Cutting down the life of the Loan

[Anonymous]

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TheFate wrote:

Is it true paying your car off early hurts your score? I would think it would be the other way around...more trust worthy

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It shouldn't hurt your score any more than paying off normally will, but it will affect a couple of things.

If you have your loan for 75mo and pay every month on-time, you will have 75mo of on-time payment history. If you cut it down to 53mo, now paying on-time will only give you 53mo of history. Obviously your credit score would love to have 75 consecutive months of on-time payments.

Next, once it's paid, your mix of credit will no longer involve this installment loan for auto.

The savings on paying off less-than-ideal loan terms will outweigh both of these. My suggestion? Pay off your car. After maybe 6-12mo of on-time payments, refinance. At the end, if you want, take out a new car loan with infinitely better terms.

[TheFate]

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@Anonymous wrote:

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@TheFate wrote:

Is it true paying your car off early hurts your score? I would think it would be the other way around...more trust worthy

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It shouldn't hurt your score any more than paying off normally will, but it will affect a couple of things.

If you have your loan for 75mo and pay every month on-time, you will have 75mo of on-time payment history. If you cut it down to 53mo, now paying on-time will only give you 53mo of history. Obviously your credit score would love to have 75 consecutive months of on-time payments.

Next, once it's paid, your mix of credit will no longer involve this installment loan for auto.

The savings on paying off less-than-ideal loan terms will outweigh both of these. My suggestion? Pay off your car. After maybe 6-12mo of on-time payments, refinance. At the end, if you want, take out a new car loan with infinitely better terms.

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I've heard several different takes on refinancing auto loans. When I first applied for DCU to try and beat the offer Dodge gave me they only offered me 25,000 but at a 1.99% rate due to me only having 2 years of history on credit cards. But it would be nice to bring down my balance to 25k in a year and a half then refinance at a 1.49 or 1.99% just not sure as I've never gone that route before

I figured I'd start a new thread for that since its a whole other topic, check it here:

http://ficoforums.myfico.com/t5/Auto-Loans/Future-Auto-Refinance-Planning-Ahead/td-p/3656801