Paying off my car loan
09-16-2007 12:32 PM
I owe about $13,500 on a car loan, and I recently inherited enough cash to just pay off the loan. I'd rather put it into my house, but without going into too many details, paying off the car is pretty necessary. I have been working hard for 2-3 years to improve my scores, and this loan was actually good for my credit since I pay on time. Will it hurt me to pay it off? Not sure I can avoid it, just wondering what to expect.
Re: Paying off my car loan
09-16-2007 01:14 PM
Bottom line (since I recently made this mistake!), DO NOT pay off your auto loan if you think doing so will raise your FICO score, thinking you will be paying off debt. This strategy only works if you pay down your credit card debt. Your auto loan is viewed as an installment loan, and the 'fico scorers' like to see this type of loan on your credit reports. My FICO scores actually dropped after I paid off my auto loan a year early. I would keep this loan for its entire term if I were you.