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Posted in Auto Loans
If I pay off my car loan entirely, will this help my credit rating
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Question By
gmacmo

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Here is some helpful advice too when deciding what to pay off. The credit mix helps as mentioned. Discover has some good 'credit simulator' tools as well as IdentityGuard. They allow you to take off certain $ amounts on each individual account you have (line of credit, credit card, loan, etc) and see how your score would look afterwards.

I found that it was better to pay off some of my student loans vs. a personal loan. Those that are familiar with Sallie Mae know that althought they group your semester/yearly loans into 1 payment, they are still technically 5-7 different individual loans that show up seperately on credit reports. You can call sallie mae and get it re-worked/financed into one loan.

Discover's tools showed that I should take a point hit if I have 5-7 loans (as that is the next tier/bracket). So i could pay off two of my smaller semester loans (instead of 1 personal loan) and get more benefit on my credit report.

Again as someone else mentioned, in the long run (unless you're going for highest score for a purchase like a car/house) it is best to get rid of the highest interest ASAP and save money.

Cheers!

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Response by
quiksilver1804

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Generally I would say it goes down a little but there are other factors that get involved as well, like for me I had 2 car loans paid off one per year and generally my credit seems to be getting better inspite me getting more debt.  But you have to consider the debt to income ratio as well as your emergency funds like nandog stated but if you could afford to I would for sure do it and use that extra money to pay off other debts and just stay debt free.

Response by
agig1317

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Mine went down after I paid it off, but not having to make that monthly payment was freeing. I have no regrets. I'm sure in a few years I'll need to trade this one in, so it's nice to have a break between car liens. 

Response by
swissmiss01

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The average car today is built to last a minumim of 20 years. With proper care they can last much longer. Keep up with the maintence in the owners manuel and you can save alot of money. Have the car detailed regularly and you will find that you won't mind driving it.

Reply by
MLEJUNE0064

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Wow, you have that backwards. The quality of cars goes down regularly unless you are driving very high end cars. And even then. Cars built 20 years ago were built to last, cars built today are not meant to outlast their loans. And it's not accident.

Reply by
hhutson

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Depends on what you mean by "built to last." Cars today tend to get more damage in an accident, true, and are less likely to be able to drive away after a fender-bender than a comparable car from the 60s. But the "flimsy" materials dissipate impact force more safely, so that the car takes a beating instead of your body. The lighter weight means better mileage.  And, lastly, the average car in the US today has 90-100K miles on it.  Used to be, a car with 100K miles was an astonishing work of maintenance - I remember my father speaking in awe-filled tones about a coworker whose car was nearing 80K, and how impressive that was. Now, it's not even AVERAGE. 

I remember hearing about replacing transmissions and rehauling engines on a regular basis among my dad's car-crazy friends in the 70s - now, they have to resort to "dressing up" their cars, or going to the junkyard to find something old to work on, because the cars they actually own and drive don't need work that's any more challenging than an oil change.

Reply by
ribblefizz

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Only in warm weather states. In NY you are lucky if the car doesn't rust before it is paid for. 8-10 years max.

Reply by
mikellie

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Pay off all debts.  That way you pay nothing in interest.  You have more money and the credit card leeches make less.  Formerly called Kneebreakers and Loan Sharks now CEO's and COO's.  Mortgage Bankers are a little farther down the food chain (bottom dwellers).

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Response by
Ferdling

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Another factor to remember: What is the interest on the loan, compared to what you can make elsewhere? Say that the loan is a dealer finance 2.9% - if you are earning 4% on another investment, taking money from there doesn't make sense. If the money comes from a source paying 1%, then it makes sense to pay the loan down, but not off. That will reduce the amount of interest accrued, but leave the "total loan amount" in play as a factor in your score.

Likewise, if you are paying more on another cash source (credit card balance at 13%), paying that down is a no brainer.

Response by
mapfelstadt

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Car Paided OFF

I need to know how i can get all three credit company to report the same. i have paided of me auto loan

and there is one credit company still showing i owe around 1700 on this car. its was paided off in 2012

what shoudl i do?? someone please help.

Thanks

Response by
mannielatino

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I'm about to let you know

Just paid off a 36 month car loan after 14 months.  For me it was a smart move to keep my debt to income in whack, I had a decrease in income.

I'll follow up with what it moves mine up or down and how much.

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Response by
switchman70

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OK, as of this post paying off my car loan has posted to TU around Feb 10.

My CK score dropped from 622 to 612, and is now back up to 617.

My TU FICO dropped from 661 to 646.

Two new accts posted open w/inquiry, so my AAoA dropped from 8 months to 6 months.

I had two additional inquiries during this process and the accounts have yet to post, so this may have skewed my actual drops.

We can call it a 10 point drop on CK and a 15 point drop on my TU FICO.

Hope this helps

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Reply by
switchman70

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ok, the car loan reported closed/zero balance today, my CK score dropped from 622 to 612.  One new credit card posted open as well so may skew the drop a bit, but my AAoA only changed by 2 months, all of my open accounts are 13 months or less now.

I will post how my TU FICO changes by the 10th of next month.

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Reply by
switchman70

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Wasted Lottery Winnings

If only I had know then, what I know Now!!!. I would have never used lottery winnings to pay off old dept that my wife had before she lost her job. I spent well over 10K thinking that purging the old bad dept would boost our credit. What a waste of cash... We now have two kids headed for college within the next two years and we will need good credit. I am finding it increasingly difficult to stop the vicious dept/credit cycle that has befalled us over the past few years.

Response by
SUPASLAVE14

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credit report

I think credit scores is a farce. It's a number that means nothing. You are going into debt, because someone says that you need a number to  get credit . The banks or five main banks want to keep America in debt. Why do people want to carry a debt anyway. Someone tell me that? Who dreamt up the scores, when did these scores come into existence. Do you know how many billions of dollars people pay in interest every year, it's unbelievable.But how much do the banks pay. ZERO. They get money back from the government. The best thing for people in the United States is to be debt free. Then the government can think of ways to tax you more.

PS--Keep your stick on the ice, And  a clean handkerchief.

Response by
Bill4646

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It's better to not pay interest

I paid my car off early and my credit score went down by 17 points.  It was worth it to not pay the thousands of extra dollars in interest.  The same goes for closing the credit card accounts.  The arbitrary increases in interest rates of credit cards is putrid and basically criminal.  At one point, my credit rating was at 798 with about $40,000 in debt.  A year later I have no debt and my credit score is only 715.  In my opinion, credit scoring is just another scam by the financial institutions to keep you as their debt slave.  Now I'm in a position to save money and put much more down on a house a car a boat or anything else that I might want - thusly keeping down the monthly payment and creating the opportunity to repeat the process and outright own all items far sooner than through the traditional way the credit and lending institutions trap you.

Response by
flavanoids

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