Senior Contributor
Posts: 4,214
Registered: ‎09-12-2008
Re: Pay off majority of auto loan?..

megaton wrote:

Long story short, I am trying to repair damaged credit so eventually I can purchase a home. 

 

I want to get an $8000 auto loan and then pay off $5-6k in the first 3-4 months.  My thinking is that I can accomplish a few things by doing this. 

 

1. I will have more than one type of credit.  As stands now I have only had revolving credit. 

 

2. I will add another open account that has no late payments.  It is my understanding that having at least 3 such accounts is good when trying to get a morgage. 

 

3. Making monthly payments made on time, over time. 

 

All of these should increase my FICO score. 

 

 

As I understand it I would end up with a super low payment after I pay off the chunk of the loan, but still get to keep it as an open account on my credit report.   Is this right or am I not understanding how this works?  Thanks for replies, new guy here.  I want to get my FICO score up into the 700s but have realized that its not something I can do overnight. 

 

 


 

+1 Lyythine.

 

Your strategy will provide additional credit as a reference.  It will avoid the cost of interest against the $5k you pay down.  It will not lower your auto payment unless you refinance the new loan with new starting loan balance.

 

 

 

 

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09/03/2009 TU: 777, EQ: 776 ($8 balance on an account dropped me out of 780's)
03/28/2009 TU: 814, EQ: 810, EX: 781 (02/12/2009)
05/18/2005 TU: 563, EQ: 580, EX: 549