payoff

Proverb — Tue, 19 Oct 2010 13:23:45 GMT

I just paid off my car loan which was $13,000.00. I mailed in the paid in full letter to credit agency. paymentes never late. The thing that I owe is my mortgage which is always current. I have a revolving account that I will payoff and close at the end of the month. My score TransUnion 609 and Equi 537. Will my score drop because I paid off ny car loan or will it go up (approximately how many points?) Thanks

Re: Payoff

llecs — Tue, 19 Oct 2010 14:16:27 GMT

You mentioned the word "agency". Who did you pay off? The car loan company or someone else?

Re: Payoff

Proverb — Tue, 19 Oct 2010 14:27:52 GMT

I paid off Regional Acceptance the loan agency.

Re: Payoff

Travis-84 — Tue, 19 Oct 2010 14:38:08 GMT

Paying off the car loan should help, but not a lot. Even with it paid off, it will be on your report for 10 years.

Paying off revolving credit will help even more. What is your revolving account? Is it a credit card?

If it is your only account, or an older account, I would leave it open, as closing it could hurt your score.

Re: Payoff

llecs — Tue, 19 Oct 2010 14:43:00 GMT

Gotcha. I wanted to make sure you weren't referring to a collection agency. Congrats, BTW! I had Regional too as a lender; they were great. After your last payment clears, they will mail you a PIF letter saying your loan has been satisfied. Shortly after that, they'll mail your title.

Installment utilization plays very little into FICO scoring. In fact, it's practically non-existant. I had a $20k loan with them and when the balance hit $5k, I PIF just to get it off my hands (at 19.9%, I wish I did that sooner). The part that will play into scoring is your mix of credit. Once a loan reports $0, the mix from that loan goes away. However, because you have one other installment loan (mortgage), I would predict that there would be no change in FICO score at all. If you want to guage the change, you'd want to pull your FICO reports immediately before and after it updates. They like to report beginning on the first of each month. In my case, my EQ went up 7 points and TU went down 5 points, but I had no other installment loans reporting outside of that.

Re: Payoff

Proverb — Tue, 19 Oct 2010 15:08:09 GMT

My revolving amount is a line of credit for $500.00. I am going to close pay and close that account. I am little frustrated about this whole process. THe more I pay off the lower my score. So this is what is on report:

Line of Credit $500.00 ( will close this at the end of the month)

School Loan (forgot to mentioned, current standing good pay on time)

Mortgage (good standing pay on time)

Re: Payoff

llecs — Tue, 19 Oct 2010 15:18:20 GMT

@Proverb wrote:

My revolving amount is a line of credit for $500.00. I am going to close pay and close that account. I am little frustrated about this whole process. THe more I pay off the lower my score. So this is what is on report:

Line of Credit $500.00 ( will close this at the end of the month)

School Loan (forgot to mentioned, current standing good pay on time)

Mortgage (good standing pay on time)

Ditto to Travis on the LOC. While installments play a tiny part in your mix, revolving (e.g. CCs, most LOCs) play a gigantic part into FICO scoring relatively speaking. Even if your LOC is at $0 now, closing it will result in a significant score drop (e.g. 20++). If you can, leave it open or replace it with a CC. You don't have to carry a balance on it at all, in fact, you can rip it up once it comes, but keeping it open will go a long way in FICO scoring.

Re: Payoff

Proverb — Tue, 19 Oct 2010 15:57:38 GMT

A month ago I was told by this forum that having a revolving LOC was bad and that I should close it. Look at response Paying of Debt. Now I;m told to leave it open. Which is it.

Re: Payoff

Anonymous — Tue, 19 Oct 2010 16:26:52 GMT

@Proverb wrote:

A month ago I was told by this forum that having a revolving LOC was bad and that I should close it. Look at response Paying of Debt. Now I;m told to leave it open. Which is it.

I went back to that thread (Paying Off Debt) and didn't see any recommendation that you close a LOC.

Unless I missed something.

From a BK years ago to:
EX - 9/09 pulled by lender 802
EQ - 7/06-663, 3/10-800, 10/10-813
TU - 10/10-774
You can do the same thing with hard work

Re: Payoff

llecs — Tue, 19 Oct 2010 16:46:20 GMT

Ditto to Marinevietvet. The consensus on that LOC was to pay it off but keep it open. You'll also benefit, score-wise, to add a CC or two. You can keep $0 balances on them and use them for a quarterly pack of chewing gum or coffee to keep them from closing for non-use, and you don't need to carry any debt on them.

I glanced at that thread and concur that GWs would help. You'd also want to get rid of that VErizon account (ask for a deletion via a GW...they only report when it is CO'd).

Re: Payoff

Anonymous — Wed, 20 Oct 2010 20:39:43 GMT

I don't see this said exactly so here ya go...

You do not have to PAY for a high score...that said, keeping CC and LOC open (with a $0 balance) can improve your score because it adds to your mix and shows you are responsible. However, no one is saying you have to pay interest to keep your score high so hopefully that's clear to you.

You can keep your score high by:

paying on time

having a good mix of products

having higher CL (and low or no balances)

having a long credit history

your score is NOT impacted by:

your salary

your location

your spouse (unless you co-own accounts)

whether you pay in full or pay interest (but low balances is good so if you have to pay interest, that isn't good)

your sex/race/etc

hope that helps! Keep reading the forums and asking questions, it'll all become clear