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Paying unsecured personal Loan off early

ttonnka3
Member

Paying unsecured personal Loan off early

Hello does Paying unsecured personal Loan off early help score? What would be the pros and cons about this?? The loan is small it is roughly 5months old
Message 1 of 5
4 REPLIES 4
jamie123
Valued Contributor

Re: Paying unsecured personal Loan off early

It will actually drop your score when you pay it off if it is a loan from a CU or bank. Open installment loans are beneficial to your credit score and there are people here that take them out just to give their score a boost.

 

I know, I know...If I have less debt my scores should go up? Wrong. It works that way with credit cards but not installment loans.


Starting Score: EQ 653 6/21/12
Current Score: EQ 817 3/10/20 - EX 820 3/13/20 - TU 825 3/03/20
Message 2 of 5
ttonnka3
Member

Re: Paying unsecured personal Loan off early

Thank you for your reply

So in other words pay off credit cards would be more beneficial to my score than to pay off loan?
Message 3 of 5
takeshi74
Senior Contributor

Re: Paying unsecured personal Loan off early

Depending on your utilization you will probably see a bigger change from reducing your utilization.

Message 4 of 5
jamie123
Valued Contributor

Re: Paying unsecured personal Loan off early


@ttonnka3 wrote:
Thank you for your reply

So in other words pay off credit cards would be more beneficial to my score than to pay off loan?

Yes, you are correct. For optimal scoring you want 1 credit card to report less than 10% of its credit line and all your other cards to report $0. Your credit card utilization has a HUGE impact on your credit scores.

 

The balance on your installment loan doesn't really factor in your credit utilization for scoring purposes. Having an open installment loan will actually boost your scores at least 10 to 30 points.


Starting Score: EQ 653 6/21/12
Current Score: EQ 817 3/10/20 - EX 820 3/13/20 - TU 825 3/03/20
Message 5 of 5
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