Best way to pay installment loans?

[Anonymous]

I've got two installment loans. One on a Snap On tool chest, the other is an auto loan.The tool chest loan is about one year old. The initial loan amount was around $6000, and the current payoff is about $800. I can let this loan continue for two more years, or I can pay it off now.

 My auto loan is new. The loan amount is around $6000, and the term is 48 months. I'd like to pay this one off very quickly to avoid finance charges. I could pay it off if I wanted to in eight or ten payments.

So, the question is, what's best for my credit scores? Pay these off fast or let them run on for a while?

[cadavis0609]

Its generally best for FICO to let them run for awhile but sometimes its smarter financially not to incurr the interest and finance charges if you have the ability to pay them off quickly.

[Anonymous]

Thanks for the response. I'm just wondering, in the case of the auto loan, would it be better to let it run for a year and then have it paid in full, or would it benefit my score to let it go longer?

[cadavis0609]

Lenders like to see how you pay your debts over a period of time. Paying it all off immediately lowers the length of time that they have to view and make a decision so I would say, generally speaking, the longer you let a loan run, the better your score in the long run. Look at it like this.

You can have it say "Paid and closed account" in a year, or you can add another year of history to that and have it say the same thing. Its also helping in your mix right now. It is my opinion you should let it run as long as possible unless it is costing you money, which it is, but it is a trade off.

[Anonymous]

I will share my expeirence as far as the mix goes.   My DH has several revolving accts but only one installment acct.   We were getting close to paying it off so I wondered if it would hurt his scores once it showed closed.  It was a 24 month loan.   It has finally updated to show paid in full, never late and closed.  Thankfully, it did not hurt his scores at all and didn't change a bit.  

 I agree though you may need to show a longer payment history rather than just paying it off now if it is not going to cost a fortune to do so.  Good luck to you!  

[Junejer]

Hi Andrew, as the others stated, it's good to see a pay history over time. However, IMO, one year is probably sufficient. These accounts can report for up to 10 years after closing, which will help your score in the long run. It also depends on what your goals are. Are you looking to app for credit soon? If so, then your FICO scores are of concern. If not, then worry about your financial health first.