topic Re: Installment loan issue in General Credit Topics

Installment loan issue

Anonymous — Thu, 13 Dec 2018 17:02:54 GMT

In June I got an installment loan from my credit union. Then in August I read here about paying it down but only if it doesn't effect your payoff date. I called the credit union and they didn't understand my questions about early paydown so I decided to just try and pay extra one month to see if it would effect my pay off date. Longggg story short my loan will now be paid off in February instead of June.

No big deal right? Well, we are still house hunting so I'm concered that my only installment loan will be paid off before we get a home loan and tank my mortgage scores. Can't get a new loan as the hard pull will hurt me and it's advised to avoid opening new accounts 6months prior to applying for a mortgage. 😭

Any advice?

Re: Installment loan issue

Anonymous — Thu, 13 Dec 2018 18:53:24 GMT

Two of the three mortgage scores are unaffected by the amount you owe on your loans. The other score is affected. Most of the veterans here believe that is Experian, though SouthJ may have had a different experience. I have wanted someone to retest that so we could have a definative answer, but no one has done that yet.

Let's assume for a second that it is Experian. If so, when the loan pays off you will lose about 20-30 points. If so, what would that do to your middle mortgage score?

Re: Installment loan issue

Anonymous — Thu, 13 Dec 2018 20:29:19 GMT

My mortgage scores are
eq 704 tu 726 ex 726
Hubbys scores are
eq 700 tu 681 ex 726

This was last checked at the beginning of Oct. Both of our fico 8s have increased since then by about 5-7 points across the board. Just from implementation of AZEO.

Re: Installment loan issue

SouthJamaica — Thu, 13 Dec 2018 22:49:33 GMT

@Anonymous wrote:
In June I got an installment loan from my credit union. Then in August I read here about paying it down but only if it doesn't effect your payoff date. I called the credit union and they didn't understand my questions about early paydown so I decided to just try and pay extra one month to see if it would effect my pay off date. Longggg story short my loan will now be paid off in February instead of June.

No big deal right? Well, we are still house hunting so I'm concered that my only installment loan will be paid off before we get a home loan and tank my mortgage scores. Can't get a new loan as the hard pull will hurt me and it's advised to avoid opening new accounts 6months prior to applying for a mortgage. 😭

Any advice?

The mortgage scores don't react like FICO 8 reacts to installment utilization changes.

In my experience the TU mortgage score reacts slightly to them, while the EX and EQ mortgage scores do not react at all.

@Revelate reported something different, as to which bureau mortgage score reacted slightly, and which two did not react at all, but it was still one score reacting slightly and two not at all.

Re: Installment loan issue

SouthJamaica — Thu, 13 Dec 2018 21:24:53 GMT

@Anonymous wrote:
Two of the three mortgage scores are unaffected by the amount you owe on your loans. The other score is affected. Most of the veterans here believe that is Experian, though SouthJ may have had a different experience. I have wanted someone to retest that so we could have a definative answer, but no one has done that yet.

Let's assume for a second that it is Experian. If so, when the loan pays off you will lose about 20-30 points. If so, what would that do to your middle mortgage score?

Yes @Anonymous, in my profile it has consistently been TU FICO 4 which reacts, and EQ FICO 5 and EX FICO 2 which have been completely indifferent. But even the TU score did not react nearly as strongly as FICO 8 and FICO 9. I would estimate that the signal strength was 20%. I.e. if TU FICO 8 went down 30 points, TU FICO 4 went down ~6 points.

Re: Installment loan issue

Anonymous — Thu, 13 Dec 2018 21:53:05 GMT

Losing 20-30 points on hubbys middle score of 700 will kill us 😭

What are some options?

Re: Installment loan issue

Anonymous — Thu, 13 Dec 2018 22:01:49 GMT

Hopefully we will not see a huge change or we get a home loan first.
Since our files are both thin and young (unlike us 😂) it seems every little change to our reports make a huge ripple.

Re: Installment loan issue

Anonymous — Thu, 13 Dec 2018 22:29:51 GMT

There is very little you can do. You have ruled out getting a new loan and paying it down.

So hope that either (a) you buy your house before the loan pays off or (b) the score change is small.

Re: Installment loan issue

SouthJamaica — Thu, 13 Dec 2018 22:50:50 GMT

@Anonymous wrote:
Losing 20-30 points on hubbys middle score of 700 will kill us 😭

What are some options?

I don't think you would lose 20-30 points, more like 4-6 at most, and maybe none at all.

Re: Installment loan issue

Anonymous — Thu, 13 Dec 2018 23:32:43 GMT

I hope your correct SouthJamaica
I would start another loan but the hard pull, lowered age of accounts, etc... would hurt me more than no loan in the short term.

Re: Installment loan issue

SouthJamaica — Thu, 13 Dec 2018 23:34:28 GMT

@Anonymous wrote:
I hope your correct SouthJamaica
I would start another loan but the hard pull, lowered age of accounts, etc... would hurt me more than no loan in the short term.

The hard pull would usually be avoidable with a share secured loan, but still... I think you're right to refrain from opening a loan.

Re: Installment loan issue

Anonymous — Fri, 14 Dec 2018 01:04:13 GMT

Thanks CreditGuy and SouthJamaica
☺