How to avoid score drop after pay-off?

[Anonymous]

So I'm about 4 years and 7 months into a $34,000 car loan. I have about $3000 left that I owe. The account is current and in good standing. I've been trying to figure out what to do to avoid the inevitable score drop once it's paid off. I'm currently in the market to buy a house before the end of the year. I was wondering what the experts (you guys) may recommend. I'm not against financing another vehicle if I need to in order to keep my scores from dropping but I'm afraid that adding a new account will effect my average age of credit. What should I do?

[chiefone4u]

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@Anonymous wrote:

So I'm about 4 years and 7 months into a $34,000 car loan. I have about $3000 left that I owe. The account is current and in good standing. I've been trying to figure out what to do to avoid the inevitable score drop once it's paid off. I'm currently in the market to buy a house before the end of the year. I was wondering what the experts (you guys) may recommend. I'm not against financing another vehicle if I need to in order to keep my scores from dropping but I'm afraid that adding a new account will effect my average age of credit. What should I do?

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I'm not sure that there is anything you can do with your intention of buying a home by end of year.

You could see if your auto lender will allow you to skip a payment? (Buys you an extra month to close on a home loan).

Get busy buying a home? 

You have 3 month's left of this year (basically)... not much time to do anything if your auto loan naturally closes before your home loan.

It's possible to get a SSL now so it gets some age before your auto loan is paid off, three month's time might not be enough to off-set AoYA or changes to AAoA.

If you do go for the SSL be sure to pay it down to under 9% of original loan (and let new balance report) before applying for a home loan. <at least this is the advice often given for maximum scores)

In practice, you really don't want to open any new accounts 6 month's to a year before applying for a mortgage. 

Hopefully someone else will be along shortly with some useful advice and possible options. 

Best of luck! 

[AllZero]

Is that your only open installment loan?

What are your current EX2, TU4, EQ5 scores?

Perhaps, time your mortgage application before the close of your open installment loan?

[Anonymous]

I currently have my auto loan and 3 credit cards that are all current and in good standing. 2 are under 30% utilization, the third is at a zero balance. The oldest one is about 3 years old, then the other two are 2 years old. 

[Anonymous]

If you can apply before it's closed it shouldn't be an issue. 

Pull your mortgage scores and see where they are now to see if a drop will even bring you down a tier

An SSL sounds good on paper, but it is a new installment account...

[Snoopy916]

FWIW I was in kind of the same situation here's a quick rundown of what happened to me

680 score, 0 credit card debt, 0 derogs in last 2 years (besides a lot of inquiries),  ch 7 2.5 years prior, $32k auto loan, $425/month, $22k balance. Denied for mortgage due to DTI.

Paid off my car in full, score dropped 18 points 2 months later, BUT 5 months later, score went up to 706  (i think it was 696 4 months after) with nothing else changing. Applied for mortgage, and got preapproval.

so the dip, in my case at least, was only temporary and the removal of a payment mattered more than the credit score anyway.