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Selling an auto and getting rid of installment

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Anonymous
Not applicable

Selling an auto and getting rid of installment

I currently have 2 installment accounts (open autos) , and I am contemplating selling one to get out of the debt. I am wondering how this will affect my rebuilding at this point. Here are the stats:
Current open trade lines:
1. Auto loan :Balance is 18k, opened in 2014, had 5 late pays in 2 years (30 days)
2. Auto loan :Balance is 22k, opened in July 2018,current , no lates
3. Discover card (AU only): Balance is 430 CL 700, opened in 2008 with zero lates.
Pretty sure that selling NO 1 auto will affect the AAoA , but to what extent. Will selling this lower my UTIL % and help or will it hurt due to closing an open trade line? I guess I have an option of selling either auto , but I am leaning towards #1 at this point.
Message 1 of 6
5 REPLIES 5
SouthJamaica
Mega Contributor

Re: Selling an auto and getting rid of installment


@Anonymous wrote:
I currently have 2 installment accounts (open autos) , and I am contemplating selling one to get out of the debt. I am wondering how this will affect my rebuilding at this point. Here are the stats:
Current open trade lines:
1. Auto loan :Balance is 18k, opened in 2014, had 5 late pays in 2 years (30 days)
2. Auto loan :Balance is 22k, opened in July 2018,current , no lates
3. Discover card (AU only): Balance is 430 CL 700, opened in 2008 with zero lates.
Pretty sure that selling NO 1 auto will affect the AAoA , but to what extent. Will selling this lower my UTIL % and help or will it hurt due to closing an open trade line? I guess I have an option of selling either auto , but I am leaning towards #1 at this point.

Purely from a FICO scoring perspective, closing the newer loan and leaving the older one open will give you the best scoring.

 

 


Total revolving limits 741200 (620700 reporting) FICO 8: EQ 703 TU 704 EX 687

Message 2 of 6
Anonymous
Not applicable

Re: Selling an auto and getting rid of installment

Closing an account does not impact your AAoA at all.  The account will remain on your CR and continue to age and impact your AAoA the same way that it would if you didn't close it.

 

 

Message 3 of 6
Anonymous
Not applicable

Re: Selling an auto and getting rid of installment

As BBS mentions, closing an account will not affect AAoA at all.

 

Closing an open loan often does affect something called Installment Utilization.  The problem is, we can't assess what your IU is because we do not know the original loan amount for each loan.  If you can tell us that, we can advise you better.

 

SouthJ is almost certainly correct in infering that your IU will decrease (which is good) if you pay off the very recently opened auto loan and that your IU will increase (bad) if you pay off the one opened in 2014.  But we can say for sure if you tell us the original loan amounts.

 

Before you consider paying off any loan you should pay your credit card debt down to $20 or so, and then always have your card reporting a small balance every month.  It's easy to spend a lot on the card while making sure it always reports a small balance.  Lots of people can walk you through that if it is not clear.

 

 

Message 4 of 6
Anonymous
Not applicable

Re: Selling an auto and getting rid of installment

PS.  Installment Utilization applies only to loans and other installment accounts.  Credit cards are not a part of the IU calculation.

 

Revolving Utilization applies only to credit cards and other kinds of revolving accounts.  Loans are not a part of the RU calculation.

Message 5 of 6
Thomas_Thumb
Senior Contributor

Re: Selling an auto and getting rid of installment


@Anonymous wrote:
I currently have 2 installment accounts (open autos) , and I am contemplating selling one to get out of the debt. I am wondering how this will affect my rebuilding at this point. Here are the stats:
Current open trade lines:
1. Auto loan :Balance is 18k, opened in 2014, had 5 late pays in 2 years (30 days)
2. Auto loan :Balance is 22k, opened in July 2018,current , no lates
3. Discover card (AU only): Balance is 430 CL 700, opened in 2008 with zero lates.
Pretty sure that selling NO 1 auto will affect the AAoA , but to what extent. Will selling this lower my UTIL % and help or will it hurt due to closing an open trade line? I guess I have an option of selling either auto , but I am leaning towards #1 at this point.

Reducing monthly debt obligations is a good strategy. Going from 2 cars to one will undoubtedly drop your insurance premiums as well. Unfortunately, the highest scoring option would likely be paying down both loans but leaving them open. That would result in a substantially lower aggregate balance to loan ratio compared to paying off either loan completely.

 

Do you like one car better than the other? Will one be easier to sell than the other? Financially what makes more sense? These considerations might be more important than any score implications. Regardless of which way you go, AAoA will remain unchanged because closed accounts continue to factor into age of accounts until they drop off your report.

Fico 9: .......EQ 850 TU 850 EX 850
Fico 8: .......EQ 850 TU 850 EX 850
Fico 4 .....:. EQ 809 TU 823 EX 830 EX Fico 98: 842
Fico 8 BC:. EQ 892 TU 900 EX 900
Fico 8 AU:. EQ 887 TU 897 EX 899
Fico 4 BC:. EQ 826 TU 858, EX Fico 98 BC: 870
Fico 4 AU:. EQ 831 TU 872, EX Fico 98 AU: 861
VS 3.0:...... EQ 835 TU 835 EX 835
CBIS: ........EQ LN Auto 940 EQ LN Home 870 TU Auto 902 TU Home 950
Message 6 of 6
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