Loan History

[Anonymous]

How long does the advantage of having a paid/paying installment loan benefit ones credit? For instance if I paid off a loan, would it still be good for my score or would it not matter at that point?

[Anonymous]

Paid off loan hurts your score as it goes from <8% to $0 if no other loan is open.  20-35 point drop for FICO8.

Best loan to report is one with less than 8.9% left to pay assuming no other loans reporting open.

Closed loan helps AoOA and AAoA for ten years after pay off tho.

[Anonymous]

Oh so should I pay it down to 8% and then let it sit for a while?  

[Anonymous]

It depends on the loan.  SOME loans let you make a huge payoff and then not have to pay again for awhile.  Other loans will still require the monthly minimum.  So be cautious and don't take one CSR's advice on whether or not your loan lets you front load the balance down.

If you can pay it to 8.9% or less (assume interest posts to raise the balance of course) it will help your scores.  If you have multiple loans, the theory is that the aggregate balance left across all loans should be under 8.9% but mortgages are scored differently than other loans.

[Billharrell]

Wouldn't a paid off installment loan help with a manual review for a future auto/personal loan? I understand he Fico score drop, but I think a lot of creditors might balk at being the first installment loan on an applicants file.

[Anonymous]

I will have to find out if i can pay to 8% and then let it sit without further payments for a while. 

Should I add another installment loan then?

[Anonymous]

Take a look at the first two posts in this thread:

http://ficoforums.myfico.com/t5/Understanding-FICO-Scoring/Adding-an-installment-loan-the-Share-Secu...

It will explain how FICO 8 scores loans (post #2) and will also describe a technique for getting the maximum points from this scoring factor -- assuming a person has no loans or may soon be paying them off.

You'll see that the specific lender we used to recommend for the technique (Alliant) no longer offers SS loans.  We are working on finding another lender that would work (with the essential attribute of one who would allow a borrower to pay almost all of the loan off early but still keep it open for the full 60 months).

My guess is that we will have found a few good alternatives by April.

[Anonymous]

That might be the next loan I put on then since I already have this selflender loan. They do not allow prepayment sadly so I guess I have to ask, how long is optimal to get a good amount of fico points from it? 6 months? less? It is a year long loan but I can pay it off anytime but I know length matters on a report too.

[Anonymous]

Is the SelfLender loan your only loan?  No other installment accounts of any kind?

Is there some particular need for credit that you have in the next two years?  E.g. buying a car or a home?  If so, what are the needs and when will they occur?  It's clear that you do not need any more credit cards -- it looks like you have almost a dozen.

Have you paid all your cards to zero except one, with the remaining card showing a fairly small positive balance? 

What are your three FICO 8 scores?

[Anonymous]

Oh no they all have balances ranging from 1 to 27% though I can pay them down fairly quickly. I don't have any other installment loans but I don't have anything real important coming up no