How long to keep a car loan for a good AutoFICO score?

[Anonymous]

I always paid for cars righ away without financing. Then to rasie my credit profile I got a 1st car loan in october 2007, then refinanced in november 2007 for twice the ammount and twice as low a rate:8.9% . Basically it was my own Benz that I decided to cash out on to have an auto score. Now I want to get another car and looking at lease. I read on here before that it's better to have at least 2 years of solid auto loan payment history so that i would be approved with no hiccups next time ( I had to provide pay stubs and they called my work to confirm ). Is that still stands? anyone has any input on this?

Thanks all.

[Watchmann]

I fail to see the sense in getting an auto loan and paying interest just so you can juice the Auto FICO score when you could have paid cash from the beginning.  Why pay a bunch of interest just to get your score up, when you don't have to?  Maybe I'm missing something.

[Anonymous]

You're missing the point here. A big one.

Anyone has an answer on this?

Thank you.

Message Edited by montana on 04-16-2009 07:36 PM

[corysti]

I've actually heard the two year auto loan before but tbh Im not sure how well that will affect you getting a new loan.

[Anonymous]

basically i want to pay current loan at 16 to 17 month, not 24. WHo knows this iron clad? I need you FICO gods!

Message Edited by montana on 04-16-2009 10:55 PM

[Anonymous]

montana -

I understand your question and would suggest, for your circumstance, the following.

1.  Pick the car you would normally pay cash for.

2.  Finance the car for the maximum amount you can borrow.  For this example, let's use $20k on 60 month terms and 7.9% which is approximately a $404.57 payment.

3.  On your first payment due, pay $13,000 toward the loan, leaving approximately $7000 balance.

4.  This leaves you with about 18 payments till paid in full if you pay the $404.57 amount as originally amortized. 

This allows you to obtain the original loan and balance, but then to minimize the interest by reducing the balance in the very beginning.  In addition, by paying the loan below 65% of original balance, you gain FICO points for improved debt ratios.  Also, you will look really good to have paid off the loan early without a refi.

If you want to pay it at around 16-17 months, the either pay a little more than $13,000 on first payment or just pay the loan off on the month you desire it paid.  You are not required to only pay the installment amount, you can pay any extra principle you want.  By paying the majority of extra principle in the very beginning, you will incur much less interest for the period you do pay installments because interest is assessed against the balance owed.

Hope this helps and answers the question you asked

Message Edited by txjohn on 04-17-2009 03:57 AM