Does closing a 2 month old credit line help or hurt your Fico mortgage score?

[Gizmo2]

I have a loan that is 2 months old that shortened my average length of credit lines.  I am thinking of closing it out to increase it.  I am going to apply for a mortage and don't want to loose any points.  Will this negativly affect my Fico morgtage scores or not?

I only have 3 lines of creidt a catalog, credit card and loan.  This may affect my credit mix, but that average age of credit line does affect it and this will increase that.

Any help would be apprecaited.

Thanks

[Kforce]

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@Gizmo2 wrote:

I have a loan that is 2 months old that shortened my average length of credit lines.  I am thinking of closing it out to increase it.  I am going to apply for amortagee and don't want to loose any points.  Will thisnegativlyy affect myFicoomorgtagee scores or not?

I only have 3 lines ofcreidtt a catalog, credit card and loan.  This may affect my credit mix, but that average age of credit line does affect it and this will increase that.

Any help would beapprecaitedd.

Thanks

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Yes mortgage scores are sensitive to new accounts of any type.

Any new account, CC or loan will have a temporary lowering of allFicoo scores.

Some from inquiry, others because of newest account age reset, and the lowering of average age's.

There are also hits from the loan being new and your debt to loan balance as high.

.however.

Some positive points might also be given from credit mix by having a loan.

Don't understand/know what you mean by "catalog" account in above post.

Closing the account after the fact, will not help most of the above factors.

If you were to pay down the loan to <9% you might gain a few point back.

* Note on a normal loan that will only last for a few months until loan is paid off *

PS: Just read your other post related to this.

Your scores will take a hit, how much varies by profile.

Your have many factors taking place all at once.

The inquiry is probably the smallest loss.

You will have the answer before we could begin to unravel your profile to make a good guess.

[CH-7-Mission-Accomplished]

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@Gizmo2 wrote:

I have a loan that is 2 months old that shortened my average length of credit lines.  I am thinking of closing it out to increase it.  I am going to apply for a mortage and don't want to loose any points.  Will this negativly affect my Fico morgtage scores or not?

I only have 3 lines of creidt a catalog, credit card and loan.  This may affect my credit mix, but that average age of credit line does affect it and this will increase that.

Any help would be apprecaited.

Thanks

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FICO scores, including the mortgage version, calculate average age of accounts using BOTH open and closed accounts, so you can't "fix" your average age by closing an account.   It's there for 10 years and will continue to age.

Credit mix looks at open and closed accounts, so even if you closed the installment loan, you would get the points for credit mix.   FICO does have a separate penalty for no open non-mortgage installment loans, however.

I see zero benefit to you in closing that account.   You've taken the hit from an inquiry and the hit from having a new account less than one year old, so you've taken all your hits.   Hang on and get the rewards over time.

[SouthJamaica]

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@Gizmo2 wrote:

I have a loan that is 2 months old that shortened my average length of credit lines.  I am thinking of closing it out to increase it.  I am going to apply for a mortage and don't want to loose any points.  Will this negativly affect my Fico morgtage scores or not?

I only have 3 lines of creidt a catalog, credit card and loan.  This may affect my credit mix, but that average age of credit line does affect it and this will increase that.

Any help would be apprecaited.

Thanks

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Paying it off isn't likely to hurt your mortgage scores, but might slightly. The safest bet for you at this point is to pay the loan down to 9% of the original loan amount, otherwise leaving it in place.