Advice on which to pay down first...

[zeusta20]

I just recently got approved for an auto loan and I wanted to pay it down sooner than my 60 month term. I have about 6k dollars in credit card debt. (using about 27% of my UTL).

Should I make extra payments to pay down my car or would it be a better idea to shift those extra payments to pay off my credit cards sooner?

[AndySoCal]

I would additional money to the highest interest rate debt first and pay it off. Then work on the next one.

[pizzadude]

If you are trying to boost your score you should pay down your credit card debt. FICO scoring weighs revolving debt much more heavily than installment debt.

[Anonymous]

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@pizzadude wrote:
If you are trying to boost your score you should pay down your credit card debt. FICO scoring weighs revolving debt much more heavily than installment debt.

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+1

Plus, installment loans factor into credit mix when opened, not closed.

[zeusta20]

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@Anonymous wrote:

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@pizzadude wrote:
If you are trying to boost your score you should pay down your credit card debt. FICO scoring weighs revolving debt much more heavily than installment debt.

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+1

Plus, installment loans factor into credit mix when opened, not closed.

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I have 6 CC total

1 Unsecured Personal Loan

1 Auto Loan.

Does the Personal loan add into the credit mix as well or no???

[Anonymous]

Yes, the personal loan is an installment loan.

[PersonalBanker89]

Put all extra money towards revolving credit debt. I wouldn't put extra money towards my IL even if I had it. Continue to pay the loan amount due each month and build that history. All 60 months of it!

[zeusta20]

Why wouldn't you put extra extra on the auto loan if you had it??? Whats the benefit of keeping it for the full 60 months. I'm pretty sure down the line, i'm going to get another car within the next 5 years. I want to pay it off as soon as possible. Of course i'm going to put that extra towards my credit card debt, but why would you pay extra in the interest if you don't have to??

I noticed your name is personalbanker89. Where are you a personal banker? I'm a personal banker myself too.

[PersonalBanker89]

Having an open IL weights a lot more heavily with the FICO scoring model than a closed loan. Once it's closed, you won't be able to gain as much ground as you could when it's open, and creditors want to see a long history of on time payments. You can sell it whenever you would like, it's called a payoff! Personally, I only have one IL and would rather pay the interest, which will allow me to gain the score I would like to reach. Not having an adequate credit mix will dramatically effect your score, and possibly cap off would you could achieve. I earn the interest paid on my loan back, with a Fidelity Rewards card, which is linked to my brokerage account. Having all financial havens in place and the IL being my only debt, it's more rewarding for me to keep the loan as long as possible so I can climb the ladder and build the history.

[zeusta20]

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@PersonalBanker89 wrote:

Having an open IL weights a lot more heavily with the FICO scoring model than a closed loan. Once it's closed, you won't be able to gain as much ground as you could when it's open, and creditors want to see a long history of on time payments. You can sell it whenever you would like, it's called a payoff! Personally, I only have one IL and would rather pay the interest, which will allow me to gain the score I would like to reach. Not having an adequate credit mix will dramatically effect your score, and possibly cap off would you could achieve. I earn the interest paid on my loan back, with a Fidelity Rewards card, which is linked to my brokerage account. Having all financial havens in place and the IL being my only debt, it's more rewarding for me to keep the loan as long as possible so I can climb the ladder and build the history.

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ahhhhh...gotcha! Makes sense!

Thanks for the info.