Pay off or let it ride

[Anonymous]

I have a general question relating to credit scores. I currently have a car payment and a scooter payment,  as well as a very low student loan payment. I have several student loans that are currently in deferment while I attend school. I have three credit cards which I keep either paid off every month or very low balances. My scores are EQ 707, TU 707, and EX 765. (There is some erroneous account information still lingering on the TU and EQ databases that is not on the EX database, accounting for the variation in the scores. My creditor has written that the information has been updated but TU and EQ don't seem to be in any hurry to update their files.) I do not have a mortgage. I have a PU BK7 from almost 8 yeras ago that TU is not showing, but EQ and EX are.

Here is my question. Would it be better, as far as increasing my score, to pay of the car and the scooter, or should I continue to make monthly payments on them? In other words, do you get more favorable scores by paying off debt or by showing consistentcy in making on-time monthly payments?

Any advice appreciated.

[JM-AM]

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@Anonymous wrote:

I have a general question relating to credit scores. I currently have a car payment and a scooter payment,  as well as a very low student loan payment. I have several student loans that are currently in deferment while I attend school. I have three credit cards which I keep either paid off every month or very low balances. My scores are EQ 707, TU 707, and EX 765. (There is some erroneous account information still lingering on the TU and EQ databases that is not on the EX database, accounting for the variation in the scores. My creditor has written that the information has been updated but TU and EQ don't seem to be in any hurry to update their files.) I do not have a mortgage. I have a PU BK7 from almost 8 yeras ago that TU is not showing, but EQ and EX are.

Here is my question. Would it be better, as far as increasing my score, to pay of the car and the scooter, or should I continue to make monthly payments on them? In other words, do you get more favorable scores by paying off debt or by showing consistentcy in making on-time monthly payments?

Any advice appreciated.

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Since they are both installment loans it does not have a very big affect on your credit scores. It may help a little if one was paid off since it brings down your total debt. But most installment loans do not see major score changes once the loans are paid off. 

With your revolving accounts (credit cards) try to only let one card report a very small balance (1%-9%) while the other cards report 0 balance. This seems to be what works best for most on these boards for best scoring possibilities.

[LTomBerry]

Letting it ride might get you a slight increase over time, but ask yourself this: If you have the $$ to pay it off now, you will save a buttload in interest payments by paying it off. Is it worth letting it ride and paying the bank lots of money for a very small increse in score? Saving money would be more important to me personally.

[boomhower]

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@LTomBerry wrote:

Letting it ride might get you a slight increase over time, but ask yourself this: If you have the $$ to pay it off now, you will save a buttload in interest payments by paying it off. Is it worth letting it ride and paying the bank lots of money for a very small increse in score? Saving money would be more important to me personally.

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Pretty much what I was thinking.  If you have the money pay it off and save yourself the money.  Any score increase will be minimal.  Unless you scores a very borderline and you are planning on applying for a mortgage where you are going to need every point you can get, pay it off.

[cashnocredit]

Since you have a thin file I'd recommend that you keep 2 cards reporting 0 balances and the third at 4% or less. In my case going from 1% to 5% cost me 15 points but I don't have any baddies. You might see about 5 points though. The 9% "rule" doesn't seem to apply as much to thin files.

It really doesn't matter except at the point you app for new credit.