Your prediction of what will happen next !!

[Anonymous]

I've fought to get a score from the low 500s' to a 591 today - this month, I make my final truck payment.   It's a bank loan of $500 month that I will no longer have..  What effect should this have on my total score ??  -  I can charge $25 on a credit card and I get an alert that my score goes down because I've increased a balance on an $800 card.... this was a $24,000.00 truck with payments of $500 that will now be eliminated.   BTW, of the 6 year history with this bank, I've not only never had a 30 day late payment, I've never been past the due date of the loan !!  Just had some other problems that are rapidly getting themselves worked out...  Just wondered if my score will take a jump upward when the Bank reports this as paid in full....

Thanks,

r

[MarineVietVet]

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@Anonymous wrote:

I've fought to get a score from the low 500s' to a 591 today - this month, I make my final truck payment.   It's a bank loan of $500 month that I will no longer have..  What effect should this have on my total score ??  -  I can charge $25 on a credit card and I get an alert that my score goes down because I've increased a balance on an $800 card.... this was a $24,000.00 truck with payments of $500 that will now be eliminated.   BTW, of the 6 year history with this bank, I've not only never had a 30 day late payment, I've never been past the due date of the loan !!  Just had some other problems that are rapidly getting themselves worked out...  Just wondered if my score will take a jump upward when the Bank reports this as paid in full....

Thanks,

r

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Hello and welcome.

First of all congratulations on the score increase and the debt pay off!!! It's always a great feeling to pay off any size debt. Having said that I have to tell you that paying off an installment loan is different that paying down/off a credit card. Utilization of installment accounts is a tiny part of scoring whereas revolving credit utilization is 30% of your total score.

If this was your only installment loan then your score may actually go down a little because FICO likes to see a mix of credit but that mix is only 10% of your score so it's not all that important in my opinion.

But you'll just have to wait and see what happens when all this clears and is shown on your credit reports. Debt reduction/ payoff should always be your #1 priority. Being debt free trumps a score any day IMO. Plus this account will continue to report for up to 10 years after it is paid off and closed and this will help your AAoA (Average Age of Accounts) and your credit length history.

Feel good about not having that truck payment and keep paying on time and managing your credit cards effectively. You're moving quickly in the right direction.

From a BK years ago to:
9/09 EX pulled by lender 802
3/10 EQ- 800
4/10 TU -772

You can do the same thing with hard work

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[Anonymous]

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Hi otter,

I hope you're enjoying the boards - it's good to have you here.

I agree with mvv:

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marinevietvet wrote:  Debt reduction/ payoff should always be your #1 priority. Being debt free trumps a score any day IMO. Plus this account will continue to report for up to 10 years after it is paid off and closed and this will help your AAoA (Average Age of Accounts) and your credit length history.

Feel good about not having that truck payment and keep paying on time and managing your credit cards effectively. You're moving quickly in the right direction.

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I was anxious to see what the score impact would be when DH paid off his only installment - a second mortgage.  There was no visible score increase or decrease.  Installment balances truly are scored differently than revolving.  But if you're looking for a score increase, there's lots of ways to get it.  If that's what you're after, post more info and you'll get some good advice here on how to increase scores.  It looks like you've done some good work already.

[RobertEG]

Installment loan util is scored low in FICO as compared with revloving util, for obvious reasons.  FICO is a risk assessment of liklihood of untimely future payment.

Most installment loans, and all auto and mortgage loans, are secured by important property that the consumer might lose upon default.  Most credit cards are not secured by anything, and controlled primarily by  the CL set by the OC.  So installment loan payment is a much, much lower risk that revolving credit payment.

I think it is a factor of at least four to five times more importance of revolving util in your score.

I would not expect any substantial FICO increase.  And has been said,t he impact is not just on your util of credti, it may also affect your scoring under credit mix.

[GregB]

I made the final $500+ payment on my truck last month. Net score change was zero for FICO and EX Plus. I do still have one installment loan left with a small balance. I assume that is why I didn't see the loss of a couple points for having no open installment loans.

Since FICO is supposed to be a measure of creditworthiness, I would think paying off and eliminating installment loans should raise your score. I can see that having no experience with installment would be a negative. A recently paid-off loan shows experience and responsibility.

Getting rid of debt definitely beats a few points plus of minus in FICO.

[guiness56]

Paying off an installment loans has little impact on your FICO score. 

[fuzzy-bear]

Ottor, it seems as if you have your alert levels set too low!, reset them to say $250 and work to stay under the $250 amount. The $250 is just an example and you can set the alerts to trigger at an amount within your own comfort level.

You do not want alerts when you spend small amounts because it provides a short snap-shot favoring a downward movement on your score. IMHO

[RobertEG]

That is a common misperception about what credit scoring is.  Credit scoring is not a measure of credit worthiness.  It is basically a measure of your risk of becoming delinquent on payment of debt in, primarily, the next two years. 

Credit worthiness is an overall measure of ability to pay.  FICO is a measure primarily of shown willingness to actually pay timely.  It is thus based heavily on demonstrated,past actual payent history.

For example, your credit worthiness also relies heavily on income, a look at all debts and assets, whether or not they are recorded in your credit file with the CRA, etc.  FIICO does not even consider such factors. 

FICO is just a piece of the information used by creditors in making credit decisions.  For lower risk, lower balance lending or credit, they may rely primarily, or even totally, on FICO scores, but larger risk, larger principal lendors, such as mortgage lendors, ask first for additional financial disclosure in establishig a more accurate evaluation of credit worthiness.