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theskinny94

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Will my credit increase by paying a loan?
Recently took out a $2,000 loan to pay off my 7 credit cards. Without thinking I paid 5 of my cards off completely (I know to build credit you have to make payments on time and pay a greater amount than the minimum), realizing that I only paid off half on my last to cards.
-My loan is for $2000, interest is 33.95% for 36 months ($89.40 payments).
-Major question: Will my credit score go up if I pay off all my debt and only pay the loan?
-2nd question: As of now if I pay the minimum on my loan I'll be paying $1,219 in interest, totaling my payback amount at $3,219, if I pay $100 a month my payback amount will overall be less right?
-3rd question: I've read that paying a loan off early won't necessarily raise my score, so will it hurt my score? How will it affect me overall once it's paid??

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First, you do NOT have to carry a balance on your cards for positive scoring purposes, on most cards your account will be marked as "paid as agreed" whether or not that you make a payment for the month. You should pay off all of your cards if you are able to. For scoring purposes you only need one card to report a small balance each month, so you are showing revolving activity. Let a balance of 10% or less of the credit line on one card report (usually around statement time) then pay it off by the due date to avoid paying interest.

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If this loan is your only installment loan then it may have a significant impact in a negative way when you close it. If you have a couple of installment loans, then paying it off an closing it shouldn't damage your scores too bad.

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If you are worried about your scores, then keep the loan open or replace it with a better apr loan or add another (cheaper apr) loan then close this one. If you are worried more about saving money, then obviously you want to pay off this 34% loan asap. Are you sure that a 33.98% loan is even legal in your state?

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Let me add that revolving credit lines such as credit cards carry more weight in score building than installment loans, meaning that having credit cards play a bigger role than having an installment loan, but an installment loan is important for building as well. Whatever you do, understand that you do not have to always be carrying a balance on your credit cards, that is not how it works.

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I had a very long explanation typed out for you, but since there was a glitch with submitting it and you cannot copy and paste on this site, I will give you a short version of what I said.

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You do not have to carry balances on your cards for scoring purposes. Most accounts will be marked monthly as "paid as agreed" whether there was a payment or not. Paying off and closing a loan will cause damage to your scores, but the excessive apr that you are paying may be worth a score decrease. Is it even legal in your state for a lender to charge that much interest?

Stop carrying balances, just let one card report a small balance each month so you show revolving activity then pay it off by the due date to avoid interest.

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