topic Re: 4 payments left. What to do? in Auto Loans

4 payments left. What to do?

joestay — Sun, 21 Nov 2010 18:16:51 GMT

Should I just pay it off or wait and let it keep reporting until the end of the term? How would it affect my credit score?

Re: 4 payments left. What to do?

MarineVietVet — Sun, 21 Nov 2010 18:45:51 GMT

@joestay wrote:
Should I just pay it off or wait and let it keep reporting until the end of the term? How would it affect my credit score?

It's just my personal opinion but paying off/paying down debt should always come before your score.

Being debt free is my #1 goal. I would pay this off now as long as you don't use up all your savings. That is the one precaution I always offer.

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".

Re: 4 payments left. What to do?

joestay — Sun, 21 Nov 2010 18:51:29 GMT

I could have paid in full when I purchased the car but I needed to build a credit history. That's why I took out the loan and needed a mix of credit instead of just credit card. So, it has given me 2+ year of history now. I have plenty in saving to pay it off and still have money for a rainy day. Now, if I pay it off, will it still count towards my "mix of credit"?

Just so people know, I paid ahead a couple of month so that's why I have 4 payment left.

Re: 4 payments left. What to do?

joestay — Sun, 21 Nov 2010 18:58:36 GMT

Oh yeah. One more thing. I heard that if there is 4 payments or less on an auto loan, they don't count that as debt in the debt to income ratio when looking for a house. Is that true?

Re: 4 payments left. What to do?

Anonymous — Sun, 21 Nov 2010 20:14:31 GMT

@joestay wrote:
Oh yeah. One more thing. I heard that if there is 4 payments or less on an auto loan, they don't count that as debt in the debt to income ratio when looking for a house. Is that true?

Let me ask you something: What are you trying to accomplish?

Your posts have given us no real information to guide you. We need to know what your concerns are.

Are you trying to buy a house in the next four months? Trying to make an offer? Or simply will be house hunting?

Do you have credit concerns?

Why are you trying to establish a credit mix?

In all honesty you will face a small score drop as your installment loan ends. To a prospective lender your DTI being freed up will more than cancel that drop.

With less than 4 months left regardless of what you do, as long as you make your payments nothing bad will happen.

Re: 4 payments left. What to do?

MarineVietVet — Sun, 21 Nov 2010 21:05:16 GMT

@joestay wrote:
Oh yeah. One more thing. I heard that if there is 4 payments or less on an auto loan, they don't count that as debt in the debt to income ratio when looking for a house. Is that true?

I have no idea if that is true or not.

Re: 4 payments left. What to do?

joestay — Sun, 21 Nov 2010 21:07:54 GMT

@Anonymous wrote:
@joestay wrote:
Oh yeah. One more thing. I heard that if there is 4 payments or less on an auto loan, they don't count that as debt in the debt to income ratio when looking for a house. Is that true?
Let me ask you something: What are you trying to accomplish?

Your posts have given us no real information to guide you. We need to know what your concerns are.

Are you trying to buy a house in the next four months? Trying to make an offer? Or simply will be house hunting?

Do you have credit concerns?

Why are you trying to establish a credit mix?

In all honesty you will face a small score drop as your installment loan ends. To a prospective lender your DTI being freed up will more than cancel that drop.

With less than 4 months left regardless of what you do, as long as you make your payments nothing bad will happen.

That answered my question. Thanks.

Re: 4 payments left. What to do?

marty56 — Sun, 21 Nov 2010 23:14:35 GMT

Might be a silly question but if you take out a 60 month loan and PIF after it reports for one month, wouldn't that be the same as paying through the entire 60 month period, FICO wise. Does a closed installment loan score differently than an open on FICO wise? I know that a closed TL is fair game by the CSRs to be deleted but I am assuming for this case it is not.

Re: 4 payments left. What to do?

Creditaddict — Mon, 22 Nov 2010 19:03:45 GMT

it's been posted before but not sure the truth behind it, but car loans give you score boosts in 1 year incriments that you keep them. If this was true or even not true, with less than a year left I would pay in full.

Re: 4 payments left. What to do?

haulingthescoreup — Wed, 24 Nov 2010 05:30:33 GMT

@marty56 wrote:
Might be a silly question but if you take out a 60 month loan and PIF after it reports for one month, wouldn't that be the same as paying through the entire 60 month period, FICO wise. Does a closed installment loan score differently than an open on FICO wise? I know that a closed TL is fair game by the CSRs to be deleted but I am assuming for this case it is not.

You (usually) get more points with at least one open installment loan than with all closed loans. Either is better than no loans at all, open or closed, on your reports.

And it varies by CRA. One member pm'd me that when he paid off his only open loan, his EQ went up and his TU went down (I think it was that way), and the TU went down by a huge amount. He was livid. Of course, TU98 is pretty obsolete, and I don't know if that's still the case with TU04.

Re: 4 payments left. What to do?

marty56 — Wed, 24 Nov 2010 13:17:10 GMT

@haulingthescoreup wrote:
You (usually) get more points with at least one open installment loan than with all closed loans. Either is better than no loans at all, open or closed, on your reports.

My autoloan will be PIF in 3 years or less and my major derog will be off in 1.5 years so I will be able to baseline this efefct on my score.

LOL I can tell DW that a need a new autoloan to raise my score.

Re: 4 payments left. What to do?

llecs — Wed, 24 Nov 2010 14:04:42 GMT

I haven't studies this entire thread, and assuming this is your only installment TL open w/ a balance, then I still vote to PIF ASAP. Let's say your FICO scores jump 10 points each CRA if you PIF, then doing that now would result in an increase sooner w/ interest saved. Let's say they drop 10 points each, and let's say you would have spent $50 in interest over the 4 months, would it be worth it to save your score for $50 just for 4 months? The change is going to happen either way.

@haulingthescoreup wrote:

You (usually) get more points with at least one open installment loan than with all closed loans. Either is better than no loans at all, open or closed, on your reports.

And it varies by CRA. One member pm'd me that when he paid off his only open loan, his EQ went up and his TU went down (I think it was that way), and the TU went down by a huge amount. He was livid. Of course, TU98 is pretty obsolete, and I don't know if that's still the case with TU04.

I've posted a few times in here of my experience of paying off my last installment (car). My EQ also went up and TU down, but both by single digits (5 & 7 respectively). In other words, it hurt EQ while reporting and it helped TU. I was predicting a drop on both and was surprised w/ the gain on EQ. BTW, it was measured by pulling the day before and the day after it reported.

Re: 4 payments left. What to do?

joestay — Wed, 24 Nov 2010 18:18:55 GMT

@llecs wrote:
I haven't studies this entire thread, and assuming this is your only installment TL open w/ a balance, then I still vote to PIF ASAP. Let's say your FICO scores jump 10 points each CRA if you PIF, then doing that now would result in an increase sooner w/ interest saved. Let's say they drop 10 points each, and let's say you would have spent $50 in interest over the 4 months, would it be worth it to save your score for $50 just for 4 months? The change is going to happen either way.

See, when I am going to go look for a home, that point difference can mean if I get a better rate or not. So, for $50 for a better rate that can save me thousands in the long run, I think that will be worth it.

Re: 4 payments left. What to do?

joestay — Thu, 30 Dec 2010 19:35:35 GMT

Now I have another question. What would happen if the last payment of my only installment loan was paid on the last month of the loan while I was in the process of buying a house? Could that kill the deal?

Re: 4 payments left. What to do?

marty56 — Fri, 31 Dec 2010 13:12:11 GMT

PIF. Lowers your DTI and looks great on a MR. IMHO the score hit, if any won't hurt you, unless your FICO score is very close to the lower limit on interest rate tiers or approval. If your score has wiggle room, no worries.

Re: 4 payments left. What to do?

Anonymous — Sat, 08 Jan 2011 06:53:36 GMT

I believe the 60 payments look better it shows u can make on time monthly installment payments and will make u more credit worthy.

Re: 4 payments left. What to do?

Anonymous — Sat, 08 Jan 2011 18:40:05 GMT

@marty56 wrote:
PIF. Lowers your DTI and looks great on a MR.

Absolutely!

Re: 4 payments left. What to do?

joestay — Sat, 08 Jan 2011 22:01:04 GMT

@Anonymous wrote:
I believe the 60 payments look better it shows u can make on time monthly installment payments and will make u more credit worthy.

It's not a 5 year loan.