Will paying down my auto loan increase my score?

phatcaddy843 · ‎05-09-2008

My goal is to buy a condo in the next 6 months but my FICO is about 640. I had poor payment history in the past, but for the past 2 years I have made no late payments and I paid off all my credit card debt. My two major loans are an 18K student loan and a 10K car loan. The car loan is high interest, so I want to get rid of it. It's down to about 6K now. Will it hurt my credit or help it to pay it all off? Another option is to pay it almost all the way off so I decrease my interest charges but keep the account open to keep reporting good credit?

shyboy · ‎05-09-2008

well it might increase your score but if thats the only installment loan that you have, you might see a decrease in your scores due to not having a mix of credit.

-------------------------------------------------------------------------------------------------Getting back in the credit game after major setbacks

smallfry · ‎05-09-2008

I doubt paying the car loan down to nearly 0 will help your scores at all. Didn't help me.

Anonymous · ‎05-12-2008

Paying down or paying off loan likely won't help score much (or not at all). Installment loans help by showing paid on time each month. Paying them down or off doesn't do much.

Paying loan off may cause a short term drop because your credit mix changes. No way to know for sure. Since you are getting condo soon I wouldn't do something that could hurt your scores.

Your best option IHMO is to pay the loan down low enough that it will be paid off AFTER you close on Condo. That way any score drop will happen AFTER condo loan is secured.

Pay it down early so it reports new lower balance on CR before broker pulls your scores. After you pay down loan ensure to tell your loan broker. Most won't include debts (like car loan) in DTI if they will be paid off in 12 months or less after closing.

Anonymous · ‎05-13-2008

i have a about a $1000 balance on 3 credit cards each, no where near the credit limit on any of the cards, and i financed a new truck in jan. at 8.5% will have it paid off next month (pay off is 5000). currently my score is 701, haven't made a late payment on anything for 5 years...any chances my score will significantly increase after i pay off the truck?