Auto Loan Question

[Anonymous]

Over the last three years I have paid more than the minimum amount due and now I am able to pay (in whole) the ~$800 remaining left on my auto loan.

So the question is.... Would having a longer payment history (say 3 more months) increase my credit / FICO score more than paying the loan off in full now??  I am lucky to be in a position where I can pay the loan off completely but am wondering if there is a benefit to continuing to pay the $270 per month I have been paying.

Thoughts?....

[Appleman]

Once you pay off the loan you are likely to see a drop in your score. That is the tough reality of paying off a loan with a great payment history. If you are going to apply for credit in the next three months there may be a reason to pay to hold off on the final pay off. Otherwise, I would just go ahead and pay off the loan.

Having a loan history with say a 32 month paid on time versus a 35 month paid on time history (once both show paid in full) would not likely make any difference.

[Anonymous]

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@Anonymous wrote:

Over the last three years I have paid more than the minimum amount due and now I am able to pay (in whole) the ~$800 remaining left on my auto loan.

So the question is.... Would having a longer payment history (say 3 more months) increase my credit / FICO score more than paying the loan off in full now??  I am lucky to be in a position where I can pay the loan off completely but am wondering if there is a benefit to continuing to pay the $270 per month I have been paying.

Thoughts?....

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The best advice depends on whether you have any other installment accounts (loans, auto leases, financing of furniture at Rooms To Go, etc.).  We'd need to know that, as well as the following:

*  Were you planning on taking out any other loans in the next year?  (Car, home, etc.)  If so what loans and when?

*  If you were to pay off your car, do you think you'd switch your car insurance to a much cheaper liability-only policy?

[MakingProgress]

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@Anonymous wrote:

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@Anonymous

*  If you were to pay off your car, do you think you'd switch your car insurance to a much cheaper liability-only policy?

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I'm curious as to why you included this,  does they type of insurance you carry have any effect on your credit?

[Anonymous]

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@MakingProgress wrote:

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@Anonymous wrote:

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@Anonymous

*  If you were to pay off your car, do you think you'd switch your car insurance to a much cheaper liability-only policy?

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I'm curious as to why you included this,  does they type of insurance you carry have any effect on your credit?

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Nope, it's the other way around.  Your credit situation affects your insurance.  If you have an auto loan, then you do not own the car -- the bank does.  And therefore they typically force you to take out a full collision packagae on it.  Thus if our OP would love to have a liability only policy, then that's an argument in favor on paying it off sooner rather than later.  He would get an extra three months paying a lower insurance premium (though of course with less protection).

Another way that your credit affects your insurance is that in most states the auto insurer bases your monthly premium partly on the quality of your credit report.  Insurers do not use FICO scores but they use a model that is similar in many ways.