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Posts: 5
Registered: ‎05-12-2007
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Raising my FICO score (student loans and auto loan)

[ Edited ]


I'm new here and I have a question for all of you.......
I need to know the best way to raise my credit score (I know the generic answer is "pay on-time, carry no credit card balances, have a variety of debt types, etc.").

I just took out a $12K loan for a car in March. Do I need to pay on it for awhile before paying it off, or can I pay it off quickly and have the same effect on my FICO score? (I have an inheritance coming, that I could use to pay it off with but I can afford the monthly payments, so it's not necessary to pay it off----especially if it wouldn't do anything to my FICO score).

Also, with my student loans, I had them in forbearance and deferment for a long time, so the interest accumulated. Presently, the outstanding balance is HIGHER than the initial amount taken out. Does that hurt my credit score? If I were to pay them down to under the initial amount taken out, would my score start to go up?  I owe about $25K in student loans and have been in repayment for 3 months.

The only other debt I really have is two credit cards, each with $100 on them (the total credit limit is $1700 between the two of them--so my debt to available limit is really good).  That will obviously be the first thing to pay off with the inheritance (but I'm paying more than the minimum each month to try and whittle it away on my own!).  Smiley Very Happy

I'm looking at buying a house next summer, and want to make sure that I'm going to be okay credit-wise. 


Thanks in advance!
Smiley Happy



Message Edited by TG84404 on 05-12-2007 04:57 PM
Valued Contributor
Posts: 2,374
Registered: ‎03-15-2007
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Re: Raising my FICO score (student loans and auto loan)

How you pay a loan off does little for your FICO as long as payments are made on time.  In your case, your utilization is already below 10%, so paying off your credit cards really would make little difference.
 
I would apply your inheritance toward the highest interest debt that you have.  Won't do much for or against your FICO.  Paying off an installment loan can sometimes cause a ding for your FICO, but the ding is usually short-lived, and the paid loan on your CR is a good thing to have.  FICO isn't everything...if you retire $10,000 in debt at 9% interest, you're saving yourself $75 a month and $900 a year in interest.  You can then apply that money toward your other loans, retiring them more quickly.
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in a credit-scoring postnuclear Stone Age...
Senior Contributor
Posts: 4,831
Registered: ‎04-20-2007
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Re: Raising my FICO score (student loans and auto loan)

You might want to pay the car loan down to about 5K. Something about 35% balances on installment loans and FICO HA's.
Moderator Emeritus
Posts: 6,182
Registered: ‎03-29-2007
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Re: Raising my FICO score (student loans and auto loan)

[ Edited ]
Saving money is more important than your score... so pay on whatever debt has the highest rate.


Message Edited by Tuscani on 05-13-2007 07:51 AM
Regular Contributor
Posts: 252
Registered: ‎03-16-2007
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Re: Raising my FICO score (student loans and auto loan)

What Tuscani said: do what makes financial sense, and that would be paying off the highest-interest debt first.
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