paying off car loan, boost in credit score?

[giosan32]

Hello everyone, 

            I'm paying off my car loan of 15k, sould I expect any kind of boost in my credit score?   I have had this loan for 2 years now and have mostly been on time but within the last year I have had 3 30 day lates on my car loan.  Wondering if maybe I should pay some more on time payments first before I pay it off, thanks ahead of time for any help.

[Creditwiser]

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@giosan32 wrote:

Hello everyone, 

            I'm paying off my car loan of 15k, sould I expect any kind of boost in my credit score?   I have had this loan for 2 years now and have mostly been on time but within the last year I have had 3 30 day lates on my car loan.  Wondering if maybe I should pay some more on time payments first before I pay it off, thanks ahead of time for any help.

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Unfortunately you can expect a DECREASE in your scores. You definitely want to pay it off on schedule if you can.  Normally when an installment loan is paid people ( myself included ) see a drop in scores.  For me it was between 4 and 10 points between CRA's.  I got another auto loan shortly thereafter and my scores recovered. 

[giosan32]

What if I pay the majority off and refinance to a lower interest rate and much more manageable car payment?

[Creditwiser]

If you did that with a different lender it will show up as a PIF and new account.  In fact it might do that with your current lender.  If thats the case then you might not see a drop, it depends.

[giosan32]

Ok thanks, torn on what to do, I want to get rid of my car payment but buying a house in a few months so don't want to hurt my credit any.

[Creditwiser]

If youre apping for a mortgage that soon I would do nothing and just make sure everything is paid on time going forward.  Anything you do could have an undesireable effect depending on other factors within your CR's.  If your scores are such that you would qualify, leave things alone until you are cleared to close !   Good luck.

[giosan32]

Thanks for the help

[StartingOver10]

Getting a mortgage loan is more than just scores. It is very important to make sure your front and back ratio's are in line. Front ratio is the housing (principal, interest, real estate taxes, homeowners insurance, flood insurance if applicable, HOA if applicable, and PMI if applicable). Back end is the front end plus installment loans and cc payments.

If you have too much debt than the mortgage lender will reduce the amount of the mortgage loan for which you qualify until you fit in the maximum guidelines. e.g. if you car payment is too high, it will reduce the amount of mortgage you are allowed to take out on a purchase.

So the car payment is critical. Having payments 30 days late within 12 months is a deal killer for a mortgage, unless you are getting a very low LTV. 

So you really have two issues: multiple recent 30 day late pays in the last 12 months and a high vehicle loan.

You would be better off paying down the balance substantially and refinacing with another lender so your payment is very low.

You won't be able to refi with your current lender - they don't refi you from a high rate to a low rate with recent lates.