To pay off or not to pay off

[Anonymous]

Hi, I have a $8000 car loan I opened about 18 months ago that I have paid off all but about $200. I also have a $4000 student loan that I have paid down to about $150. Both of these loans say that my payments are prepaid for year to come. They both report to the credit agencies open and paying as agreed. I don't mind the cost of interest on such low amounts. My question is would it help my credit score if I paid them off or should I leave them until years down the road that final payment comes due?

I also have an annoyance with my scores. I have pulled my tu and my eq scores three times in the last year. In August, they were 724/758; November 716/773; January 713/776. I have had zero issues with my credit in the last year. My Eq score keeps going up and reflects that I'm doing good. My Tu keeps going down. I think it's lower because it's dinging me for my 10k in student loans. Other than that, my last negative hit was in 2007 with some 30's and 1 60 day late. So why might tu consistantly go down while eq consistantly goes up?

[MarineVietVet]

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@Anonymous wrote:

Hi, I have a $8000 car loan I opened about 18 months ago that I have paid off all but about $200. I also have a $4000 student loan that I have paid down to about $150. Both of these loans say that my payments are prepaid for year to come. They both report to the credit agencies open and paying as agreed. I don't mind the cost of interest on such low amounts. My question is would it help my credit score if I paid them off or should I leave them until years down the road that final payment comes due?

I also have an annoyance with my scores. I have pulled my tu and my eq scores three times in the last year. In August, they were 724/758; November 716/773; January 713/776. I have had zero issues with my credit in the last year. My Eq score keeps going up and reflects that I'm doing good. My Tu keeps going down. I think it's lower because it's dinging me for my 10k in student loans. Other than that, my last negative hit was in 2007 with some 30's and 1 60 day late. So why might tu consistantly go down while eq consistantly goes up?

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Hi there, glad you found us!

I almost always recommend that any debt be paid off as fast as possible no matter what the circumstances are but I think there are exceptions and yours might be one of them. Closed accounts in good standing will generally stay on your reports for up to 10 years after closing which continues to help your AAoA (Average Age of Accounts) and credit length history. If you can extend the time these are open accounts then that means a longer time for them to remain on your reports after they finally are paid off and closed.

Does any of that make sense? 

As far as the score differences that can be a hard one to figure out. Very rarely is the information exactly the same across all 3 CRA's and even identical items are looked at  differently by each CRA. For instance my TU report always says "your non-mortgage installment balances are too high" but EQ never has that notation.

From a BK years ago to:
EX - 9/09 pulled by lender 802, EQ - 10/10-813, TU - 10/10-774

"Some people spend an entire lifetime wondering if they've made a difference. The Marines don't have that problem".

[Anonymous]

Yea, it makes some sense; but sadly leaves me wondering if I should pay them off or not. I like that every month they report that I'm open, paying as agreed. They help my AAoA. I can easily pay either/both of them off, but I've withheld doing so thinking they may be doing some good. Any others have an opinion on it?

As far as that notation, that is exactly my case. TU is defining my student loans as non-mortgage installment balances. I intend to pay them down this year, or pay them off. I was thinking of dropping them to below the $300 threshold and leaving them to make happy "open, paying as agreed" annotations to my credit report.

[llecs]

I'd PIF. Even when closed, it will still report as paid as agreed. In other words, per payment history, you are no better off PIF now or later, you still get credit for it. And it still helps your AAoA after you PIF and close it. For 10 more years it will help. BTW, I paid off my last and only loan a couple of years ago. I pulled FICO the day before and the day after they reported to $0. One FICO dropped and the other gained by single digits. Economically, the interest saved was worth gaining or losing a few points.

[IOBA]

In my opinion, pay them off!   It tells future creditors that you take paying off your debt very seriously.    

[larinoriani]

If you have the means, I'd pay them off too. The less outstanding debt you show the better you look to lendersin a manual review. The score difference will be minimal if any.

[IOBA]

A random thought (it drives me to be debt free)...if something happened, a mistake, an illness, major power outage, bank problems, etc....would you want the debt hanging over your head?

One oops and there goes your credit score, sliding down...

One oops and you are stressing about how to pay bills....

oops = unforeseen circumstance