Effect of paying off only installment loan

[Junejer]

A few weeks ago, I paid off my car loan. I had been keeping it at $101 for the past year. That allowed me to hit high F8 scores of 850, 850 and 849. After applying for some new cards and seeing my scores drop as a result, I decided to pay off the loan. The results are as follows:

EQ is down -27 points from 838 to 811. EX is down -20 from 838 to 818. TU is down -23 from 825 to 802.

I will expect further temporary declines as I made a major purchase and will have a card nearly maxed out for a few months. That's not germain to this conversation, however.

[keekers]

So basically always have an open installment loan? Is that the takeaway here?

[SouthJamaica]

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@keekers wrote:
So basically always have an open installment loan? Is that the takeaway here?

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The takeaway is that having one's aggregate installment loan utilization percentage paid down to 9% or less of the loan amount(s) gives a boost to one's FICO 8 and 9 scores, and that having no open loan causes a drop in FICO 8 and 9 scores.

[keekers]

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@SouthJamaica wrote:

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@keekers wrote:
So basically always have an open installment loan? Is that the takeaway here?

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The takeaway is that having one's aggregate installment loan utilization percentage paid down to 9% or less of the loan amount(s) gives a boost to one's FICO 8 and 9 scores, and that having no open loan causes a drop in FICO 8 and 9 scores.

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I assume it doesn't matter what type (e.g. Auto Loan, Mortgage, Student Loan, etc.)?

[JoeRockhead]

Curious as to whether or not you're planning to stay loan free? Aside from the fact that it can be done, it would be interesting to see how long it takes you to get back to 850 without an open loan, and once you've paid down that major purchase. 

[SouthJamaica]

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@keekers wrote:

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@SouthJamaica wrote:

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@keekers wrote:
So basically always have an open installment loan? Is that the takeaway here?

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The takeaway is that having one's aggregate installment loan utilization percentage paid down to 9% or less of the loan amount(s) gives a boost to one's FICO 8 and 9 scores, and that having no open loan causes a drop in FICO 8 and 9 scores.

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I assume it doesn't matter what type (e.g. Auto Loan, Mortgage, Student Loan, etc.)?

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I can say that it doesn't matter as between auto loans, personal loans, and savings secured loans. But I can't answer as to mortgages and student loans. I hope @Thomas_Thumb can weigh in on that.

[TrapLine]

Offering my condolences as the exact same thing for almost the exact same number of points hit me this April 2024.

The mortgage was paid off last June 2023 coupled with the vehicle loan being zeroed I sit at 802 Fico 08 EX.

Now, just a bottom feeding low life in the world of credit!!!

[Thomas_Thumb]

There is no magic 9% for a mortgage. I went from over 50% B/L to 1% B/L with NO scoreboost anywhere along the way. I did see an impact when the mortgage, my only open loan, closed.

For those who care to read reason code lists you will find codes specific to mortgages. I can't speak to student loans but, I don't recall reason codes specific to that type.

[keekers]

Fascinating. So it sounds like mortgages are "bucketed" separately from other loan types.

[SouthJamaica]

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@TrapLine wrote:

Offering my condolences as the exact same thing for almost the exact same number of points hit me this April 2024.

The mortgage was paid off last June 2023 coupled with the vehicle loan being zeroed I sit at 802 Fico 08 EX.

Now, just a bottom feeding low life in the world of credit!!!

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Well in the "world of credit" maybe, but to my mind your accomplishment is exemplary

I find the no-open-loan penalty, and its credit card counterpart, the all zero penalty, to be completely illogical.

I would love to be debt free one day, and would be glad to accept whatever 'penalties' FICO algorithms decide to dish out.