Credit Score Question--to pay or not to pay?

[Frisco]

Hey,

I have an auto loan with one payment left, but am 1.5 years ahead on payments. I have been reading that I shouldn't pay it off for a while--that creditors like to see a mixed balance credit: credit cards, students loans, mortgage, car loans, etc.

Is this true--will it hurt my credit score by paying off my car? I don't need the title--no plans to sell.

 

[ucfgrad93]

I'd say pay it off.

 

[appleisking]

Well what other loans do you have? I think it goes without saying if you're behind on some of your other loans, that you should allocate more money there since they need it more than your auto-loans.

 

[yg17]

Pay it off. Even if it does affect your score, I don't think it would be by more than a few points.

 

[mobilehaathi]

To hell with them! Pay it off.

 

[malman89]

Probably not much. The bonus from having less total debt might outweigh any negative consequences.

My auto loan is just at 1.9%, so I ignore it and just pay a month in advance and instead focus on my student loans of 2-6.5% (primarily for 4-6% ones).

I paid off two via lump sum this year and my credit score went up. Granted, they were smaller loans in the big scheme of things, but I'd rather have less to owe - even if did cost me points on my credit score.

 

[Gutwrench]

One payment? Pay it is my thought.

Beside depending on the terms despite being ahead you still may need to make the monthly payment. Nonetheless I can't imagine what benefit delaying a single payment will bring you.

We have two CCs and we avoid going over 30% of their limit and pay them off each month.

 

[prostuff1]

Carrying any debt that you have the possibility/ability to pay off now is just stupid.

So long as paying it off does not severely dip into an "emergency" fund then pay it off and pay it off now.

 

[Macky-Mac]

any negative will disappear fairly quickly from your credit history, so unless your score is currently marginal and you're planning on applying for a big loan in the very near future, pay it off and be done with it

 

[sdilley14]

Pay it off. Positive pay history and the average age of accounts is going to have more of a positive effect on your credit as opposed to leaving an auto loan out there with a small balance. Having a mix of debt is a good thing for your credit score, but in this case it just doesn't make sense to leave it out there with one payment left.

FYI, I'm a loan underwriter and I analyze credit reports and approve loan applications for a living.

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We have two CCs and we avoid going over 30% of their limit and pay them off each month.

Smart! People have no idea how important it is to utilize your available revolving debt correctly. They either think "credit cards are the devil!" so they don't have a single CC on their report, which isn't doing their score any favors. Or they think as long as they pay the CC on time, they can max it out and it doesn't have an effect on their score, which is VERY much the opposite of the truth. Think of it this way, if you have a $1000 credit card with $0 balance, you have 100% revolving available. The general rule of thumb is for every 1% that you utlizie, that knocks a point off your score. SO, if all you have is one $1k CC and you max it out, you are robbing yourself of about 100 points off your credit score. Same goes if you have NO credit cards open and you open a card and keep the balance at $0...it's a good way to boost your score by about 100 points. Granted, this isn't an exact science and there are a ton of other variables that go into it, but these are good general rules to follow.

 

[kggf]

pay it off, one more thing off your list and you don't want anything dark following you.

 

[Frisco]

Thanks everyone. I get it. Pay it Off