topic Re: Paying off my vehicle in Rebuilding Your Credit

Paying off my vehicle

hdirider1974 — Sun, 11 Apr 2010 23:04:18 GMT

I've just recently had a setback at my job. I currently have the money to pay off my vehicle and eliminate that 600.00 a month payment. I have a high interest rate but it's never been late for 17 months. By paying this off is it going to hurt my score?

Re: Paying off my vehicle

hdirider1974 — Sun, 11 Apr 2010 23:12:03 GMT

Also I have a first premier card with a 450 cl. Although it is one of my older cards I was thinking of closing this card since I have recently gotten a few better cards with some (not much) better cl. By closing this card will I hurt myself, or will it be worth it in the long run to get rid of first premier since it has served it's purpose.

Re: Paying off my vehicle

Anonymous — Sun, 11 Apr 2010 23:17:35 GMT

I'd keep it open indefinitely if it doesn't have an annual fee or is pretty recent. Closed, it will drop off of your CRs in 10 years.

If you can pay off your vehicle, I'd personally do it, but I don't know if it'll drop your score.

Re: Paying off my vehicle

hdirider1974 — Sun, 11 Apr 2010 23:23:42 GMT

Thanks, the af is only 48.00. I'll be paying it off next week. Once it is paid my only payment will be my home, utilities, and insurance. All 6 of my cc have a 0 balance. I have a real high interest rate on my home (10%) I would love to refi and drop that payment, but I currently have 2 tax liens. One is being vacated and the other will show as satisfied. I didn't even know I owed them till they showed up, but I have fought for as long as I can with the state of Alabama. I feel like this is the best I'm going to be able to do. Once those drop off my score should get to at least 650, which I'm hoping will qualify me for a better than 10% rate.

Re: Paying off my vehicle

Anonymous — Sun, 11 Apr 2010 23:30:20 GMT

There's a board for score understanding here - they might be better at evaluating this situation, but it seems that scoring is kinda mysterious. In any case, I'd consider the difference in age between that account and your others (for the CC) against the AF. And, if I were in a situation with an unclear job future and a $600 car payment, I'd be more concerned about paying the interest on it and not necessarily being able to continue making that payment than I would be about the impact on my score of not having that installment loan with continued on-time payments.

Re: Paying off my vehicle

hdirider1974 — Sun, 11 Apr 2010 23:33:21 GMT

Well I am going to pay off the vehicle regardless of the possibility of a score change, I was just wandering what to expect as far as a score impact.

Re: Paying off my vehicle

MarineVietVet — Mon, 12 Apr 2010 00:07:46 GMT

@hdirider1974 wrote:
I've just recently had a setback at my job. I currently have the money to pay off my vehicle and eliminate that 600.00 a month payment. I have a high interest rate but it's never been late for 17 months. By paying this off is it going to hurt my score?

I don't think it will hurt you at all. You will still have a mix of credit which FICO likes. IMO paying off debt should always be a #1 priority. At the same time make sure you have an emergency fund in case that job setback turns into something worse.

From a BK years ago to:
8/09 TU-765 EQ- 783
9/09 EX pulled by lender 802
3/10 EQ- 800

You can do the same thing with hard work

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Re: Paying off my vehicle

RobertEG — Mon, 12 Apr 2010 01:30:10 GMT

The biggest FICO bump will come from getting rid of the taz liens, if at all possible. These are major derogs. You say one is being vacated. Make sure you get a copy of this filed with the CRAs. The other lien is apparently stll unpaid. Tax liens dont drop from date of the lien, they drop 7 years after the lien is paid.

So from a scoring perspective, you might want to address this before making advance payment on your auto loan. How much is the lien?

In the overall category of credit usage, the majority of scoring impact is based on revolving, and not installment loans. Paying off an installment loan early wont result in significant FICO boost. It also wont affect your credit mix much because you still have at least one remaining installment loan.

Closing the low CL card wont hurt much. All you will immediately loose is its low CL. You wont lose its account age. YOu will avoid the annual fee.

Of course, whether to pay or not to pay early is not just a FICO issue. It is also a financial issue. Saving monthly interest and fees never hurts.

Re: Paying off my vehicle

hdirider1974 — Mon, 12 Apr 2010 02:00:16 GMT

Both liens are paid one was for 400.00 and the other was for277.00 the 400.00 lien they say was paid before the lien was filed thefore it will be vacated. The other was will just show as a satisfied lien. These liens were for sales taxes for my business that were overlooked and I didn't know they weren't paid till they showed up on the report. But either way they are both paid.

Re: Paying off my vehicle

Anonymous — Mon, 12 Apr 2010 02:30:21 GMT

@hdirider1974 wrote:
Also I have a first premier card with a 450 cl. Although it is one of my older cards I was thinking of closing this card since I have recently gotten a few better cards with some (not much) better cl. By closing this card will I hurt myself, or will it be worth it in the long run to get rid of first premier since it has served it's purpose.

In regards to your car, i just paid off my car (4yrs of good TL) and received a SCOREWATCH alert today with a 3pt increase. I heard it would decrease when losing a positive TL, but it actually went up (not much, but an increase none the less).

Now for the CC, if it has a long credit history, First Premier may be helping your scores. From what i've read on this site, closing cards can hurt you, but if you are not in the market to make a big purchase anytime soon, the negative impact may not hurt as much.

Re: Paying off my vehicle

Anonymous — Mon, 12 Apr 2010 17:25:20 GMT

Since it is an installment loan, it has very little impact on your FICO for utilization.

Payment history and AAoA would count higher.