topic Re: DId I make a HUGE mistake? in Auto Loans

DId I make a HUGE mistake?

EdwardMH — Mon, 02 May 2016 16:39:56 GMT

I paid off my Car payment early this month in the hopes I can use the money to paydown the rest of my debt but my Experian credit score dropped 44 points because of it. from 709 to 665.

Re: DId I make a HUGE mistake?

Anonymous — Mon, 02 May 2016 16:52:23 GMT

Making a payment earlier in the month shouldn't cause a huge dip. You didn't close the account and effect the age of your report. Are you sure there were no other changes to your report?

Re: DId I make a HUGE mistake?

EdwardMH — Mon, 02 May 2016 18:49:09 GMT

I payed the Car Loan TOTALLY off.

Re: DId I make a HUGE mistake?

grillandwinemaster — Mon, 02 May 2016 19:03:36 GMT

The absence of an installment loan caused your score to go down. However, saving money ALWAYS trumps credit score. If your looking to apply for credit and need to maximize your score, search these threads for opening a small installment loan at a credit Union. If your not looking to apply for credit and don't need to maximize, don't worry about it. You can smile all the way to the bank because you're saving money!

Great "credit future" to you!

Re: DId I make a HUGE mistake?

krielly — Mon, 02 May 2016 19:33:34 GMT

IF the "rest of your debt" is revolving debt/credit cards, once you start paying down the debt and your utilization decreases, you could see a big increase in your scores. (Depending upon what your utilization is now, and what it will be reduced to)

Re: DId I make a HUGE mistake?

jim44 — Mon, 02 May 2016 21:14:19 GMT

@grillandwinemaster wrote:
The absence of an installment loan caused your score to go down. However, saving money ALWAYS trumps credit score. If your looking to apply for credit and need to maximize your score, search these threads for opening a small installment loan at a credit Union. If your not looking to apply for credit and don't need to maximize, don't worry about it. You can smile all the way to the bank because you're saving money!
Great "credit future" to you!

OP, I agree completely with grillandwinemaster. Saving interest money always trumps credit score. You should make sure just closing this installment loan has made your score drop that many points. In the end your score will bounce back and you'll have excellent payment history for future car loans if you need one. Well done!

Re: DId I make a HUGE mistake?

EdwardMH — Mon, 02 May 2016 21:45:16 GMT

I have 2 signature loans and 3 credit cards $35,000 at 65% utilization, My plan was to pay off the car and shove that extra $500 on the credit cards and loans to try to pay them all off by Dec. 2017 The cards should be paid off in 4-5 months.

Re: DId I make a HUGE mistake?

Appleman — Mon, 02 May 2016 22:04:13 GMT

For others reading, pay down the revolving debt (credit cards first) as this will likely give you the best score.

Was the car loan at a higher rate than the CC debt?

Re: DId I make a HUGE mistake?

StartingOver10 — Tue, 03 May 2016 00:50:05 GMT

@Appleman wrote:
For others reading, pay down the revolving debt (credit cards first) as this will likely give you the best score.
Was the car loan at a higher rate than the CC debt?

^^^True, however, if you need that $500/month to pay down the revolving debt than what you did is fine. Don't worry about the short term drop in scores while you are paying off the cc's and other loans. Just don't apply for anything else until you get into a position to do so (better scores with lower cc utilization).

Re: DId I make a HUGE mistake?

Anonymous — Tue, 03 May 2016 06:07:57 GMT

I had the same thing happen when I refinanced my car, the origional loan showed paid but the new loan was not yet reporting. I agree with the other posters that you should make the best financial decision and not worry about the scores in the short term. My opinion on paying off car loans is that last year or so is almost all principle (the interest is weighted towards the front of the loan) so there isnt much to be saved by paying them off early once you get to that point. It is probably best to use the extra cash to pay off debt that is accruing interest first. Having said that the best cars are the ones that are paid off. I have enjoyed a couple of years of no payments on my BMW and it has been really nice. Congrats.

Re: DId I make a HUGE mistake?

Anonymous — Tue, 03 May 2016 16:47:50 GMT

Does this apply to personal installment loans because I paid off my first ever installment loan which was a personal loan from Regions bank and my credit score rose 35 points.

I paid on this loan for over a year then paid the last 500 off early.

Re: DId I make a HUGE mistake?

EdwardMH — Tue, 03 May 2016 17:26:18 GMT

My thoughts were to use the Car payment to pay off the other debt faster, I hope to be debt free by December 2017 or close to it. I have a desire to either move to Arizona and buy my first home or continue renting and save enough money to pay cash for a full time RV and travel the US while my health allows.

Re: DId I make a HUGE mistake?

Anonymous — Tue, 03 May 2016 18:24:22 GMT

I think you're on track. Being debt free outweighs a (probably temporary) point loss on your FICO scores, especially since the only purpose of having a FICO score is so lenders can make decisions about you - but you aren't planning to borrow any money anytime soon, anyway.

If you need to improve your "credit mix" short-term you could consider a small personal loan or something along those lines to add another installment loan back into your profile - but I wouldn't do that until a couple of months ahead of mortgage shopping, if that's the way you decide to go, or RV financing time, or whatever. No need to borrow - and pay interest on - money you don't need, particularly when being debt free is the ultimate goal.

Re: DId I make a HUGE mistake?

MyLoFICO — Mon, 16 May 2016 19:23:52 GMT

I don't mind helping out. If you need it in the mix, you can make my truck payments and I will report it as an open auto loan.

Re: DId I make a HUGE mistake?

SouthJamaica — Wed, 18 May 2016 20:58:01 GMT

@EdwardMH wrote:
I have 2 signature loans and 3 credit cards $35,000 at 65% utilization, My plan was to pay off the car and shove that extra $500 on the credit cards and loans to try to pay them all off by Dec. 2017 The cards should be paid off in 4-5 months.

Don't sweat it, Edward, you're doing good.

As you pay down your loans and cards you'll see your scores rise.

If you tell us the number of cards, limits, balances, and the same with the loans, we can give you a recommended

target to maximize your FICO scores.

Re: DId I make a HUGE mistake?

EdwardMH — Tue, 17 May 2016 04:51:50 GMT

I used my checking line of credit to pay off my NFCU MasterCard, Bestbuy card and my Paypal accounts the interest rate was lower.

My current debt is

NFCU Visa 15.40% $10,000 balance $8,000.99,

NFCU signature loan 17.750% $12,000 balance $10,237.18

NFCU Checking Line of Credit 15.90% $15,000 balance $12,040.42

USAA Signature Loan 17.75% $9,000 balance $7,394.28

outside min payments I have an extra $509.70 a month I can put on one bill a month from my payed off car payment. I thought to pay off the CLOC first but my NFCU Visa keeps growin more than the $250 a month I pay so is getting higher not lower.

Re: DId I make a HUGE mistake?

Anonymous — Wed, 18 May 2016 17:24:34 GMT

@EdwardMH wrote:
I used my checking line of credit to pay off my NFCU MasterCard, Bestbuy card and my Paypal accounts the interest rate was lower.

My current debt is
NFCU Visa 15.40% $10,000 balance $8,000.99,
NFCU signature loan 17.750% $12,000 balance $10,237.18
NFCU Checking Line of Credit 15.90% $15,000 balance $12,040.42
USAA Signature Loan 17.75% $9,000 balance $7,394.28
outside min payments I have an extra $509.70 a month I can put on one bill a month from my payed off car payment. I thought to pay off the CLOC first but my NFCU Visa keeps growin more than the $250 a month I pay so is getting higher not lower.

What was the amount you paid to pay off ur car loan? Honestly you should of used that money to paid off credit card instead of car loan unless ur car loan interest is above 18% or unless your credit cards all have the intro rate of 0% interest. Yes u might look at it now u have 510 a month to put into a credit card but if u were to use the money j used to pay off car loan to pay for ur highest interest credit u will save that interest

Re: DId I make a HUGE mistake?

EdwardMH — Fri, 03 Jun 2016 06:15:19 GMT

Less than one extra payment paid it off a month early. I had payed $9000 a year ago when I had no extra debt. Total car loan was $31573.00 at 8.790% interest, I just wanted the extra $507 to go toward my debt sooner.

Re: DId I make a HUGE mistake?

StartingOver10 — Wed, 18 May 2016 20:54:14 GMT

@EdwardMH wrote:
I used my checking line of credit to pay off my NFCU MasterCard, Bestbuy card and my Paypal accounts the interest rate was lower.

My current debt is
NFCU Visa 15.40% $10,000 balance $8,000.99, This one is at 80%
NFCU signature loan 17.750% $12,000 balance $10,237.18 This one is at 85.31%
NFCU Checking Line of Credit 15.90% $15,000 balance $12,040.42 This one is 80.2%
USAA Signature Loan 17.75% $9,000 balance $7,394.28 This one is 82.15%
outside min payments I have an extra $509.70 a month I can put on one bill a month from my payed off car payment. I thought to pay off the CLOC first but my NFCU Visa keeps growin more than the $250 a month I pay so is getting higher not lower.

What is holding down your scores now is the high utility on each of the loans/cc's above. Do what you have to do to get those under 80%, then under 70%, then under 60% etc. I would start with the VISA if that one is growing more than going down.....throw that extra $500 on it each month to get it to reasonable levels. Then tackle the NFCU signaturre loan. See if you can find some money by selling things around the house to make a lump sum payment.

Re: DId I make a HUGE mistake?

RonM21 — Thu, 19 May 2016 22:22:34 GMT

Like everyone else is saying, make the decision on what's best for you financially first.