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Higher Score with longer repayment

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Higher Score with longer repayment

My MyFICO stimulator shows that my credit score will increase more if I pay off my credit cards over 24 months than 12 months. My goal was to pay off all balances over the next 9 months but if I will get a higher score by paying them off over time I can do that also. I created a chart that shows what the MyFICO simulator estimate scores are:

 

 EquifaxTransunionExperian
Current Score633649621
12M Pmts748734716
24M Pmts763749731

 

I know its only showing a 15 point difference but 15 points can make a big difference. I am not in a rush to get any new cards or accounts. I am planning to lease a car in 2017 and refinance my home in 2021. Should I go for the 12M or 24M pay off?

Message 1 of 16
15 REPLIES 15
New Contributor

Re: Higher Score with longer repayment

Can't go wrong either way in my opinion.
Message 2 of 16
Valued Contributor

Re: Higher Score with longer repayment

When you enter 24 you are simulating an extra year of age on everything.  It has nothing to do with length of repayment.  Pay them off ASAP. 

EQ08 BE: 776 | TU08: 812 | EX08: 797
Chase Ink [21.5k], Citi DC [20k], Alliant [15k], GICU [15k], QS1 [14.7k], Amex OBC [10k], Sportsman's Guide [9.4k], Blispay [7.5k], PenFed [6.5k], Chase Amazon [6.5k], Discover it [5.2k], Citi TYP [5.2k], Chase Freedom [5k], Fidelity Amex [5k], Consumers CU [5k], Wyndham [5k], Synch/Amazon [5k], Synch/Paypal [5k], Elan [4.5k], Ft.Knox [2.5k], BofA BBR [2k], Victoria's [1.7k], BofA 123 [500!]
Message 3 of 16
Established Member

Re: Higher Score with longer repayment

Thanks Core, I guess I wasn't clear in my first post. What I am trying to say is that the MyFICO score simulator is reflecting a high credit score because I am making more payments on the accounts (24 vs 12) and like you said, simulatiing an age. Because they are revolving accounts, I do not have a repayment term, but would it be better to extend the payment over time instead of paying them off in the near future.

 

I've read that people pay off balances fast but it seems as if it is mostly due to near future approvals for loans/mortgages. Since I am not in the market for anything in the next 2 years, I would like to get opinions if it would make a difference if I paid them off in 12 months or 24 months.

Message 4 of 16
Established Member

Re: Higher Score with longer repayment

@MarinoHD Im thinking the same also. I guess it just depends on if I want to have more of a $$ cushion. I guess if there's no absolutely necessary real reason to pay the credit cards off fast then I should extend the payments.

Message 5 of 16
Regular Contributor

Re: Higher Score with longer repayment

Scoring wise it doesn't really matter. It's the payment history and age that's driving the score. 

 

Financially you'll pay more interest with extending payments, as well as hurt your relationship with the creditor.  Someone who pays off debt quickly is much more favorable to a creditor than someone who pays slowly. 

Message 6 of 16
Established Member

Re: Higher Score with longer repayment

@EricDET Good point. I forgot about the interest. It guess it would be wiser to pay the credit cards off faster and save money on interest charges.

 

I guess I'm confused because I think that payment history+age+/-whatever other factors=points. Am example would be that I would get more points for making payments for 5 months than paying a lum sum payment. Isn't payment history a reflection of payments?? Maybe I'm not understanding this scoring thing correctly or my semantics are off. 

Message 7 of 16
Valued Member

Re: Higher Score with longer repayment

I don't think you should be making financial decisions based on the impact to your FICO score. If you have debt and you are paying interest on that debt, then you should pay it off as soon as possible. The whole point of having a higher credit score is to get lower rates, which saves you money. So extending your payments and accruing more interests because you think it will get you a few extra points on your score seems to defeat the whole purpose of trying to increase your score in the first place.

Message 8 of 16
Valued Contributor

Re: Higher Score with longer repayment


@Thexy1 wrote:
I guess I'm confused because I think that payment history+age+/-whatever other factors=points. Am example would be that I would get more points for making payments for 5 months than paying a lum sum payment.

No, it makes no difference.  You can pay your balances over 12 months (and pay interest), or pay them all off tomorrow and just let your accounts age for 12 months and your score will be exactly the same in either case.  FICO has no memory of past balances; all that matters is what balances are shown at any given moment.

EQ08 BE: 776 | TU08: 812 | EX08: 797
Chase Ink [21.5k], Citi DC [20k], Alliant [15k], GICU [15k], QS1 [14.7k], Amex OBC [10k], Sportsman's Guide [9.4k], Blispay [7.5k], PenFed [6.5k], Chase Amazon [6.5k], Discover it [5.2k], Citi TYP [5.2k], Chase Freedom [5k], Fidelity Amex [5k], Consumers CU [5k], Wyndham [5k], Synch/Amazon [5k], Synch/Paypal [5k], Elan [4.5k], Ft.Knox [2.5k], BofA BBR [2k], Victoria's [1.7k], BofA 123 [500!]
Message 9 of 16
Established Member

Re: Higher Score with longer repayment

@core Thanks for the explanation. For some reason I thought points were gained for each monthly payment made that reduces the balance.

Message 10 of 16
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