Does the velocity of payment have any impact on your credit rating. I currently have a $20,000 student loan debt and now can send $2,000 a month to pay it down. Will this help at the end of my debt in terms of overall FICO score?
RE: Velocity of Debt Repayment FICO score aside, paying the loan off will help your overall financial picture by getting you closer to a debt-free status, not to mention the interest you will save by paying early. Regards, JP
RE: Velocity of Debt Repayment I agree with JP. Paying off early will definately save you money & change your financial position. After paying your debt, you could invest that money in stocks, CD's, money markets, etc. & watch that money grow. As far as your FICO scores, they can do nothing but go up provided that you are on time with your payments. Not only will it show that you can pay a large debt off, but depending on how much your salary is, it may improve your debt to income ratio. Good luck!
RE: Velocity of Debt Repayment They may be right, but the key to the puzzle may be the rate on your student loan. I have never had one of these loans, but I hear the rates can be very low. Look at all the angles. You may be able to use some of that money to EARN a higher interest than what you are paying out, for example, if the loan is costing you 5% and you get 8% on a bond, you may be better off investing some of the money. Also, the interest on your student loan may have some tax advantages. Just my opinion. Of course, reducing your debt will improve your FICO score. http://www.creditsense.com
RE: Velocity of Debt Repayment Good advice Herb. The key here is to carefully look at your personal financial profile. For example if you have $5000 in credit card debt at 18% and $20000 at 9%, then obviously you are better suited to payoff the credit card debt first. Regards, JP
