Bigger Credit Score Hit: Refinance or SlowPay?

[Anonymous]

 I've been unemployed for a while and with the benefits about to expire,  I inquired about refinancing my 2 auto loans with my credit union.

The credit union offered to temporarily reduce the payments for the next 6-8 months instead of refinancing, but would report as a slow pay.

Payment reduction in both scenarios is about 50%

I expect to return to work within that time frame, either as part or full time and then resume full payments (reduction scenario) or if able to double up on the payments (refinance scenario).

If it makes a difference, the loans are 2.5 and 3 years old, and have never been late with either. Also, I am primary on the first loan and my wife is primary on the second.

The second loan, payment wise ($320) is not as big a concern, as the first($520) but figured if I was to do this I might as well do both.

The CU manager indicated to me that the reduction scenario would be the lesser score hit of the two as it is temporary, and the auto loans are mature at 2+ years.(not sure why that matters, but she felt that it was important to mention)

My other concern is any repercussions that might happen with either scenario to my credit cards: limits, interest rates or payments. (never late on any of them) with utilization at about 60% overall (yes I know that is high but there have been some emergencies lately)

Credit scores at the moment are in the 680-710 range.

As I know every situation and person is different, generalities are all I am looking for.

Thanks and I hope I covered everything, but if not, just ask.

[Lel]

IMO, choosing the reduced payment option has a very high likelihood of having a severe effect on your credit score, with potential repercussions for your credit cards.  If you opt for the reduced payments, these loans could be marked as "paying less than the scheduled amount" or something to that effect, which can drop your scores.  When your credit cards do their routine reviews and see this notation or the lower score, they could cut your credit limits (driving up your utilization and further dropping your scores) or close your accounts involuntarily.

Refinancing will result in new inquiries, new accounts, and a reduced average age of accounts, but the negative effects would not be as significant as a derogatory comment attached to your existing loans.