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

Discussion in 'Community Discussion' started by Frisco, Sep 21, 2013.

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Pay off car loan or let it ride?

  1. Pay it off--won't have impact on the my credit score

    13 vote(s)
    72.2%
  2. Hold off--your credit score will drop

    1 vote(s)
    5.6%
  3. I am puffing the Magic Dragon with my iPhone 5S Gold

    4 vote(s)
    22.2%
  1. Frisco macrumors 68020

    Joined:
    Sep 24, 2002
    Location:
    Utopia
    #1
    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.
     
  2. ucfgrad93 macrumors P6

    ucfgrad93

    Joined:
    Aug 17, 2007
    Location:
    Colorado
  3. appleisking macrumors 6502a

    Joined:
    May 24, 2013
    #3
    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.
     
  4. yg17 macrumors G5

    yg17

    Joined:
    Aug 1, 2004
    Location:
    St. Louis, MO
    #4
    Pay it off. Even if it does affect your score, I don't think it would be by more than a few points.
     
  5. mobilehaathi macrumors G3

    mobilehaathi

    Joined:
    Aug 19, 2008
    Location:
    The Anthropocene
  6. malman89 macrumors 68000

    Joined:
    May 29, 2011
    Location:
    Michigan
    #6
    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.
     
  7. Gutwrench macrumors 65816

    Gutwrench

    Joined:
    Jan 2, 2011
    #7
    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.
     
  8. prostuff1 macrumors 65816

    prostuff1

    Joined:
    Jul 29, 2005
    Location:
    Don't step into the kawoosh...
    #8
    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.
     
  9. Macky-Mac macrumors 68030

    Macky-Mac

    Joined:
    May 18, 2004
    #9
    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
     
  10. sdilley14 macrumors 65816

    Joined:
    Feb 8, 2007
    Location:
    Mesa, AZ
    #10
    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. :)

    ----------

    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.
     
  11. kggf macrumors newbie

    Joined:
    Aug 29, 2008
    #11
    pay it off, one more thing off your list and you don't want anything dark following you.
     
  12. Frisco thread starter macrumors 68020

    Joined:
    Sep 24, 2002
    Location:
    Utopia

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