WILL PAID OFF PERSONAL LOAN NEGATIVELY IMPACT MORTGAGE SCORES

[Travel1now]

I have a personal loan that will be paid off in May. My remaining debt will be two car payments, one balance $22,000 and one $5,000 ( as of this post date). I adhere to AZEO every month. Should I expect my mortgage scores to drop since I will only have car loans. I want to buy a house in June or July (depending on market).

Mortgage Scores are EQ 769/TU 775/EX 784

Thanks for the insight.

[dragontears]

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@Travel1now wrote:

I have a personal loan that will be paid off in May. My remaining debt will be two car payments, one balance $22,000 and one $5,000 ( as of this post date). I adhere to AZEO every month. Should I expect my mortgage scores to drop since I will only have car loans. I want to buy a house in June or July (depending on market).

Mortgage Scores are EQ 769/TU 775/EX 784

Thanks for the insight.

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Mine have never been affected negatively when paying off a loan (occasionally get a few points increase presumably from the "number of accounts with a balance" score factor). 

[Anonymous]

Your score could drop a few points, but the loan being paid off should help your debt to income ratio (DTI).  I just paid off a personal loan and my score dropped 5 points.  Same thing happened when I paid off my car.  You should be fine with your current scores.  I use to be a loan officer (but it was about 15 years ago and it was a lot different then) and it didn't matter as long as you were over 740.  741 and 850 got the same rate.  Have you talked to a loan officer?  It might be a case where you should pay off the $5000 car loan also, but I would talk to someone before you do.

[homeloanexpert]

@Travel1now 

Good morning!

That's a great question. Anytime you pay off an installment loan, you run the risk of having your credit scores drop. How much?  It really depends on how long you had that loan for. An account you had for 60 months vs an account you had for 12 months; well you see my point. The biggest impact on a mortgage credit report will be your lack of revolving credit cards (specifically Visa and MC’s), longevity, and utilization.