topic Re: Paying off Auto loan vs paying off closed accounts in General Credit Topics

Paying off Auto loan vs paying off closed accounts

Anonymous — Sat, 13 Aug 2011 00:12:17 GMT

Hi there,

Hope someone can help.

I have a current auto loan on which i am current. I have a few old credit card accounts that i am paying off using debt consolidation.

I want to increase my credit score from where it is now. Will paying off the current auto loan have a bigger impact or paying off the closed credit accounts?

Thanks in advance.

Ashwin

Re: Paying off Auto loan vs paying off closed accounts

RobertEG — Sat, 13 Aug 2011 00:58:30 GMT

Your % util on accounts is weighted MUCH higher in FICO scoring for revolving accounts than installment loans. You will get much more bang for the FICO buck by paying down the revolving debt. Status of the account as open or closed makes no difference.

An additional FICO implication is mix of credit. If that account is your only installment account, then closing it might negatively impact your mix of credit.

Aside from the FICO impacts, you pay interest on any debt. In most cases, the interest rate on credit card debt is much higher than that on installment debt. So, considering monthly $$ out of pocket, this would also suggest that applying the funds to the revolving accounts would make more sense.

Re: Paying off Auto loan vs paying off closed accounts

MarineVietVet — Sat, 13 Aug 2011 01:25:08 GMT

@RobertEG wrote:
Your % util on accounts is weighted MUCH higher in FICO scoring for revolving accounts than installment loans. You will get much more bang for the FICO buck by paying down the revolving debt. Status of the account as open or closed makes no difference.
An additional FICO implication is mix of credit. If that account is your only installment account, then closing it might negatively impact your mix of credit.
Aside from the FICO impacts, you pay interest on any debt. In most cases, the interest rate on credit card debt is much higher than that on installment debt. So, considering monthly $$ out of pocket, this would also suggest that applying the funds to the revolving accounts would make more sense.

If it does the damage would be minimal IMO. Closed accounts are still counted into the credit mix although open, active accounts are given more weight.

From a BK years ago to:
EX - 3/11 pulled by lender- 835, EQ - 2/11-816, TU - 2/11-782

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