So it's true that your credit score goes down when you close open accounts, but what about when you pay off an installment loan??
2007-01-25 14:22:26 · 5 answers · asked by CEESONE 4 in Business & Finance ➔ Credit
If you pay off an installment loan, the "credit" no longer has value. Therefore paying it off will help your score very little. Think of it like this, the available "credit" to you is zero and you owe zero. Now do the division. Your ratio is 0/0. Oops, you can't do division by zero! There is no value there. However, the payment history will help your score tremendously. If you have a payment history on that loan that is greater than three years, that is good. That will do more for your score than paying it off.
Now, as that paid off installment loan gets older, your score will begin to drop if you aren't actively maintaining other credit lines. This is where credit cards come in handy. As long as you use them wisely they can be a key element in keeping your FICO score up in the 700's.
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2007-01-25 14:53:56 · answer #1 · answered by nebula7693 4 · 1⤊ 0⤋
It will go down intially, but it'll go back up. I deal with FICO daily. And paying off an installment loan is a plus in terms of making your points go up. It is recomended that when you have open accounts, that you don't go over a 1/3 of yoru available credit, but use some of you credit to show your timliness!!!
2007-01-25 22:38:56 · answer #2 · answered by painter in ohio 2 · 0⤊ 0⤋
No paying off installment debt will improve you FICO score. and it is true that paying off all your open revolving credit lines will hurt but not just closing a couple here or there
2007-01-25 22:35:59 · answer #3 · answered by Anonymous · 1⤊ 0⤋
Reducing your debt increases your score. Higher your balances in relation to your high credit reduces your score. You can raise your score by paying down debt (especially credit card) and asking for a credit line increase (but do not use it).
Applying for credit lowers your score.
Pay off credit cards first (but do not CLOSE them. you want to show you have credit available and use it reponsibly).
2007-01-25 22:37:46 · answer #4 · answered by AlwaysOverPack 5 · 1⤊ 0⤋
whenever you show that you can payoff creditors, that will help your fico scores...
2007-01-25 22:36:15 · answer #5 · answered by Jeff G 2 · 1⤊ 0⤋