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Posted in Auto Loans
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Question By
Junce

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Should I not pay off my car loan to build credit by showing responsible payment history?
I just bought a new car and got financed for 6% by the dealer (quoted for 8% by my employer credit union!). The credit union and the dealer were independently on the same side (against me) reasoning that my profile is too "shallow/thin" to qualify for a lower interest. I have enough money to pay off the car and have some left over for a couple of rainy days, but pulled the auto loan to build credit.

Is it worth it to pay the interest to build credit? Or does merely pulling the auto loan benefit me whether or not I pay it off early or during the full contracted term? I hear that good marks stay on your account for 10 years, is this one of them? I do not plan on making another large purchase anytime soon, so I do not mind the minor hit to my score for closing a credit line.

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Top Contributor
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At that interest rate (which isn't bad but could be a lot better) I'd go ahead and pay it off.  I recently bought a car and the loan is for 6 years, but I want to pay it off within three and also do not mind a hit. You can always add another credit card to your portfolio after the car is paid off.  The key to good credit is a history of on-time payments, especially those that are more than just minimums.   And interest rates on savings right now are sujper low.

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