Car payments - literally one, 1, uno payment left - how will it affect me?

[pritchardhallhokie]

Just as the title says, I have one more payment that will complete the car loan I currently have outstanding.  It's NEVER EVER reported late EVER... it's always reported to all 3.  My question is, when I pay this off in 2 weeks, will this do anything to my credit?  I like having that steady history there and the fact that it's current.  BUT, will paying this off actually help my credit by showing my debt going down even further?  Surely someone has experience in this area   Please let me know!

Thanks as always!!!

[haulingthescoreup]

If it's your only open installment loan, your score might drop some. If you still have others open, including a mortgage, you probably won't see a change in either direction, although it might go up a little on Equifax.

But installment utilization is a very small portion of FICO scoring. It's revolving util that carries a lot of weight.

Congrats on paying off the car! To me, this is an instance where good financial sense trumps whatever might happen to scores.

[llecs]

Ditto to Hauling.

I paid off my last installment loan (car also) last year. I pulled my FICOs the day before and the day after it reported. EQ gained 7 and TU dropped 5.

[Anonymous]

I gained 3-pts on Scorewatch after paying off my Honda auto loan last month ..  I actually paid it off 9-months early ...

FICO scoring makes no sense sometimes,, When I refi'd my truck last year I actually gained 9-pts after the refi from Penfed reported along with the loan I was refi'ing ...

My score stayed flat after the other loan reported PIF ...

..

[Travis-84]

I think it makes sense that it doesn't go up much.  Lets say you have one payment to make.  You might owe 400.00 with an original line of credit of 18000.   So the loan has a utilitazion of 2%. 

When you make a payment, your utilitazion drops 2%, and one more payment is reflected.  Not exactly a big change.

But on a personal note, its a huge milestone.  Extra money each month, and who wouldn't want to pay one less bill.

[RobertEG]

+1

I see three basic payment strategies.  One, to minimize total outlay of interest each month, two, to gain max FICO score improvement, and three, to manage your own monthly budget under your own terms.

Strategy one generally says to pay the higher interest credti first.  From a longer term financial viewpoint, that is the way to go.

But if immediate FICO score boost is needed, such as having plans to soon apply for new credit, then strategy two generally says that paying down % util on the highest util card might make more sense.  If making sure you can safely deal wth min monthly payments is important, then strategy three says that gettng rid of installment loans with mim payments that exceed those of your credit cards might make more sense.

It all depends on one's own current situation, and current goals and perspectives.

[Anonymous]

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@RobertEG wrote:

+1

I see three basic payment strategies.  One, to minimize total outlay of interest each month, two, to gain max FICO score improvement, and three, to manage your own monthly budget under your own terms.

Strategy one generally says to pay the higher interest credti first.  From a longer term financial viewpoint, that is the way to go.

But if immediate FICO score boost is needed, such as having plans to soon apply for new credit, then strategy two generally says that paying down % util on the highest util card might make more sense.  If making sure you can safely deal wth min monthly payments is important, then strategy three says that gettng rid of installment loans with mim payments that exceed those of your credit cards might make more sense.

It all depends on one's own current situation, and current goals and perspectives.

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+1  

I love this and ABSOLUTELY AGREE!! So often people only focus on what will help their score or on what will reduce the intrest but sometimes, some of us need to focus on what makes the best financial sense.   This is exaclty how I got credit scores in the high 700's/low 800's!  I had to do what I could manage sometimes. 

[homerunstacy]

I just did the same thing last month.  I paid my car loan off four months early in one final lump sum payment.   It had zero impact on my score the following month when the account finally showed up as closed.  So now I have 4 total never missed a payment/ good standing auto loans all closed that go back to 2001.  I also have 1 closed real estate account and one open real estate account in good standing.  Possible that is why it had zero impact.