Will paying off the installment loan early affect my score negatively? ( Middle score was 660 as of last month)

Asked by K210, San Antonio, TX Fri Mar 1, 2013

I owe about $600 left on it and pay about $100 per month. So technically, it would be paid off anyway prior to me going in for a pre-qualification.
Also: I'm enrolled in an IDA program and will be done with the program in about 6 months. I have a few debts that I was advised to pay that are reflecting on my credit report. 1 hospital bill, an old credit card charge off, and a number of student loans that are currently deferred. Currently, I'm paying on a car loan and installment loan, and one current credit card. I have the money to pay off everything but the car loan and student loans.

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Fri Mar 1, 2013
In my experience, this will not affect the score in the short term.

Paying down the credit card will help greatly.

Don't mess with the collections until your loan officer sees your file. Paying them can lower your score.

You can pay that AFTER you get your home.

http://dallasloanguy.com/free-credit-book/ http://www.ntreisinnovia.net/cgi-ntr/BR_login?0501134
0 votes
Travis Reed, Agent, San Antonio, TX
Mon Dec 22, 2014
Good Afternoon -

Have less debt will help when looking to pre-qualify for a loan as that lowers you debt to income. When it comes to the hospital bills and charge off''s, I would consult a lender on the best course to proceed.

To get pre-qualified costs nothing and they can help in repairing any credit issues that might keep you from buying a home. To qualify you need to be over 620 which it seems you are. If looking for lenders that would work with you let me know, I have a list of ones that can help you.

Thank you,

Travis Reed
River Valley Real Estate
0 votes
Derrick Sly, Home Buyer, Albuquerque, NM
Wed Dec 10, 2014
Credit scores exist to tell companies if people are good debt-payers. If you pay off your debt shortly after getting it, then a future company can assume that you will do the same for them. It's a general measurement of how reliable you are financially. I don't think there is any harm to paying it off nice and early.
0 votes
Kawain Payne, Agent, Seal Beach, CA
Wed Mar 13, 2013
Hello K210,

The less debt you have, the better.

Unless there is a pre payment penalty, it is a great benefit to pay any loan off as soon as possible!

Keep those bills down, you will be in stronger position to get a mortgage loan with less debt.

Much Success to You,

Kawain Payne, Realtor
0 votes
Don Groff, Agent, Austin, TX
Wed Mar 13, 2013
Paying off a small installment loan will not effect your credit score. Paying off a large or paying down a large balance installment loan can dramatically improve your credit. Paying down a revolving account (credit card) is even better and will get you the most benefit.

As Tom said below, please do not do anything with your collection accounts unless your lender instructs you to do so. Paying an old collection or charge off can make that account dramatically effect your credit in a negative way because you are essentially bringing it back to the forefront of your credit. So leave them alone unless you need to do something to get the loan.

Hope this helps.

Don Groff
REALTOR® & Mortgage Broker
Austin Real Estate Pros | 360 Lending Group
office: 512.669.5599 mobile: 512.633.4157
http://www.AustinListed.com | http://www.360LendingGroup.com
0 votes
Vino Alonzo, , San Antonio, TX
Fri Mar 1, 2013
Hi K210,

Paying off an installment loan will not affect your score negatively in most cases. This action usually increases your score.

I can input your information into our credit simulator and look at different scearios to determine the best way to increase your score.

Feel free to contact me at your convenience.

If you need help with your home loan, please contact me. I have 14 years experience in helping families finance their next home. I am familiar with all loan programs and property scenarios, FHA, VA, USDA, Conventional, Homepath, Short Sales, Bank Owned Foreclosures, etc. I’ll make sure you have all of the information you need to make an informed decision. Customer service and on time closing is top priority. Hope to hear from you soon.

Vino Alonzo, Loan Officer
NMLS# 184279
Castle & Cooke Mortgage
0 votes
Jason Campbe…, Agent, San Antonio, TX
Fri Mar 1, 2013
Paying off debt is never a bad thing. Frees you up a bit to qualify for more on your income to debt ratio, and in most cases will raise your scores. With a 660 score, you are good to go right now.

But, before you pay that bad boy off... talk to the loan officer first. They may need that account for credit debth.. Do pay off the old credit cards and hospital bills for sure. IN MOST CASES, the more debt you pay off, the better it gets.

But to be safe... go here: http://www.DHIMortgage.com/Kasey-Hampton - she is the very best loan officer in Texas. Have her take a look at everything and have her guide you. You will thank me later!

Jason C Campbell
Platinum Top 50 Finalist
Option One Real Estate
web: http://www.SAHomeExpert.com
0 votes
Ron Thomas, Agent, Fresno, CA
Fri Mar 1, 2013
I understand that they look at serveral things:
The total amount of DEBT as a ratio, Debt to Income: So you want to reduce the Debt.
But they also look at the debt to the limit ratio, particularly on Cards; so you want to have a $200 debt on a $1,000 Card: If you paid this off completely, that card would not report on you, at all, and you want that favorable report.
Good luck
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