Will pre-paying my installment loan improve my credit score?

[Anonymous]

I am going to be applying for an auto loan next month, and I am trying to get my credit score as high as possible before I do so. I already have an installment auto loan, the loan I am going to be applying for is for a second car. The debt to credit ratio on the existing installment auto loan is 80%.

I am wondering if pre-paying a portion of the existing installment auto loan will improve my FICO score. The amount I am able to prepay would reduce my debt to credit ration for this loan to 68%.

Any opinions on this?

Tom

[haulingthescoreup]

Hi, Tom, welcome to the forums!

You're probably not going to get much score pop for reducing installment util. It's a very small factor in FICO scoring.

The big bank for the buck comes in reducing revolving util. If you carry balances on CC's, or even if you pay them off every month after the balance posts on your statement, you might be losing points, maybe a lot of them.

The strategy is to pay all but one of your CC's off online 3-4 days before each statement is due to post. When that statement shows a $0 balance, that will be reported to the credit bureaus. Let one card report a small balance ($10-20), because you will lose points for all $0 balances. (Strange but true.)

Timing exceptions: HSBC/ Orchard bank cards and USBank cards report on the last business day of the month, reporting the balance as of that moment. American Express reports the balance on your statement, but they don't send in the info until 4 weeks later, making your reported balances effectively a month behind.

If you haven't already, please read Understanding Your FICO ® Score and Credit Scoring 101 (at least the first post.)

These will give you the background knowledge you need to understand what you read here on the forums.