Will paying off Alliant SSL boost my score?

[toadsworth]

When I set up the Alliant SSL, I had no installment accounts but now I have a car lease reporting. It’s a 3 year lease with 2 years and 3 months remaining, starting balance $8600 current balance $6200 ($239/mo). The Alliant SSL was $500 and is paid down to $44 remaining, next payment due 2021.

Would it raise my scores to pay off the Alliant SSL? Would it lower them?

[Anonymous]

The likely result would be no score change at all.  Installment loan utilization both with the loan open and with it closed is going to be essentially the same, so there would be no scoring changed based on utilization.  The only possibility of gaining a point or two could be because you would then have one fewer account with a balance.  Depending on your number (and percentage) of accounts with balances, eliminating one sometimes can be ever so slightly beneficial to scoring... but usually not.

[Anonymous]

Here is the thread you probably read that helped you decide to add that Alliant loan and pay it down to $44.

http://ficoforums.myfico.com/t5/Understanding-FICO-Scoring/Adding-an-installment-loan-the-Share-Secu...

Read the first two posts, especially the second one that explains the Theory Behind The Technique, or Why It Works.

Then think about these questions:

(1) What is my total installment utilization right now?

(2)  If I paid off the Alliant loan next month....

       (a) What would my TIU be in three months?

       (b) What would happen when my car lease was paid off?

(3)  If I did not pay off the Alliant loan....

       (a) What would my TIU be in three months?

       (b) What would happen when my car lease was paid off?

I am giving you the tools to answer these questions, rather than telling you the answer, because with credit (and other things) it's important to know why things work the way they do.  Only way to do that is to sit down with pen and paper and crunch some numbers.

Let us know what you uncover.

[SouthJamaica]

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@toadsworthwrote:
When I set up the Alliant SSL, I had no installment accounts but now I have a car lease reporting. It’s a 3 year lease with 2 years and 3 months remaining, starting balance $8600 current balance $6200 ($239/mo). The Alliant SSL was $500 and is paid down to $44 remaining, next payment due 2021.

Would it raise my scores to pay off the Alliant SSL? Would it lower them?

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 It would raise your overall installment utilization percentage from 68.6% to72%, so if 70% is a threshold it would cause a small drop in your FICO 8 scores. Why take the chance?

[toadsworth]

So, plugging exact exact values in, with the SSL my current installment util is 71.36% and in 3 months will be 63.49%. Without the SSL that would be 75% and 66.66%. I underestimated the utilization buffer the SSL provides.

I’ll be keeping the SSL, as it’ll still be active and giving me a boost when I’m in the market for my next car lease.

I was about to ask if paying the SSL down more would help much but when I look at three months out it’s only a fractions of a percent util change.

So, it’s apparent that from a utilization standpoint I should keep the SSL but what about the boost from having one less account with a balance?

[Anonymous]

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@toadsworthwrote:
So, plugging exact exact values in, with the SSL my current installment util is 71.36% and in 3 months will be 63.49%. Without the SSL that would be 75% and 66.66%. I underestimated the utilization buffer the SSL provides.

I’ll be keeping the SSL, as it’ll still be active and giving me a boost when I’m in the market for my next car lease.

I was about to ask if paying the SSL down more would help much but when I look at three months out it’s only a fractions of a percent util change.

So, it’s apparent that from a utilization standpoint I should keep the SSL but what about the boost from having one less account with a balance?

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Good work figuring out the answer.

As far your last question, there you are getting into highly speculative territory.  It is true that it would be an additional account with a balance.  On the other hand, there's also been some speculation that one or more models consider the ratio of the number of revolving accounts to number of installment.  When that number is too high (many revolvers to only one open installment) the conjecture is that you might get dinged a few points.  Since it looks like you have a huge number of cards, having two open installments might benefit you.

The point is, when you get into such wildly speculative territory, you might end up with different things canceling each other out.  I'd focus on the things that are known to be scoring factors: CC utilization, installment utilization, having 3+ cards and 5+ accounts, paying bills on time, etc.

[DollyLama]

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@SouthJamaicawrote:

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@toadsworthwrote:
When I set up the Alliant SSL, I had no installment accounts but now I have a car lease reporting. It’s a 3 year lease with 2 years and 3 months remaining, starting balance $8600 current balance $6200 ($239/mo). The Alliant SSL was $500 and is paid down to $44 remaining, next payment due 2021.

Would it raise my scores to pay off the Alliant SSL? Would it lower them?

---

 It would raise your overall installment utilization percentage from 68.6% to72%, so if 70% is a threshold it would cause a small drop in your FICO 8 scores. Why take the chance?

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+1 I paid off an installment loan (last payment)in Feb, CC is 1 card AZEO and UTL went down. Got bumps in UTL then turned around and lost 7 each on EQ and EX (which I only have 4 more payments left). I figure TU was not affected, because the remaining one loan is being double reported.

[NRB525]

OP, the other consideration is that your Alliant SSL is no longer available. If you did not have it, and your car lease expires in two years, then no installment loans, and the common complaint of dozens of points lost is yours.

I would consider starting another SSL of $500 to get that onto an amortization path. By the time the lease and existing SSL are done, the one you started in mid-2018 will be reaching a nice utilization level on its 5 year mission.

[Anonymous]

Looking at the scores the OP has now, I don't know that having a SSL would provide any real-world benefit 2 years from now.  If his scores are in the 720's-730's now, in 2 years time just from natural aging there's no reason to believe that his scores wouldn't be in the mid-upper 700's, assuming no introduction of negative items and if utilization is kept ideal.  That being said, the 25-30 point score boost associated with a SSL really wouldn't matter much on his profile, as with mid-upper 700's scores he'd be able to obtain the best products/rates already.

[toadsworth]

Thanks for the input guys; when my SSL hits one year from being done, I’ll probably get a $500 unsecured loan from Alliant as the paying it down early trick still works with them. Then once it’s on autopilot and correctly reporting at $44 I’ll pay off the original one.

Actually now I have another question for the experts out there. Since we are talking about how this affected my installment utilization; would it provide a bigger boost/buffer if I did a larger loan and paid it down right away next time?