Traded in my car, effect my score?

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kasmith9906
 
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Traded in my car, effect my score?

Postby kasmith9906 » Mon Feb 27, 2017 10:17 pm

I traded in my car, and my name is not on the new loan at all. Only my husband's name. Will this effect my credit score? Will it be negative or positive? I'm really trying to build my credit, but I'm just unsure how it all works. Thanks for any help!


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Vattené
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Re: Traded in my car, effect my score?

Postby Vattené » Fri Mar 03, 2017 9:52 pm

Was there still a loan outstanding on the car you traded in and, if so, was your name on that loan?
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kasmith9906
 
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Re: Traded in my car, effect my score?

Postby kasmith9906 » Sun Mar 05, 2017 8:13 pm

Yes there was a balance, that's why I'm wondering. I should have clarified that, sorry.

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Vattené
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Re: Traded in my car, effect my score?

Postby Vattené » Fri Mar 10, 2017 12:01 pm

In that case, I have no direct experience but my guess is the old loan that was in your name will now be paid off and it will more than likely hurt your score. My understanding is FICO really has no "memory" of installment loans, and - while the record will show up in your credit profile for 10 years - the scoring benefit you get from it (like diversifying your credit and having a low outstanding loan to original balance) will go away as soon as it is paid. Of course, it all depends on how all the factors come together in your particular situation, but just generally speaking expect a score to dip when an installment loan gets paid off.
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TXviking
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Re: Traded in my car, effect my score?

Postby TXviking » Tue May 02, 2017 12:55 am

Interesting. I wonder if this is designed this way on purpose to encourage people to keep taking out new installment loans. E.g. when a car is paid off, buy another one, even if you don't need to.

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Re: Traded in my car, effect my score?

Postby takeshi » Tue May 02, 2017 2:04 pm

While creditors may benefit from that, FICO has no interest or benefit from getting people to take out new installments even if the consumer doesn't need it.

The reason for this is that installments are not seen as the same sort of risk as revolvers and can actually indicate reliability in a consumer's willingness & ability payment of debts -- of course, depending on the specifics as one can certainly also overextend with installments in the mix.

kasmith9906 wrote:Will this effect my credit score? Will it be negative or positive?

It won't effect it (it already exists) but it can affect it. ;)

If it was your only installment then you'd lose the benefit of having the active installment. That said, being on the new auto loan means you'd also take a hit to your AAoA and incur a hard pull and have the other impacts of having a new account on your reports. Whether all this is a net positive or a net negative and to what degree depends on much more than closing out the old auto loan and not being on the new auto loan. The shape of your credit plays a significant role as well. However, it's not uncommon for people to see a change in the realm of 20 or so points for closing out their only active installment.

There isn't anything you can do about it at this point and it's not like it would break your credit on its own. If there was significant impact to your credit then you probably have other issues you need to address that make your credit profile more volatile.



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