Credit score impact: two loans with 1/2 original balance or one loan with full original balance?

Does anyone know what’s better from a credit report/score standpoint?

I have two personal, unsecured loans with essentially the same terms with two different lenders. The two loans were each for $25k, current balance on each is $20k. I want to pay off $20k of the loans.

Is it better to pay $10k on each of the loans or $20k on one of the loans and pay that one loan off?

(This is purely a credit report question, there is no convenience benefit to me to only have one loan, I’m not trying to snowball debt or anything like that, and I’m not concerned about having two separate creditors in a bankruptcy or any of the other non-credit score reasons why it may be better to take one action over the other.)

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My guess is there’s no difference.

AFAIK installment loans have very little weight (if any) on Credit Utilization, which is almost entirely about revolving accounts (credit cards). Paying a loan off sooner will have a tiny impact on the Average Age of Accounts, but that won’t happen until 10 years later when it falls off the report, so it’s not likely to have any impact on the score.

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Tough call, having too many accounts with an outstanding balance is bad, but so is high credit utilization. I would probably pay off one loan completely, as the other loan’s credit utilization will fall over time.

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Getting 2 “paid as agreed” notations each month will help more than one notation, but, unless you have a very thin report, the effect will be negligible.

Cashflow isnt a factor in your score specifically, but it is on a credit application - what you have to pay monthly is compared to your monthly income. In those terms, paying off one loan will be much more effective, because it cuts your monthly obligations in half by eliminating a payment entirely. Pay off just a portion of each loan, and your required monthly payments remain unchanged.

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Jesus thats smart.
Good tip.

In case it’s not obvious, it should probably be noted that this only applies to loans with fixed repayment terms, such as personal loans, student loans, mortgages, etc. It does not apply to credit cards or lines of credit whose minimum monthly payment is calculated as a percentage of the remaining balance.

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I would have figured they would reamortize, but confirmed with both lenders that they will not reamortize. Since I didn’t want to speed up timing on the payoff, I just paid the one off and left the other one as is.

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