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Question By
MandyPW

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28 People Helped
My auto loan is about to be paid off. How will this affect my credit?
I'm trying to raise my credit to buy a home, currently around 650. I have the income but little credit history due to my age. I got my first two credit cards (secured) at age 25 to build it up and am keeping those under 30 percent.. The ONLY other line of credit I have is an auto loan and it will be paid off soon. Will my score go down when that line of credit is paid off?

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Unfortunately, yes it will.  It isn't fair, but that's the way it works.  Once you pay off a loan, it's like you no longer have that credit available, plus you've lost one type of credit (mix of credit types counts for 10% of your score).  Some other things you can try to increase your credit score - get increased limits on the two secured cards you already have, or better yet, see if the card companies are willing to switch you to an unsecured credit card, which normally gives you higher limits.  That will help your utilization, which is 30% of your score.   If you have any good friends or relatives with good credit, you can ask them to add you to one or more of their credit cards as an "authorized user".  This means that all their credit history (from the date they opened the account) will magically appear on your credit report.  You don't need to get a copy of the card, you don't even need to know the card number (which is really good if someone is worried you may use the card and run up a balance, and that is not a slam against you personally).  Also, you may qualify for a NACA loan (Neighborhood Assistance Corporation of America, a non-profit group), which is a fantastic deal for folks within a certain income range (4% interest, zero down, credit score ).  Visit www.naca.com for more info on that, you may already qualify through them.  Keep up the good work and best of luck!

Reply by
MandyPW

2 Contributions
28 People Helped

Thank you, that was my fear. It's a bad place to be in. I can't get approved for a line of credit on my own but that's really my only way to build it! Frustrating. 

I also work in real estate, so have some good connections with lenders who have great programs. We want 100% financing though and that requires a bit more credit. 

Thanks!

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