So I just bought a new car ("Buy First New Car" achievement unlocked) and I traded in my old car, which I still owed about $10,000. I put $5,000 down, which covered the amount I was upside down on, plus put about $2,500 towards the new loan. Right now, I have PenFed reporting my auto loan (no missed payments for the past 18 months) and am waiting for Honda to pay it off.
My question is how much do you think paying off the old loan and adding a new loan is going to affect my scores?
When I bought the original car, I didn't have any kind of loan on my credit report. The dealership screwed things up because I told them I was financed through PenFed and I will give them the check as soon as I get it in the mail. Well, the finance guy didn't listen and ended up financing me through Chase. So when I got the check from PenFed, they paid off the loan for Chase, and it shows on my reports as the account being opened and closed basically on the same day, but in good standing. Once it hit my reports, my score dropped 50 points! Can I expect the same thing once my old PenFed loan is paid off and the new Honda one starts reporting?
PenFed
Original amount: ~$13,500
Paid down to: $10,301
Honda Finance
New Loan: $22,941
@HeavenOhio wrote:
@Queen_Etherea wrote:Right now, I have PenFed reporting my auto loan (no missed payments for the past 18 months) and am waiting for Honda to pay it off.
Watch this very closely. We've had posts here where the dealer didn't pay off the loan on time and the customer ended up with a 30-day late. I'd be in touch with both Honda and PenFed on this.
I was worried about this happening. I already called Honda and they said they mailed the check last week. Then I called PenFed and they said they still haven't received it. My payment is due on Nov. 3, so if it's not paid off by the 2nd, I'm just going to pay it myself. They said if I end up making the payment, it'll just go back into my savings once the check is processed.
Thanks for looking out!
@Anonymous wrote:Are these two your only loans? For example, do you have a mortgage, student loans, personal loans, auto leases, etc?
If the two loans you mention are your only installment accounts, then my guess is that you'll take a small hit, since your installment utilization was 76% and it is going to 100%. But only a small hit.
If the last time you opened an account was 12 months ago, you will also take a substantial (and additional) hit for your Age of Oldest going from > 12 months to 0 months.
I have a student loan that I've had for 2 1/2 years I believe. It was rehabbed from many moons ago.
The last time I opened an account was this month. It was a PenFed credit card, but I haven't opened any other installment loans since my last car loan. I also opened quite a few credit card accounts in Sept. 2018.
@Anonymous wrote:What is the original loan amount and the current balance for the student loan -- as they appear on your credit report?
Have any of the new cards from Sept appeared on your reports yet? And have you seen your FICO 8 score since they appeared?
Orignal loan amount as it appears on my credit report is $2,625. Current balance is $4,772. I got these loans back in 2012, so the balance more than doubled over the years because of the interest. I'm paying $70.34/month for 88 months. Well, I've been paying $100/month to help with the interest over time. I think I'm going to start paying $150/month instead.
All of my cards have started reporting, even the PenFed ones, except for the AMEX card. I've heard they take a while to start reporting, though.
Do you think the balance of my student loan is hurting me since the actual balance is double the original?
@Anonymous wrote:OK. Since you have very new accounts now on your reports, the score hit from adding zero age accounts has already occurred (inquiries, AoYA going to zero, AAoA impact, etc.).
So the only significant thing left will be the effect that the loans closing and being added will have on your "total installment utilization." (There will be a tiny effect on your AAoA when the new loan appears but we can ignore that in what follows.) Below are the conceptual tools you need to figure out your TIU at any point in time, and in particular to predict how the TIU will change as new loans appear or old loans close.
TIU measures how much of your existing open installment debt you have paid off. Here's how that factor works. You take all your current open installment loans (only the open ones -- ignoring all closed loans). You then add up all the amount you currently owe. Call that CURRENT. Then you add up the amounts that the loans were originally for. Call that ORIGINAL. Then you divide CURRENT by ORIGINAL and you get a percent. (Do you see how that is a lot like the credit card utilization calculation?) When that % is close to 100, or if you don't have any open loans at all, then you get no FICO points from this factor. But when the % is very low (say 1-9%) then you get most or all of the points from this factor.
So in your case you should compute your TIU at two places:
What was your TIU one month ago?
What will your TIU be after the existing car loan closes and the new one appears?
Remember that every time you calculate TIU you include only open loans. That's why when an existing loan closes it almost always changes your TIU.
I suggest you calculate your TIU at both timepoints and then circle back and tell us what those two TIU values are.
PS. There's been some conjecture (based on a few case studies) that loans that have an individual installment utilization of > 100% experience a (possibly small) FICO 8 scoring penalty, and that this IIU penalty goes away when the balance gets below 98.99% (and stays below that mark). You ask about that, but the answer is that there's been very little emprical testing of that -- it's all conjecture. Certainly the highly IIU affects the person's TIU (as indicated above -- the balances are just part of the TIU calculation).
Ok so the original balance on my 2014 Hyundai was $13,485.16 and I’ve paid it down to $10,309.60. My student loan was originally $2,625 and I’ve paid that down to $4,696.63.
Current: $15,006.23 (4,696.63 + 10,309.60)
Original: $16,110.16 (2,625 + 13,485.16)
It comes out to 93% (this would be my TIU last month)
With the new loan (I owe the full balance of $22,941)
Current: $27,637.63 (4,696.63 + 22,941)
Original: $25,566 (2,625 + 22,941)
It comes out to about 108% TIU. Since I owe waaayyy more than the original balance on my student loan, it definitely messes with the percentages here. I owe almost 200% on my student loan.
I'm pretty sure I did that right. Please let me know if I screwed it up somewhere along the way. Thank you so much for your help! It looks like I may take a hit for having the TIU at over 100% until I can pay it down to below that 98.99% range.
The new loan posted to my credit report (EX) this morning. So, I'll be able to see how it affected my score after midnight! My PenFed auto loan is still there, and they usually update the balance on the 29th, so I'm not sure when they'll update it as paid/closed. Good thing is Honda finally paid it off yesterday. I'll let you guys know what happens in case anyone else out there is curious and/or in the same situation. I'm not sure about the other bureau's as I only have my subscription with EX which updates daily and I can pull all 3 every 30 days.
Current score is 691 (EX)
This is with just my PenFed auto loan paid down to about 93%
Also, when the new loan posted, it lowered my AAoA from 2 years, 2 months to just 2 years.