If you mean a DTI dip, it would just decrease by whatever your monthly payment on Car 2 is. If you mean a FICO dip, I think the only metrics it would really affect would be installment balance:loan ratio and installment amounts owed, though there may be something unique to the mortgage scores I'm missing. W/o knowing the balance and initial loan amounts on the student loans, it's impossible to say what the change to b:l would be, but if SLs are large and the balance on them is still high I don't think closing the auto loan would have much effect, score wise.
@Anonymous wrote:We have 2 cars and my wife and I now work at the same place, so we are thinking of ditching one of the cars. We are also preparing to look at a mortgage (both middle score around 660), and the dip in DTI from selling would be helpful.
Installment loans -
Student Loans that were consolidated last July - so fairly new
CAR 1 - 4 years old - 5000 left of orginal 20000
Car 2 (one we are thinking about selling) - 1 year old 15000 left of origanal 20000
Should I expect a big dip if we sold the car and the installment loan is closed?
Not at all. I would expect you to gain points, not lose them.
You'll be getting rid of an account with balance, and getting rid of 15k of debt.
(Presumably you're thinking about the dips some people sometimes experience when closing out a loan, but those have to do with installment utilization percentage, which has little or no effect on your mortgage scores, and which usually only affect the FICO 8's and 9's in any serious way. But even those won't be affected negatively in your case, because your installment utilization will be improving, not worsening.)
@Anonymous wrote:Yes SL balances are ~100000 with just about that balance. When I said dip I meant that getting rid of that car payment would help lower our DTI and give us a better chance. Thank You for your reply
It's going to improve your DTI, which is big in the mortgage realm, but is not a FICO scoring factor. You were asking whether you would experience a dip in your FICO mortgage scores.
@Anonymous wrote:Yes - and Thank you for the Reply - You helped alot, knowing that while it could affect the FICO 8 it would have very little on the all important mortgage score.
It most likely will NOT affect your FICO 8's in any way.
And I didn't say it would have little effect on the mortgage scores, I said it would likely improve your mortgage scores.