01-23-2013 04:24 PM
Just wanted to give a update: Love the Camry! Car loan hit credit file the score did dip from 572 to 570. Paid off balance on credit card with Capitol One and got new score alert of 607! I will be gettting quarterly bonus in February somewhere between 10-13K. Should I pay a large portion on car loan balance then try to refinance at lower rate?
01-24-2013 11:28 AM - edited 01-24-2013 11:29 AM
JoeyD, if you got the car for 16k and put down 2k, then that means you financed 14k correct? I just want to ensure I have the numbers correct. I don't know exactly when you purchased your car (date), nor do I know what your other credit cards look like, but first, if I were getting 10-13k in a bonus, I would make sure my credit card utilization was my first priority, as well as saving a little bit. So, for example, if I received 12k bonus and had recently gotten the car and owed 14k, but had 6k in credit card debt, I would pay the credit card debt off first; save about 3k, and then that remaining 3k, I would pay towards prinicipal on my car loan, and look to refinance as soon as feasibly possible.
Someone else can confirm this, but it was my understanding that auto loans are not a high FICO mix, and that credit card utlization is, and that's why it's important to keep that < 9% of utilization. Now, if you have no credit card debt, then, using my 12k bonus scenario amount from above, I would save 5-6k, and the remainder I would pay towards the principal on the auto loan. Hope all of this makes sense!
Good luck, and it's always nice to get a bonus or unexpected windfall to help with paying of debts!
01-26-2013 03:27 PM
01-26-2013 06:43 PM
If you pay the auto loan off quicker, this will not help your score as much because of the shorter payment history. Ideally, you want to pay your regular monthly payment over time to see a larger increase in scores, lenders like to see a long payment history with pays as agreed status.
While paying longer is preferable from a pure FICO perspective, FICO <<< personal finances in my opinion.
That said, if you make extra payments to an auto loan, it doesn't necessarily shorten the tradeline by that much. When I was with Wells Fargo Dealer Services with my subprime loan, extra payments made actually pushed my next due date out by a corresponding amount. Had I known I was going to stumble into a well paying second job, I would've kept that ugly 19.35% interest rate, made a bunch of extra payments to principle, and then let the tradeline idle for two years, making a $1 payment or whatever each month just to keep it from being flagged as inactive... probably could've gotten 3.5-4 years out of my 5 year original term with not much in the way of interest paid.
IMPORTANT INFORMATION: All FICO® Score products made available on myFICO.com include a FICO® Score 8, along with additional FICO® Score versions. Your lender or insurer may use a different FICO® Score than the versions you receive from myFICO, or another type of credit score altogether. Learn more
FICO, myFICO, Score Watch, The score lenders use, and The Score That Matters are trademarks or registered trademarks of Fair Isaac Corporation. Equifax Credit Report is a trademark of Equifax, Inc. and its affiliated companies. Many factors affect your FICO Score and the interest rates you may receive. Fair Isaac is not a credit repair organization as defined under federal or state law, including the Credit Repair Organizations Act. Fair Isaac does not provide "credit repair" services or advice or assistance regarding "rebuilding" or "improving" your credit record, credit history or credit rating. FTC's website on credit.