For optimal scoring - Installment loans

[Anonymous]

For optimal scoring, I have read that it is good to have an insallment loan. However, I don't have a 'current' installment loan (no car payment, no personal loan, etc.).  I do, however, have 'paid' installment loans still reporting.  In order to have optimal scoring, must it be a 'current' installment loan?

Thanks!!

[manyquestions]

Yes.

[Anonymous]

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@manyquestions wrote:

Yes.

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Thanks!  

[SouthJamaica]

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@Anonymous wrote:

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@manyquestions wrote:

Yes.

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Thanks!  

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For it to optimize scoring it has to have a low balance. And if you pay it off, you'll wind up losing the points you've gained.

[elim]

It amazes me you must stay in debt by opening another instalment loan to keep those FICO points. It's easy to see by your "paid on-time and in full" instalment loans that your instalment credit is good.  I would think you should gain the points for early pay-off.

[Anonymous]

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@elim wrote:

It amazes me you must stay in debt by opening another instalment loan to keep those FICO points. It's easy to see by your "paid on-time and in full" instalment loans that your instalment credit is good.  I would think you should gain the points for early pay-off.

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I was thinking the same ... the irony!  lol

[SouthJamaica]

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@elim wrote:

It amazes me you must stay in debt by opening another instalment loan to keep those FICO points. It's easy to see by your "paid on-time and in full" instalment loans that your instalment credit is good.  I would think you should gain the points for early pay-off

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Yeah it amazes me too that Fair Isaac hasn't figured out yet that it's a good thing for someone to pay off a debt

[s_haliz]

I just wanted to let you know that it is possible to have a perfect FICO even without an intallment loan (like car loan).....I don't have car loan....

[manyquestions]

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@s_haliz wrote:

I just wanted to let you know that it is possible to have a perfect FICO even without an intallment loan (like car loan).....I don't have car loan....

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All you have showing on your report are credit cards? No mortgage, no loans of any type?

[bdhu2001]

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@elim wrote:

It amazes me you must stay in debt by opening another instalment loan to keep those FICO points. It's easy to see by your "paid on-time and in full" instalment loans that your instalment credit is good.  I would think you should gain the points for early pay-off.

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You're FICO score is based on your responsible use of credit, not responsible money management.  Only 10% of your FICO is based on credit mix, but that can be up to 85 pts for most people.  

Once you pay off your house or car, you may start using those funds for other expenses.  Some people pay off everything, including credit cards, because they feel using credit is too tempting and they can't handle credit.  The FICO algorithm has no memory of utilization and no idea of why you aren't using credit simply.  Thus, it can't predict whether or not you'll be as responsible with new payments as you were with previous payments.

35% of your score is based on payment history, thus you continue to get pts for your previous great payments & an additional 15% of FICO is based on length of credit history.

If you paid off and closed all of your RV, it would affect your credit mix and would also affect your score even though the history stays on your report for 10 years.  But that 10 years calculates into 15% length of credit history.  But most of us maintain a few cards for various reasons. Even without a good mix, you can still get the best rate on loans and credit.  But you aren't as likely to reach 850.