Guys and gals - have a quick question for you. As part of my rebuilding process, about 4 months ago I obtained a number of secured installment loans from my local credit union. These loans, which are secured by the cash in my savings account, are scheduled to be repaid over a period of 24 months. My question is this. If I let the loans run until the 13th month and then decide to pay them off early in a lump sum, will that hurt my score and the beneficial effects that these loans are having on it? I would think that letting them run for a year and a month would give me the payment history and positive effect I am looking for, but I am not 100% sure. I don't want to do anything to jeopardize my rebuilding efforts with respect to these loans, so it is important that I know with certainty the effect of paying them off early. Any thoughts, opinions, advice...???
MY OPINION...you must do at least 12 months... If you have like 3...pay one off @ 15 months 1 @ 18 months 1 @ 24 months ONLY F.I.C.O. WOULD KNOW FOR SURE HOW IT WOULD AFFECT YOU...BUT UNDER NO CIRCUMSTANCES, PAY BEFORE 12 MONTHS...
I have 3 secured installment loans. 1 from a bank where the loan proceeds were placed in a CD with a term of 36 months. The other two are credit union loans secured by my share savings; both of these loans have 12 month terms. I will probably pay off the 36 month loan in 24 months. The other two I will not pay off in less than 12 months. One of my credit unions will not re-finance my vehicle until I pay the loan with them off. That still is not going to make me pay it any sooner than 12 months because I feel it will not benefit me. Sure, I can pay them off now, but I will not achieve the effect I am trying to create by showing an installment payment history.
Not that long ago I was told by my brother's finance guy (car loan) that he should pay at least 25 mos on his loan (not less than 24). He got a 60 month loan. So my brother is paying it down a lot now, then he'll make his normal payments later on (thus he minimizes interest expenses) and still gets 25 mos payments. Why? FICO bump in score. HE said it goes in increments. <12 mos not much help on score at all. He said if people knew how little <12 mos helped they wouldn't even bother prepaying that quickly. 12 mos. some help 18 mos better 24 minimum to get a real score bump 36 mos most bump you're going to get. don't bother going over this if you're just concerned about scores. I do like the suggestion of letting 1 go 12 mos (I'd do 13 to make sure it reports at least 12). Then maybe 18 mos (19 to make sure). Then 24 mos (25) you get the idea. It'd keep your ratios down and give you length of time on the accounts (aging). By the way, I have heard from a reliable source that higher revolving balances KILL scores while installments have much less affect. SO, if you have revolving balances pay those first then work on the installments.
Marie By the way, I have heard from a reliable source that higher revolving balances KILL scores while installments have much less affect. ---------------------------------------------------------------------------------- I guess I need to get an installment loan to pay off credit cards...I have no installment loans now... Might be worth the inquiry...
Marie - do your rules count for student financial loans as well? I believe I have up to 5 years to pay them off.. but I only have 1 month left before I will be able to pay them off in entirety.. but I was debating whether I should just leave a balance of $100 on each to age the accounts for a few years before making the final payment.. the two I have left are: Citibank and Stafford Loan..
Re: Early Loan Payoffs? ATTN: MARIE Don't know. In 2 days I'm meeting w/someone who's a rescoring expert. I'll pass on the advice
Re: Early Loan Payoffs? ATTN: MARIE Marie, please do let us know what you find out. Any and all information would be greatly appreciated. Thank you for keeping us all informed.
From reading this i can see another why that credit scoring rips you off in that it causes folks to owe money longer just so lenders can collect more interest
