Hey carolina,
Super Congrats on the new car loan!!!
You must be thrilled!
Paying your bills on time --- whether they are an
installment loan or revolving debt --- causes your
scores to go up over time. Not paying your bills
on time will cause your scores to go down. Guaranteed.
The thing about revolving credit like lines of credit
and credit cards is that paying on time and keeping
your balances between 0-9% of the limit causes your
scores to pop very quickly. For installment loans,
every 6 months of on-time payments creates a nice
boost. The FICO formula gives more weight to how
you manage revolving debt because it's more risky
than a set monthly payment like an installment loan.
So the better you manage risk, the more you are rewarded.
So, to review: YES, paying your bills on time helps your scores
go up. Paying revolving debt early or on time and using a small
portion of the credit line boosts your scores the most; paying
installment loans on time in 6-month blocks makes your scores
rise but they are less risky than revolving debt, so paying
them faithfully over a longer period of time compensates for the
reduced risk.
And once your installment loan (auto, boat, signature, etc) has
9 payments or less outstanding, the loan is not considered as
part of your debt to income ratio. This is something to keep in
mind if you have plans to buy a house in the future.
Hope this helps you, carolina. Congrats again on the new loan!!!
CanDo
"The right attitude is everything"
p.s. Please pass the word: Beginning today, GMAC has changed
their lending qualifications. You now only need a 621 FICO to be
approved for factory financing from GM. Previously, you needed 700...
