topic Re: How Will Paying Off CC vs. Installment Loans Affect Score? in Understanding FICO® Scoring

How Will Paying Off CC vs. Installment Loans Affect Score?

Anonymous — Fri, 20 Jul 2007 14:52:45 GMT

I've just found this forum and I think it's great. I'm going to have a good time this weekend trying to read everything.

Hopefully some of the wise people may be able to answer a question. I've been slowing improving my score for over a year -- last year it was 588, now its 673. However, now I'm going to be coming into a bit of money and was wondering how to pay off debts to improve score. I've got one revolving account at 19% so that goes without doubt. However, I have an installment loan at 14.75% from my CU and a CC from the same CU at 11.9%, both with about the same balance. Should paying off one have a priority over paying off another as far as my score is concerned? Instead of paying off one, would it be better to split the money 50/50 to each? Also, if I do get even more money than anticipated, the next loans to payoff are all installments at about the same rates. Again, is paying down one account $1000 better than paying down two accounts by $500 each?

Any help/thoughts/insights would be greatly appreciated.

Re: How Will Paying Off CC vs. Installment Loans Affect Score?

Anonymous — Fri, 20 Jul 2007 15:41:45 GMT

Generally, paying off credit cards will improve score more. I would need to know if any of your loans are Consumer Finance or just personal, auto ect because personal and auto, student... loans are not weighted very heavy to bring your score down.

Re: How Will Paying Off CC vs. Installment Loans Affect Score?

Anonymous — Fri, 20 Jul 2007 17:29:57 GMT

Thank you very much. I appreicate the response. The outstanding loans are student loans and car loans. I'm guessing from your response that it really doesn't have a big impact on my score if I pay one down all the way versus paying two down 50%. Is that right?

Again, thanks so much for your response

Re: How Will Paying Off CC vs. Installment Loans Affect Score?

fused — Fri, 20 Jul 2007 18:17:45 GMT

courthousedoc wrote:
I've just found this forum and I think it's great. I'm going to have a good time this weekend trying to read everything.

Hopefully some of the wise people may be able to answer a question. I've been slowing improving my score for over a year -- last year it was 588, now its 673. However, now I'm going to be coming into a bit of money and was wondering how to pay off debts to improve score. I've got one revolving account at 19% so that goes without doubt. However, I have an installment loan at 14.75% from my CU and a CC from the same CU at 11.9%, both with about the same balance. Should paying off one have a priority over paying off another as far as my score is concerned? Instead of paying off one, would it be better to split the money 50/50 to each? Also, if I do get even more money than anticipated, the next loans to payoff are all installments at about the same rates. Again, is paying down one account $1000 better than paying down two accounts by $500 each?

Any help/thoughts/insights would be greatly appreciated.

As far as scores are concerned, pay down the CC first. 1-9% util of your total CL for max FICO points. Any money left over can be used to pay down the installment loan but don't expect much improvement with your scores, this is just a matter of paying less interest and saving money. Just remember high installment balances hardly affect your scores, what's important is paying on time whereas with CC's (and other revolving accounts) it's both, paying on time and keeping util low, again 1-9% util is ideal.

Message Edited by fused111 on 07-20-2007 08:17 AM

Re: How Will Paying Off CC vs. Installment Loans Affect Score?

Anonymous — Fri, 20 Jul 2007 22:22:16 GMT

Thanks a lot. I really appreciate the info.

Re: How Will Paying Off CC vs. Installment Loans Affect Score?

Anonymous — Sat, 21 Jul 2007 01:29:00 GMT

I would pay the CC first. Then, work on the installment loans save the students loans for last.

Re: How Will Paying Off CC vs. Installment Loans Affect Score?

RobertEG — Sun, 22 Jul 2007 01:08:04 GMT

Agreeing with all that has been said, I also offer the fact that paying off an installment loan takes it out of your "type credit" category. Could cost 10-20 pts. With installment loans gone, you will take a hit in the 85 pt credit mix category, which will be much greater than eliminating the loan. If FICO gain is your goal, keep it in the mix. Pay off revolving accounts, and take advantage of the history of payments on the ACTIVE installment loan.

Re: How Will Paying Off CC vs. Installment Loans Affect Score?

fused — Sun, 22 Jul 2007 02:07:15 GMT

RobertEG wrote:
Agreeing with all that has been said, I also offer the fact that paying off an installment loan takes it out of your "type credit" category. Could cost 10-20 pts. With installment loans gone, you will take a hit in the 85 pt credit mix category, which will be much greater than eliminating the loan. If FICO gain is your goal, keep it in the mix. Pay off revolving accounts, and take advantage of the history of payments on the ACTIVE installment loan.

The installment loan doesn't disappear beacuse it's PIF. After it's PIF, usually this type of TL's status will change and become closed and age on your reports for up to 10 years. Best if there is nothing derogatory reporting on this type of TL such as lates. Again closed and open TLs are weighted and scored equaly, doesn't matter if they are revolving or installment. I have never heard of an installment loan PIF early hurting anyones FICO scores.

Re: How Will Paying Off CC vs. Installment Loans Affect Score?

Anonymous — Sun, 22 Jul 2007 02:09:42 GMT

since installment loans don't figure into revolving Util moving CC debt would free up util.

Re: How Will Paying Off CC vs. Installment Loans Affect Score?

fused — Sun, 22 Jul 2007 02:42:54 GMT

rbbyrbsn wrote:
since installment loans don't figure into revolving Util moving CC debt would free up util.

Exactly!

Re: How Will Paying Off CC vs. Installment Loans Affect Score?

gem0648 — Sat, 01 Dec 2012 22:07:02 GMT

agreed on paying CC debt down first. unless of course you have an high installment loan balance at 25% interest rate. It all depends on the APR for the CC and loan, if their within say 5% of ea other, pay down the CC, then work on the installment loan(s). As has been said in prev posts, this is the best way to raise your FICO score faster.

Re: How Will Paying Off CC vs. Installment Loans Affect Score?

hoodun — Mon, 22 Apr 2013 01:17:08 GMT

My score went up 121 points(to 723) when I paid down my CC debt from 50% to <20%. The only account that I have listed as an installment is a Discover Card (not sure why it is installment, but it helps), which is at 50%. I have 0 late payments on abut 8 cards. 6 of which are real crappy low limit high interst cards than I am now getting rid of after being approved for some good cards (Bank of America, US Bank).

I was a bit shocked at the difference paying down my CC Debt made. I think there is more to a FICO score than we will ever know. My utilization was at 50% for the past four months. I'm thinkg this is taken into consideration, the time the utlization is high, and bringing it down when high for a long period can make a drastic difference. ...There are alot of factors it seems.