Closed Loan Question

[mathman]

Hi there -  in the past three years, I've had three separate auto loans through local CUs.  Each time they offer me a lower rate, I tend to refinance.  The last time I refinanced, the CU representative said that closing (paying off) an auto loan would raise my score more than just paying on one loan on time each month.  Is this true?  I wouldn't think so because I'm having the loans for only a year or so each.  

So, what do you think?  Would one loan paid on time each month for three years help more, less, or the same as three loans paid off in full in the same time?

Thanks for the advice!

[Anonymous]

No. It is better debt wise to pay off the loan early but it doesn't benefit your score. Fico likes to see good long payment history.

[Anonymous]

What your CU representative may have been referring to is that each time you refinance it opens a new account on your report and thus reduces your average age of accounts. Plus it puts a new account (under a year old) ding into the scoring algorithm. So by refinancing 3 times in 3 years you have affected these scoring points. But in the end I believe we need to put more emphasis on what is good for my personal finances not just what is good for my FICO score. If you were able to improve your financial situation by these moves then good for you. And bottom line is on time payments count a lot more than the other factors.