Auto Loans

[amieric88]

I have a question pertaining to my current auto loan. Currently it is financed with my mother as a co-signer. However I am curious, she is wanting to refinance the car in just her name alone vs. just me and her to have a lower payment and interest rate. With having limited credit after trying to rebuild after the collapse of my business in 2007/2008 on into 2009, my credit isn’t that great – would taking that hefty balance off my credit reports more than likely hurt me or help me. I want to start rebuilding but it feels like my credit report is just stagnant at this point with nothing really moving up to better scores. I just I want to know what is a realistic expectation of this closed/paid off account (I’m sure as it will show). I hope I was clear enough in my question to obtain an answer.

[MovingForward_2012]

It will be bad in the long run if it was reporting pays as agreed and you have no other credit reporting. Do you have any other trade lines reporting on your CR? You need to have active accounts reporting pays as agreed to continue to see boosts to your credit score. Having zero active accounts is bad.

[amieric88]

I do have 5 credit cards all paid as agreed (2 NFCU, 2 CAP1, and 1 target) and an auth user on a CareCredit card. And I have almost paid off a small personal loan to get some installment credit other than my auto loan; 1-2 payments left that I'm a month ahead in.

[martinkk]

We always say (paid ahead of schedule) like that is a good thing and I think it is for us. Creditors may even like to see accounts paid sooner than required when they are deerming whether to grant new credit or not, but I don't believe that paying things off ahead of schedule is good for your FICO score. FICO likes to see consistency over time and the longer the better. That's just my two cents. I paid off my student loans as s-l-o-w-l-y as possible on automatic payments to help me rebuild after BK. I think that keeping the car account in your name showing 'pays as agreed' is best for your score, IMHO.

[MovingForward_2012]

Given that you have other accounts open, you won't see as much of a dip but it will hurt a little because it is a auto loan, which is scored separately from your revolvers, etc. the loss of diversification will hurt your score some. Beg your mom to keep you on the car loan.

[amieric88]

Lol! I am okay with it. I need to lower the payment. She has excellent credit (obvious that I am no longer in the 780+ club anymore) and with the high rate that NFCU gave us due to my excellently terrible credit - it would be more financially fitting to have a 3% rate vs the 14% I have. I suppose it's a start to something better, at least through my checking account. :-)

[MovingForward_2012]

It makes sense to refi if you really want the payments lowered. It will lower your score a little but over time your on time payments to your CCs will offset the drop and make it grow again at a slightly slower rate. To get max score increases, please pay in full every month (leaving a small balance on one of your cards will further help your score). I still think down the road with gardening, you'll be able to get a good rate on a auto loan by yourself.

Merry Christmas!

[MovingForward_2012]

By the way, 14% isn't terribly bad, there are people that have to fork over double that.

[dabrian]

I hate co-signing and think it shouldn't be allowed. Is your Mom able to pay for the car if you can't pay?

[amieric88]

Well thank you for your opinion - she can actually. But that's not the answer to my though. Please keep it relevant and polite.