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Should I pay off a car loan?

Discussion in 'Credit Talk' started by Bushka, Jul 29, 2007.

  1. Jul 29, 2007 #1
    Bushka

    Bushka Well-Known Member

    I have 6 payments left on an auto loan with about a $2200 payoff balance (60 month loan, never late). I'm trying to improve my FICO score as much as possible in prep for a mortgage application. Is it a good idea to pay off the loan so it shows as paid on my credit report? Does this help the FICO score?

    I have other places where that $2200 could do some good so if it isn't likely to help me, then I'd rather not pay off the car loan. If it can bump me 20 points or so, then it is worth it to me.

    thanks,
    bushka
     
  3. Jul 29, 2007 #2
    apexcrsrv

    apexcrsrv Well-Known Member

    Insofar as it's an installment loan, it shouldn't make a difference in terms of utilization. It may be better then just to ride the loan out for addition payment history (at least in terms of scoring).
     
  4. Jul 30, 2007 #3
    bizwiz41

    bizwiz41 Well-Known Member

    Paying off the auto loan may not help your FICO score significantly, but....many mortgage lenders consider total outstanding debt in their approval process, (and all available balances as "debt").

    If you are applying for a mortgage, it is best to try and pay off all debt that you can. If you have credit cards, or revolving accounts, it may be better to pay them off. This would help your FICO and remove debt from your personal "financial staement".
     
  5. Jul 30, 2007 #4
    eyes2005

    eyes2005 Member

    It wont help that much, to boost up your credit score, but if its gone, you will have it off your mind.
     
  6. Jul 31, 2007 #5
    silvert100

    silvert100 Member

    I wouldn't pay it off this late in the loan. You might save a few dollars. Very few.
     
  7. Aug 3, 2007 #6
    Bushka

    Bushka Well-Known Member

    It wasn't really about saving money. It was about improving my FICO score in preparation for a mortgage. It seems unclear to me. One post says it is better to have the additional payment history, and the other says it is better to eliminate the outstanding debt. Eliminating the debt makes some sense to me.

    Thanks,
    bushka
     
  8. Aug 3, 2007 #7
    init2winit

    init2winit Well-Known Member

    Depending on how soon you plan on applying for the mortgage, the mortgage might not be reporting as paid off yet.
     
  9. Aug 5, 2007 #8
    silvert100

    silvert100 Member

    If you pay the loan off early you'll still have the payment history but it will fall off the reports that much earlier. 10 years from the last reported date. Nobody can tell you how much your score would go up or down by paying off an installment loan early. It seems to me FICO likes to see car loans on your report but doesn't really give you much credit for having one.
     

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