May be too late of a reply but paying down the car loan won't do much for your mortgage underwriting; well very little, the only score of the trifecta which pays attention to installment utilization is Experian. (EX Risk Model v2 aka EX FICO 2 or EX FICO 98), and paying my loans down past some breakpoint (we're still not really sure where the top one is) was only 6 points (dirty file, tax lien, lates, collection). The money shot is down under 10% or 9% with FICO's rounding, and that's generally a lot of cash on any auto or mortgage loan.
From a mortgage perspective hold onto that cash; from a scoring perspective, need to address that CO... kaykay got it exactly right earlier, your score is basically going to be stuck for the next twoish years until the CO expires from the credit report. Either that or pay it and draw the line in the sand at least, open balance on a closed revolver is bad mojo, and having it report every month keeps it fresh... also no bueno.
CO's suck.
@biggywynn wrote:What do you mean "draw a line in the sand"?
Thank you so so so much for the advice. Very clear except the sand part.
So if I pay off the $21K, that will lower my score and for how long? Will it just never get up past 680 with the Charge Off haunting me?
I am suprised that you don't say to let fall off.
I was only posting regarding the FICO impact. FWIW, I buried my head in the sand for 10 years on a Federal Tax Lien, and to be honest 21K was a small fraction of that; if it were me, I'd just let it fall of naturally myself.
By draw the line in the sand, I mean if paid, it stops updating and starts aging. The conventional wisdom is there are some boundaries when it comes to aging on various deliquencies and derogatories, I've seen that behavior in lates and CO's I suspect are similar in that regard. That said, 2 years to fall off, not certain that's much time for a boost when we're talking the scores used in mortgage underwriting. The balance on a closed tradeline still counts though and hits revolving utilization hard which is a big deal on any FICO score.
Have you tried talking to a different lender, one that might play ball? How much loan are we talking about? There may be some out there as jumbo loans are all over the map, doesn't hurt to ask to see their tier sheet and see what their minimum score is for jumbo loans for a number of different jumbo players.