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Paying off loan scoring question

800scoreplease
New Contributor

Paying off loan scoring question

Happy New Year

I've been reading the threads but couldn't find an answer to this.  I know if you have an installment loan that reaches under 8.9% you gain points but when you pay the balance off in full and you lose those points gained and some if it's your only installment loan. I want to confirm that if you have a mortgage too than you are still considred to have an installment loan thus I won't get dinged for no open installment?

 

I have a student loan original balance $16k I just paid down to $100 to see what points I will gain. I also have a mortgage 1year old so pretty new. My only other debt is a credit card at 70% utilization, practicing AZEO, aggregate utilization 20%. Clean thick file.

 

Thank you



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7 REPLIES 7
OmarGB9
Community Leader
Super Contributor

Re: Paying off loan scoring question

Yes mortgage counts as an installment loan. You should be fine to pay off your student loan in full. Smiley Happy

 

BTW, keep in mind, installment loans also take into consideration overall outstanding balances versus original balances, so you may not actually see any score boost from paying down the student loan because of your new mortgage which is still almost at full original balance.


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Message 2 of 8
FireMedic1
Super Contributor

Re: Paying off loan scoring question

You'll gain some points getting that 1 card at least under 28% too.





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Message 3 of 8
dktide91
Member

Re: Paying off loan scoring question

I also had a question related to this.  I just paid off my auto loan but still have 4 other loans, one being a mortgage, and my score didn't seem to go up at all.  It seems my score is most sensitive to credit utilization even though I've read that it only comprises 30% of the fico score calculation.  I am planning to pay off 2 more of my loans so that will leave me with one unsecured loan and one mortgage.  I am thinking that now my credit score won't go up that much until I've paid down my utilization on my credit cards.  Is that a correct way of thinking?  If so, why am I not getting more credit for paying down large loans?

Message 4 of 8
expatCanuck
Super Contributor

Re: Paying off loan scoring question


@dktide91 wrote:

I also had a question related to this.  I just paid off my auto loan but still have 4 other loans, one being a mortgage, and my score didn't seem to go up at all.  It seems my score is most sensitive to credit utilization even though I've read that it only comprises 30% of the fico score calculation.  I am planning to pay off 2 more of my loans so that will leave me with one unsecured loan and one mortgage.  I am thinking that now my credit score won't go up that much until I've paid down my utilization on my credit cards.  Is that a correct way of thinking?  If so, why am I not getting more credit for paying down large loans?


Your thinking is fundamentally correct.  FICO cares much more about credit card util than installment util.  As regards large loans, they matter -- just not as much.  Pretty sure that the age of those loans matters at least as much -- i.e. - recency hurts.

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Message 5 of 8
SouthJamaica
Mega Contributor

Re: Paying off loan scoring question


@800scoreplease wrote:

Happy New Year

I've been reading the threads but couldn't find an answer to this.  I know if you have an installment loan that reaches under 8.9% you gain points but when you pay the balance off in full and you lose those points gained and some if it's your only installment loan. I want to confirm that if you have a mortgage too than you are still considred to have an installment loan thus I won't get dinged for no open installment?

 

I have a student loan original balance $16k I just paid down to $100 to see what points I will gain. I also have a mortgage 1year old so pretty new. My only other debt is a credit card at 70% utilization, practicing AZEO, aggregate utilization 20%. Clean thick file.

 

Thank you


1. Yes the mortgage counts as an installment loan for credit mix purposes and for purposes of avoiding the no open loan penalty.

 

2. Your paying down the student loan will have no meaning at all in terms of scoring. Installment loan utilization percentage, which affects some of your FICO scores, is an aggregate factor. Your paying down the student loan will have negligible effect on your aggregate installment loan utilization percentage.

 

3. If you want to do something for your scores get that 70% account down to 28% or less. Practicing AZEO while having a sore thumb like that account is pretty pointless.


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Message 6 of 8
SouthJamaica
Mega Contributor

Re: Paying off loan scoring question


@dktide91 wrote:

I also had a question related to this.  I just paid off my auto loan but still have 4 other loans, one being a mortgage, and my score didn't seem to go up at all.  It seems my score is most sensitive to credit utilization even though I've read that it only comprises 30% of the fico score calculation.  I am planning to pay off 2 more of my loans so that will leave me with one unsecured loan and one mortgage.  I am thinking that now my credit score won't go up that much until I've paid down my utilization on my credit cards.  Is that a correct way of thinking?  If so, why am I not getting more credit for paying down large loans?


If you want to help your scores, concentrate on the revolvers.


Total revolving limits 689000 (587000 reporting) FICO 8: EQ 715 TU 712 EX 695

Message 7 of 8
800scoreplease
New Contributor

Re: Paying off loan scoring question

Thanks all. I know I'm not seeing any benefit from azeo now but Inhave a plan in place to be at 48% by April and 28% by August so soon to come.  Thank you again for clearing this up for me. 



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