@Anonymous wrote:
@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.
@SoonerSoldier33 is correct. Closed installment accounts and closed revolving accounts both count toward credit mix. You can satisfy credit mix and not have open accounts.
The point loss you see when paying off your last open installment loan is from a change in amount of debt, not a change in credit mix. It is essentially the same as having all revolving accounts report zero balance, you incur an all zero penalty. If all installment loans are paid off you have 0% installment utilization and thus incur an all zero installment penalty. The loss in points is from Amount of Debt, not Credit Mix. It has been proven multiple times that closed accounts satisfy the Credit Mix portion of FICO scoring, a quick search will reveal several threads dedicated to it.
I am well aware of how installments work. Ive had 2 SSL's with Alliant yrs ago and NFCU until the new SUV. I am going by a well rehearsed poster @pizzadude which stated. "Open credit mix and closed credit mix may be two seperate scoring factors." Just like open and close cards count with FICO. They are counted either way. Thanks. Back to topic.
