to Refi or pay it off?

[grassfeeder]

Decision time....

Like many of you, I'm rebuilding from Chapter 7 (discharge Oct '12).  I received a car loan in January of '13 - interests at 10.99% (what do you expect)

Now, should I refi the car at a lower interest so I can keep it reporting on a monthly  - assuming I get refi'd at 5% or below - or should I pay off the car in Feb and be done with it all together.

The payment per month doesn't hurt me and I could pay it all off if needed to - but I want the credit line reporting to help build.

What would have greater impact on my score?

[gdale6]

If you have the capacity to pay it off I would advise you to do so. Paying interest is not a good idea just to push up scores. Installment loans have very little effect on FICO unless you default on one, most of your score will come from action on your revolvers over time as the bulk of FICO is dedicated to revolving credit lines.

[grassfeeder]

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@gdale6 wrote:

If you have the capacity to pay it off I would advise you to do so. Paying interest is not a good idea just to push up scores. Installment loans have very little effect on FICO unless you default on one, most of your score will come from action on your revolvers over time as the bulk of FICO is dedicated to revolving credit lines.

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good insight....wasn't sure what the percentages were either way.....I figured if I got the interest low enough I'd be paying pennies on the dollar for the LOC reporting.

my other thought was that I really want to establish loan history with either my local CU who I use for my primary banking or NFCU.  Perhaps just showing I pay on my credit report is enough.

[ezdriver]

Installment loans are a favorable type of tradeline for home mortgage financing so, if the interest you are paying on it does not bother you, refinance it and keep it.

[0REDSOX7]

EZ driver is correct.

Installment loans such as cars, help with future installment loans, such as more cars or a mortgage.

Revolving lines help you get, well, more revolving lines.

[grassfeeder]

good deal, thank you!  I'll most likely keep it open and pay the nominal interest since the plan is to buy a house in the near future (3 years time).....