How much can I improve my score if I pay down the balance on my installment loan?

[CappyJack]

I was wondering how much my credit score would improve if I paid down the balance on my student loan. I currently owe about $7K on the loan, which was about $11K originally. It is my only installment loan. My credit utilization ratio is 1%. As I understand, it would hurt to pay off the loan altogether due to mix of credit, but if I paid down the student loan, would that give a boost to my score? If so, how much?

Thanks.

[bradk14]

it may be different but I'm not sure there's much of an impact on balances on installment loans simply because of their nature (?). The only evidence I have that speaks to that is I took out 2 installment loans so that I could fully pay off all my revolving credit and my scores all skyrocketed.

[RocketGoBoom]

Installment loans have a minor negative when they are new.

 

However after a few payments and the balance going down naturally, your score is usually back up to where it was before, assuming nothing else significant changes.

 

Based on my personal experience over the years, I doubt you will see much change at all from paying down an installment loan that is $7,000 now of $11,000 originally. I am guessing you are thinking of paying it down to $2,000 or so. 

 

It really depends on too many other factors in your credit profile. How thick is your file, etc. A score that is already strong at 800+ probably won't move at all. A score that is barely 700 might move 5 to 10 points higher.

[CappyJack]

Okay, thanks. That’s kind of what I was expecting. 

[Cactus Flower]

I can speak from experience, that it is not as much about amount, as length of time. An installment loan seems to take about 2-3 years to age out of impact to your credit score.   car loans especially.

[Frontman]

There will be little impact on your credit scores from paying down your school loan balance. But, as these loans tend to have somewhat high interest rates, paying down your loan would save you some money in interest. Personally, if I were you, and I were able to pay down my student loans any significant amount, I would do so.

[cv91915]

The direct benefit from your only installment loan kicks in as the balance is repaid.  The lower the balance in relationship to the original loan amount the better it is for your score.  

 

You can speed up the benefits by making larger payments.  It isn't just about time passing.

[Konrad2012]

On 9/2/2018 at 10:40 AM, Cactus Flower said:

I can speak from experience, that it is not as much about amount, as length of time. An installment loan seems to take about 2-3 years to age out of impact to your credit score.   car loans especially.

Installment loans pretty much have nothing to do with time and are all about percentage of balance remaining vs initial balance.

[Konrad2012]

On 8/31/2018 at 9:32 AM, RocketGoBoom said:

It really depends on too many other factors in your credit profile. How thick is your file, etc. A score that is already strong at 800+ probably won't move at all. A score that is barely 700 might move 5 to 10 points higher.

Actually you're totally wrong.  The quirk with installment loan pay downs is that they have a larger effect on prime files as opposed to mid or subprime files.

 

You should read up on the Alliant hack thread here, or the Installment loan hack thread (maybe threads) at MyFico.  People with Prime files in the 780+ range routinely see increases of 30 points when placing an installment loan with a 9% remaining balance on a file that didn't have any active installment loans.

[RocketGoBoom]

18 hours ago, Konrad2012 said:

People with Prime files in the 780+ range routinely see increases of 30 points when placing an installment loan with a 9% remaining balance on a file that didn't have any active installment loans.

 

That is interesting and I will read up more on that observation.