Re: Pay off majority of auto loan?..
08-01-2009 09:32 AM
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.
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.