Auto Loan Payoff

[Thomas_Thumb]

@BrutalBodyShots 

My loan was a mortgage. It had 15 year fixed rate terms. Standard monthly payments were made until payoff. So, under 0.5% B/L ratio prior to last payment.

Yes, I had a buffer at 850 when my loan was open and it was likely around 20 points. At low utilization (under 4%) I ended up with 1 point loss associated with no open loan. However, I initially thought the closure penalty was 30-35 point and would persist at that level. That belief was based on my 842 => 806 drop after loan closure when utilization was elevated.

The point I am trying to get across is not specific to 850 and a buffer. An example might help.

Say a profile has an open loan and a 780 score. Aggregate utilization is 4%. Then aggregate utilization reports at 12% and score drops to 770. The spike in utilization caused a 10 point decrease.

Say the same profile has a closed loan with 4% utilization. Score is 760. Now aggregate utilization goes to 12% and score drops to 740.

In summary, comparing score differences open/closed at 4% UT shows a 20 point offset (780 => 760). By contrast comparing at 12% UT shows a 30 point offset (770 => 740)

In essence the open loan mutes the impact of elevated utilization. So, if UT is high when loan closes a 30 point drop is observed but that offset is not fixed - it can change. The offset is not time related, but can vary over time due to other factors.

I saw muting with my open Mortgage. Not sure an open Auto loan has that effect.

[BrutalBodyShots]

Understood. And I'm assuming you theorize this to be the case since both variables (installment loan utilization and revolving utilization) are part of the same slice of the FICO pie, Amount of Debt? With both present (open) more consideration needs to be given to both.

Have you thought about it reversed? Someone has an open loan and [one] open credit card and they close the card. They'd take a huge score hit of course, but that hit could (would) therefore be different than it would be if they had no open loan.

[Zoostation1]

@BrutalBodyShots  Not sure how relevant it is to your last comment, but on a student loans only profile (4 open 1 closed) my sister was at a EQ8 740 and EX8 767 just before she opened her first CC (BCE).  I had her sign up for the free versions on myFICO and Experian just before applying last June.

[BrutalBodyShots]

Good to know. I'd imagine her scores increased a good chunk when that first revolver reported?

[Zoostation1]

I'll see if I can get the info from her for DPs