topic Re: Higher Score with longer repayment in Understanding FICO® Scoring

Higher Score with longer repayment

Thexy1 — Mon, 09 Mar 2015 05:06:36 GMT

My MyFICO stimulator shows that my credit score will increase more if I pay off my credit cards over 24 months than 12 months. My goal was to pay off all balances over the next 9 months but if I will get a higher score by paying them off over time I can do that also. I created a chart that shows what the MyFICO simulator estimate scores are:

	Equifax	Transunion	Experian
Current Score	633	649	621
12M Pmts	748	734	716
24M Pmts	763	749	731

I know its only showing a 15 point difference but 15 points can make a big difference. I am not in a rush to get any new cards or accounts. I am planning to lease a car in 2017 and refinance my home in 2021. Should I go for the 12M or 24M pay off?

Re: Higher Score with longer repayment

Anonymous — Mon, 09 Mar 2015 05:13:20 GMT

Can't go wrong either way in my opinion.

Re: Higher Score with longer repayment

core — Mon, 09 Mar 2015 05:20:11 GMT

When you enter 24 you are simulating an extra year of age on everything. It has nothing to do with length of repayment. Pay them off ASAP.

Re: Higher Score with longer repayment

Thexy1 — Mon, 09 Mar 2015 05:28:15 GMT

Thanks Core, I guess I wasn't clear in my first post. What I am trying to say is that the MyFICO score simulator is reflecting a high credit score because I am making more payments on the accounts (24 vs 12) and like you said, simulatiing an age. Because they are revolving accounts, I do not have a repayment term, but would it be better to extend the payment over time instead of paying them off in the near future.

I've read that people pay off balances fast but it seems as if it is mostly due to near future approvals for loans/mortgages. Since I am not in the market for anything in the next 2 years, I would like to get opinions if it would make a difference if I paid them off in 12 months or 24 months.

Re: Higher Score with longer repayment

Thexy1 — Mon, 09 Mar 2015 07:10:11 GMT

@MarinoHD Im thinking the same also. I guess it just depends on if I want to have more of a $$ cushion. I guess if there's no absolutely necessary real reason to pay the credit cards off fast then I should extend the payments.

Re: Higher Score with longer repayment

Anonymous — Mon, 09 Mar 2015 08:53:06 GMT

Scoring wise it doesn't really matter. It's the payment history and age that's driving the score.

Financially you'll pay more interest with extending payments, as well as hurt your relationship with the creditor. Someone who pays off debt quickly is much more favorable to a creditor than someone who pays slowly.

Re: Higher Score with longer repayment

Thexy1 — Mon, 09 Mar 2015 09:25:23 GMT

@EricDET Good point. I forgot about the interest. It guess it would be wiser to pay the credit cards off faster and save money on interest charges.

I guess I'm confused because I think that payment history+age+/-whatever other factors=points. Am example would be that I would get more points for making payments for 5 months than paying a lum sum payment. Isn't payment history a reflection of payments?? Maybe I'm not understanding this scoring thing correctly or my semantics are off.

Re: Higher Score with longer repayment

Stylez — Mon, 09 Mar 2015 14:21:06 GMT

I don't think you should be making financial decisions based on the impact to your FICO score. If you have debt and you are paying interest on that debt, then you should pay it off as soon as possible. The whole point of having a higher credit score is to get lower rates, which saves you money. So extending your payments and accruing more interests because you think it will get you a few extra points on your score seems to defeat the whole purpose of trying to increase your score in the first place.

Re: Higher Score with longer repayment

core — Mon, 09 Mar 2015 14:25:48 GMT

@Thexy1 wrote:
I guess I'm confused because I think that payment history+age+/-whatever other factors=points. Am example would be that I would get more points for making payments for 5 months than paying a lum sum payment.

No, it makes no difference. You can pay your balances over 12 months (and pay interest), or pay them all off tomorrow and just let your accounts age for 12 months and your score will be exactly the same in either case. FICO has no memory of past balances; all that matters is what balances are shown at any given moment.

Re: Higher Score with longer repayment

Thexy1 — Mon, 09 Mar 2015 14:28:53 GMT

@core Thanks for the explanation. For some reason I thought points were gained for each monthly payment made that reduces the balance.

Re: Higher Score with longer repayment

CluelessJohn — Mon, 09 Mar 2015 22:07:32 GMT

You're talking about a 15 point difference from a "black box estimator". Does that point difference really matter? Think about the money you're throwing away in interest cost. That's what matters.

Re: Higher Score with longer repayment

bdhu2001 — Mon, 09 Mar 2015 23:22:32 GMT

@core wrote:
@Thexy1 wrote:
I guess I'm confused because I think that payment history+age+/-whatever other factors=points. Am example would be that I would get more points for making payments for 5 months than paying a lum sum payment.
No, it makes no difference. You can pay your balances over 12 months (and pay interest), or pay them all off tomorrow and just let your accounts age for 12 months and your score will be exactly the same in either case. FICO has no memory of past balances; all that matters is what balances are shown at any given moment.

Now that you know it's based on time and timely payments (i.e. no late payments during that time), did you enter various months between 12 & 24? I ask, because when I used the simulator, it showed that I would reach the 24 month score in 18 months. Actually, it showed that my score would increase at 3 mos, 6 mos, 12 mos and 18 mos.

I'm too frugal to pay every month, so I used the simulator and noted the months that it would change. Month 3 will be on 4/28/15, but I think I'll pull my score again at 6 months which will be 7/28/15.

Re: Higher Score with longer repayment

NRB525 — Tue, 10 Mar 2015 02:23:39 GMT

@core wrote:
@Thexy1 wrote:
I guess I'm confused because I think that payment history+age+/-whatever other factors=points. Am example would be that I would get more points for making payments for 5 months than paying a lum sum payment.
No, it makes no difference. You can pay your balances over 12 months (and pay interest), or pay them all off tomorrow and just let your accounts age for 12 months and your score will be exactly the same in either case. FICO has no memory of past balances; all that matters is what balances are shown at any given moment.

OP, you are confusing the score simulator. Pay your interest bearing balances off as fast as you can. Your revolving accounts will be there, and you can use them for PIF purchases after they are zeroed. After the 24 months, you likely will be at the same place as the 24 month simulator says, and even better, you will not have paid more interest than you have to.

Your score does not care if you are paying on a balance, it cares that you have another good month with no lates.

Re: Higher Score with longer repayment

Thexy1 — Tue, 10 Mar 2015 11:55:44 GMT

@NRB525 Thanks .. so no lates is the increasing factor not monthly payments. Thanks all for your help.

Re: Higher Score with longer repayment

Thexy1 — Tue, 10 Mar 2015 11:59:02 GMT

@bdhu2001 I just did 12 and 24 to note the difference but I will definitely go back and run the numbers for the different number of months.

I forgot about total interest over time and I would rather save on interest.

Re: Higher Score with longer repayment

Thexy1 — Tue, 10 Mar 2015 12:00:38 GMT

@cluessJohn My original question/statement was does 15points even really matter which is why I wanted feedback.