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Personal Loans vs Installment Loans

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KrissyDee
New Member

Personal Loans vs Installment Loans

Do FICO count personal loans and student loans the same? I have a personal loan account that was opened up 8mnths ago and I want to close it out without hurting my credit. I have student loan history from 2009. Will getting rid of the personal loan account lower my score or boost it?
11 REPLIES 11
rbentley
Established Contributor

Re: Personal Loans vs Installment Loans

Not sure what you mean by "personal loan".  I use that phrase for a loan from another person, a noncommercial transaction, usually from a close friend or family member.  If by "personal loan" you mean an installment loan" from a commerical entity such as a bank, CU, finance company or the like, then yes those are treated the same for FICO purposes as student and car loans.  You only need one installment loan for FICO scoring purposes.  You say you have a student loan from 2009.  I am unclear if it is still current and unpaid or if you satisfied and closed it in 2009.  If it is still open and appearing on your reports, then yes you can safely close the "personal loan" without worry about its effect on your score.  If however it is your only open loan, you would see some score drop by some amount.

Message 2 of 12
Sloedough
Regular Contributor

Re: Personal Loans vs Installment Loans

Personal Loans vs Installment Loans is like saying Apples vs Apples. They are the same thing. Both are installment loans.

 

Personal and Student loans are both unsecured. All installment loans on your CRs are treated the same, with the exception of a mortgage.



Message 3 of 12
Anonymous
Not applicable

Re: Personal Loans vs Installment Loans

Nice reply by RB.  As he says, the first step is to find out what the OP means by "personal loan."  If he means a private agreement between two people who know each other (Bob lends Fred $800) then that loan will not appear on Fred's credit report and hence will have nothing to do with his score.

 

The phrase is best used, however, to mean a sub-type of installment account.  All of the following are installment accounts:

 

Auto lease

Auto Loan

Mortgage

Student Loan

Financing agreement with Rooms To Go to buy a couch

Personal Loan

 

A personal loan in this sense is just a loan in which a bank or CU gives you cash that you promise to pay back, typically not attached to any particular type of purchase (auto, education, home, etc.).

 

In this sense it does not make sense to contrast Personal Loans vs. Installment Loans, any more than it makes sense to talk about Bears vs. Mammals, Trees vs. Plants, etc -- because all bears are mammals, all trees are plants.

 

Message 4 of 12
Sloedough
Regular Contributor

Re: Personal Loans vs Installment Loans

Well put @CreditGuyInDixie. If my name is Bob and I lend Fred money, I am totally reporting Fred. Smiley Happy



Message 5 of 12
KrissyDee
New Member

Re: Personal Loans vs Installment Loans

I meant to put personal loans vs student loans. I know they are all the same, I am just making sure before I pay this one off and it drop my score.
Message 6 of 12
Sloedough
Regular Contributor

Re: Personal Loans vs Installment Loans


@KrissyDee wrote:
I meant to put personal loans vs student loans. I know they are all the same, I am just making sure before I pay this one off and it drop my score.

They are treated the same. Pay off the one that is going to give you the biggest bang for your buck. Without the details of each loan like balances, APR terms, etc ... we can not give you informed advice.



Message 7 of 12
Anonymous
Not applicable

Re: Personal Loans vs Installment Loans

We don't know yet whether the OP has an open student loan.  The OP mentions student loan "history" from a long time ago, which might mean a closed loan.

 

We can best help the OP (who is asking about scoring impact) if the OP lists all open installment accounts, like this:

 

Loan 1.  Balance = ____   Original Loan Amount = ____

Loan 2.  Balance = ____   Original Loan Amount = ____

Loan 3.  Balance = ____   Original Loan Amount = ____

etc.

Message 8 of 12
kxkxkxx
Regular Contributor

Re: Personal Loans vs Installment Loans

From my own experience...I had a loan from lending club....when I paid it off early....I first got a 7pt jump....then they closed the loan out and I took a 10pt hit....

Current FICO 8 Scores
EQ 759
TU 748
EX 744
Message 9 of 12
Revelate
Moderator Emeritus

Re: Personal Loans vs Installment Loans


@Sloedough wrote:

Personal Loans vs Installment Loans is like saying Apples vs Apples. They are the same thing. Both are installment loans.

 

Personal and Student loans are both unsecured. All installment loans on your CRs are treated the same, with the exception of a mortgage.


Pretty certain under modern FICO models mortgage is the same as any other installment loan (well, any non-CFA installment loan, different penalty there).  All loans to your point, if they're not counted as a CFA, are the same.

 

I know others do disagree based on how all the CMS's including the ones from the bureaus present the information, but it's the same reason codes and I got the nearly the same score shifts both upward in my original testing and then downward when the mortgage reported but unfortunately the files were pretty busy when the mortgage landed so I couldn't isolate it.

 

I should have pretty good data when my mortgage ticks over 80% though in another six months at least.




        
Message 10 of 12
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