Pay off installment loans to improve credit scores?
Should you pay off an installment loan to improve your credit score? My advice is no, consumers don’t want to pay off accounts, especially accounts with a long credit history before applying for a mortgage. Installment accounts that are years old have a substantial positive impact on consumer credit scores. Even though a consumer may have the substantial potential reduction in monthly payments, the negative impact on their credit score could cost them the opportunity to get a mortgage. The negative factors of getting a new loan could be:
• New inquiry
• New account with no history
• Loss of most of the impact of the old account
That is not what I would recommend. Consumers should have 3 to 5 good bank credit cards. Then pay down all revolving balances to 5-9% and then build up some savings for the costs of the mortgage.
When consumers are planning on applying for a mortgage, it is never a good idea to start closing accounts. If they are having a problem qualifying from an income and expenses perspective that is a different story. I am strictly talking about from a credit score perspective, it is never a good idea to pay off any installment loans prior to applying for a mortgage. A long credit
history is the most important thing to a great credit score.
Go to www.getloanready.com to find other ways to improve your credit score. I’m Dave Sullivan here for the credit guy TV so you with a little bit me we’re going to change the credit industry thank you
Pay off installment loans