@hairluver wrote:Hi everyone,
I've been searching for days and couldn't find an answer for my particular question.
My car was totaled and insurance paid it all off except for $50.
All I currently have is cc's and this will be my 2nd auto installment loan that will show pif.
However because I don't want to lose the points for credit mix. Should I leave that $50 there since it isn't due till Dec. So that I will have the points, or will it look bad having 2 auto loans even though the balance on one is only $50?
For reference depending on which cb aaoa is 8-10 years. No dergoatories of any kind. My cc utilization is high but I'm paying most of that off with the equity check from insurance.
I have 7 cc's. 5 with balances of which I will only have a balance on 2 when I go car shopping. Scores right now range from 603 to 676 but historically i range about 756 across the board which I'm guessing will be within range as soon as I pay these balances off/down.
Sorry to be long winded. Thanks for any insight.
If it was your only installement loan. Sure. But you have another auto installment loan. So paying it off wont do too much. Your still in the credit mix. Pay down the util on your cards and that will do more than closing 1 of 2 loans. Higher scores lower interest. Try to have only one CC reporting a low util to try and get past 700 for better rates. Good Luck! Sorry about the car. least everyone is ok.
@hairluver wrote:Hi everyone,
I've been searching for days and couldn't find an answer for my particular question.
My car was totaled and insurance paid it all off except for $50.
All I currently have is cc's and this will be my 2nd auto installment loan that will show pif.
However because I don't want to lose the points for credit mix. Should I leave that $50 there since it isn't due till Dec. So that I will have the points, or will it look bad having 2 auto loans even though the balance on one is only $50?
For reference depending on which cb aaoa is 8-10 years. No dergoatories of any kind. My cc utilization is high but I'm paying most of that off with the equity check from insurance.
I have 7 cc's. 5 with balances of which I will only have a balance on 2 when I go car shopping. Scores right now range from 603 to 676 but historically i range about 756 across the board which I'm guessing will be within range as soon as I pay these balances off/down.
Sorry to be long winded. Thanks for any insight.
Paying it off won't affect your credit mix, but it could affect your aggregate installment loan utilization percentage. If your aggregate is presently 9% or less, then you will lose points in FICO by paying it off, so -- from a pure credit score perspective -- you should wait until you have to make the payment. But I'm of the school that it's more important to get the paperwork done and get your clean title.
Credit mix and closing a loan seems to be really misunderstood. You don't lose credit mix when you close a loan even if it is your only installment loan. Closed installment loans that remain on your reports satisfy credit mix as well. The common score loss associated with paying off an installment loan is due to losing points for low installment utilization...not credit mix. So, if your current loan reporting a $50 balance is keeping your aggregate installment utilization below a scoring threshold, you may lose some points by paying it off. It will not be bc of losing credit mix though.
@pizzadude wrote:I believe it is possible that you may lose a few FICO points if your only open installment loan is paid off, open credit mix and closed credit mix may be two seperate scoring factors.
At present I have no open installment loans, my most recent auto loan was paid / closed in July 2020 and since then my top scoring reason from FICO 9 each month has been "Lack of recent installment loan information".
This is really interesting. Do you get the same reason code on FICO 8?
@SoonerSoldier33 wrote:Credit mix and closing a loan seems to be really misunderstood. You don't lose credit mix when you close a loan even if it is your only installment loan. Closed installment loans that remain on your reports satisfy credit mix as well. The common score loss associated with paying off an installment loan is due to losing points for low installment utilization...not credit mix. So, if your current loan reporting a $50 balance is keeping your aggregate installment utilization below a scoring threshold, you may lose some points by paying it off. It will not be bc of losing credit mix though.
Creditors like to see that you’re able to manage various types of debt. If eliminating a particular debt makes your credit report less diverse, it can negatively affect your score. For example, if you pay off an auto loan and are left with only credit cards, your credit mix suffers.
@FireMedic1 wrote:
@SoonerSoldier33 wrote:Credit mix and closing a loan seems to be really misunderstood. You don't lose credit mix when you close a loan even if it is your only installment loan. Closed installment loans that remain on your reports satisfy credit mix as well. The common score loss associated with paying off an installment loan is due to losing points for low installment utilization...not credit mix. So, if your current loan reporting a $50 balance is keeping your aggregate installment utilization below a scoring threshold, you may lose some points by paying it off. It will not be bc of losing credit mix though.
Creditors like to see that you’re able to manage various types of debt. If eliminating a particular debt makes your credit report less diverse, it can negatively affect your score. For example, if you pay off an auto loan and are left with only credit cards, your credit mix suffers.
I'm 100% certain that closed loans count towards credit mix. It's interesting to see that, although they do count, it's entirely possible that they may not count 'as much' as open installment accounts. How we're ever going to break that down is a bit of a conundrum. Lol.
Link to 1 source, and I've seen many others as well:
