Credit Mix Question - Effect of auto loan payoff

[Thomas_Thumb]

Mix can impact scorecard assignment. However, installment mix looks at both open and closed accounts. There is a wealth of info from Fico discussing this even though the above misleadingly suggests otherwise.

Having an open installment loan is very important for a rock steady 850 score. However, only 1 installment loan, can be any type, is needed.  A low balance to loan ratio (utilization) adds minimal score value if the loan is a mortgage. The ultra low utilization is much more impactful on low duration (5 years or less) SSL or Auto loans.

An open mortgage with 5 or more years of payment history usually overshadows/nullifies impact of other loan types on Fico scores. In my case, I had maintained Classic Fico 8/9 850s for 7 years with only a single open loan, a mortgage, and no closed loans. Things changed when the mortgage was closed. Scores dropped due to lack of recent installment activity.

Note: Fico looks at loan history - both age of oldest loan and age of oldest open loan. These metric are more influential on score than multiple loan types ... As is loan activity. FWIW -

Lack of non mortgage loan types only held down my Auto industry option Fico score. It was the only type of Fico score that ever displayed lack of a non mortgage installment loan as a reason statement on a 3B report.

To the OP,  a drop on your Classic or Bankcard Fico scores by paying off the Auto loan should be minimal to 0 if your mortgage has a few years payment history.

[SouthJamaica]

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@lostinhouston wrote:

Hello all!

I have auto loan that I would like to payoff next week, as I will be coming into a small windfall then.  I also have a mortgage.  My question is if the open mortgage loan will be enough to keep a good credit mix?  

I have 6 credit cards that are in good shape. low utilization, etc, so not worried about that.  However, I was planning on opening up another card in 2-3 months, once I pay off a couple of cards that went into collections (in-house collections) next week as well.

Should I keep a small balance on the car loan to keep it open for about 3 months until I apply for new credit cards, or go ahead an pay it off?

I have done some prelim research on this, and there is conflicting info on if having just a mortgage open is enough for the credit mix % part.

Thanks in advance!

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1.  Even a closed loan continues to contribute to the "credit mix" factor, so no problem there.

2.  No point in keeping the auto loan open, because the installment utilization factor is based on aggregate numbers; I imagine your paying off the loan won't even move the needle on that factor, since your mortgage is likely to be much bigger than the auto loan.

[FireMedic1]

I'll just say one more thing. We say finances over FICO. Once the auto loan is satisfied. Less interest paid. More $ in your pocket.

[lostinhouston]

Yes, I understand finances over FICO, but I was only going to leave a $1,100 balance which is about 3 payments to allow the paid charge offs to update on my credit report.  So the interest left would be a minimal amount.  The payment on the car loan is $365 a month.

[SouthJamaica]

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@lostinhouston wrote:

Yes, I understand finances over FICO, but I was only going to leave a $1,100 balance which is about 3 payments to allow the paid charge offs to update on my credit report.  So the interest left would be a minimal amount.  The payment on the car loan is $365 a month.

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There is no FICO score reason for you to refrain from paying it off, and getting your clean title.

[lostinhouston]

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@SouthJamaica wrote:

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@lostinhouston wrote:

Yes, I understand finances over FICO, but I was only going to leave a $1,100 balance which is about 3 payments to allow the paid charge offs to update on my credit report.  So the interest left would be a minimal amount.  The payment on the car loan is $365 a month.

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There is no FICO score reason for you to refrain from paying it off, and getting your clean title.

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Agreed after reading all of the responses.  I have decided to just pay it off and be done with it!

Thanks for everyone's responses!

[Junejer]

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@SouthJamaica wrote:

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@lostinhouston wrote:

Hello all!

I have auto loan that I would like to payoff next week, as I will be coming into a small windfall then.  I also have a mortgage.  My question is if the open mortgage loan will be enough to keep a good credit mix?  

I have 6 credit cards that are in good shape. low utilization, etc, so not worried about that.  However, I was planning on opening up another card in 2-3 months, once I pay off a couple of cards that went into collections (in-house collections) next week as well.

Should I keep a small balance on the car loan to keep it open for about 3 months until I apply for new credit cards, or go ahead an pay it off?

I have done some prelim research on this, and there is conflicting info on if having just a mortgage open is enough for the credit mix % part.

Thanks in advance!

---

1.  Even a closed loan continues to contribute to the "credit mix" factor, so no problem there.

2.  No point in keeping the auto loan open, because the installment utilization factor is based on aggregate numbers; I imagine your paying off the loan won't even move the needle on that factor, since your mortgage is likely to be much bigger than the auto loan.

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I know this is FICO states, but this wasn't my experience last summer. When I paid off an installment loan (which was still on my reports) my scores dropped by 60 - 70 points across the board. That's why I'm keeping a balance of $101 on my car loan.

[SouthJamaica]

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@Junejer wrote:

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@SouthJamaica wrote:

---

@lostinhouston wrote:

Hello all!

I have auto loan that I would like to payoff next week, as I will be coming into a small windfall then.  I also have a mortgage.  My question is if the open mortgage loan will be enough to keep a good credit mix?  

I have 6 credit cards that are in good shape. low utilization, etc, so not worried about that.  However, I was planning on opening up another card in 2-3 months, once I pay off a couple of cards that went into collections (in-house collections) next week as well.

Should I keep a small balance on the car loan to keep it open for about 3 months until I apply for new credit cards, or go ahead an pay it off?

I have done some prelim research on this, and there is conflicting info on if having just a mortgage open is enough for the credit mix % part.

Thanks in advance!

---

1.  Even a closed loan continues to contribute to the "credit mix" factor, so no problem there.

2.  No point in keeping the auto loan open, because the installment utilization factor is based on aggregate numbers; I imagine your paying off the loan won't even move the needle on that factor, since your mortgage is likely to be much bigger than the auto loan.

---

I know this is FICO states, but this wasn't my experience last summer. When I paid off an installment loan (which was still on my reports) my scores dropped by 60 - 70 points across the board. That's why I'm keeping a balance of $101 on my car loan.

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1.  Your score probably fell because of a change in your aggregate installment utilization percentage, not a change in credit mix. Your credit mix factor was unchanged.

2. I'm skeptical of there being a 60-70 point drop in FICO scores based on paying off an installment loan. If it was your only open loan, or if there was an increase in aggregate installment utilization from below 10% to above 10%, there would typically be a drop in the neighborhood of 30 points, not 60 or 70. That sounds more like something a Vantage score would do.

[Junejer]

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@SouthJamaica wrote:

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@Junejer wrote:

---

@SouthJamaica wrote:

---

@lostinhouston wrote:

Hello all!

I have auto loan that I would like to payoff next week, as I will be coming into a small windfall then.  I also have a mortgage.  My question is if the open mortgage loan will be enough to keep a good credit mix?  

I have 6 credit cards that are in good shape. low utilization, etc, so not worried about that.  However, I was planning on opening up another card in 2-3 months, once I pay off a couple of cards that went into collections (in-house collections) next week as well.

Should I keep a small balance on the car loan to keep it open for about 3 months until I apply for new credit cards, or go ahead an pay it off?

I have done some prelim research on this, and there is conflicting info on if having just a mortgage open is enough for the credit mix % part.

Thanks in advance!

---

1.  Even a closed loan continues to contribute to the "credit mix" factor, so no problem there.

2.  No point in keeping the auto loan open, because the installment utilization factor is based on aggregate numbers; I imagine your paying off the loan won't even move the needle on that factor, since your mortgage is likely to be much bigger than the auto loan.

---

I know this is FICO states, but this wasn't my experience last summer. When I paid off an installment loan (which was still on my reports) my scores dropped by 60 - 70 points across the board. That's why I'm keeping a balance of $101 on my car loan.

---

1.  Your score probably fell because of a change in your aggregate installment utilization percentage, not a change in credit mix. Your credit mix factor was unchanged.

2. I'm skeptical of there being a 60-70 point drop in FICO scores based on paying off an installment loan. If it was your only open loan, or if there was an increase in aggregate installment utilization from below 10% to above 10%, there would typically be a drop in the neighborhood of 30 points, not 60 or 70. That sounds more like something a Vantage score would do.

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I've been around this forum off and on for almost 16 years. Surely, I understand the difference between FICO and otherwise. Gimme a break.

[Junejer]

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@SouthJamaica wrote:

---

@Junejer wrote:

---

@SouthJamaica wrote:

---

@lostinhouston wrote:

Hello all!

I have auto loan that I would like to payoff next week, as I will be coming into a small windfall then.  I also have a mortgage.  My question is if the open mortgage loan will be enough to keep a good credit mix?  

I have 6 credit cards that are in good shape. low utilization, etc, so not worried about that.  However, I was planning on opening up another card in 2-3 months, once I pay off a couple of cards that went into collections (in-house collections) next week as well.

Should I keep a small balance on the car loan to keep it open for about 3 months until I apply for new credit cards, or go ahead an pay it off?

I have done some prelim research on this, and there is conflicting info on if having just a mortgage open is enough for the credit mix % part.

Thanks in advance!

---

1.  Even a closed loan continues to contribute to the "credit mix" factor, so no problem there.

2.  No point in keeping the auto loan open, because the installment utilization factor is based on aggregate numbers; I imagine your paying off the loan won't even move the needle on that factor, since your mortgage is likely to be much bigger than the auto loan.

---

I know this is FICO states, but this wasn't my experience last summer. When I paid off an installment loan (which was still on my reports) my scores dropped by 60 - 70 points across the board. That's why I'm keeping a balance of $101 on my car loan.

---

1.  Your score probably fell because of a change in your aggregate installment utilization percentage, not a change in credit mix. Your credit mix factor was unchanged.

2. I'm skeptical of there being a 60-70 point drop in FICO scores based on paying off an installment loan. If it was your only open loan, or if there was an increase in aggregate installment utilization from below 10% to above 10%, there would typically be a drop in the neighborhood of 30 points, not 60 or 70. That sounds more like something a Vantage score would do.

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When I posted, I couldn't remember exactly how much it went down, so there was a little hyperbole in there...just a little. I just checked EX and EQ. I don't have a way to track TU in this fashion. EX went from 822 to 776. 46 points lost. EQ went from 839 to 794. 45 points lost. It was my only open installment loan. I still had (and do have) old mortgage loans and old car loans reporting.