Can paying the full amount of a car loan before 5 years help or hurt your credit?

[fdub]

(This is a spin off of the "average american can't afford a 30k car) Here is my situation... I just payed off my credit card debt about the end of 2012 (That took about 7 years to pay), so that's one debt that I don 't have to worry about paying. On July of 2010, I financed a 2007 Impala LT used(My first car). The sticker price was $11,999, but I negotiated to drop the price to $10,500. I put down $2,500, which made my loan about $8K after everything. My note is $194.75 a month, which was good for my income. I have never missed a payment or payed late (Smart payment plan FTW) and my account is current. I plan on paying the reminding $4k and some change withing the next couple of days to get this dept out my head and the only debt I plan on paying after my car note is my student loans, which will take in effect in November of this year. My question is, Since I've been paying my note for about 2 in the half years, will it make my credit look real good if I decide to pay the remaining balance in full even though, my loan is up to 5 years? I'm hearing that if you pay off a car before the 5 year plan, it won't show that much impact of improvement on your credit score, is that true?

 

[rko2004]

Well one thing you want to do is make sure you wont face penalty for paying early. Some banks are pissy about this because they're missing out on interest.

I'm not sure what it will do for your credit. I would THINK that it would give you a boost.

 

[forzanapoli]

paying off your car will boost your credit rating

 

[digital022]

I wouldn't worry too much about how it affects your credit score.  The money you'll be saving on interest can go towards paying your student loans.

 

[jaypesoz]

The longer the credit history, the better. I remember reading a thread on NT way back in the day about how its just better to put all your money in some type of savings account and just have your monthly payments deducted from there. You'll get interest on that that money instead of just losing it all right away by paying up front or something.

 

[703 hwy]

If you can then just go ahead and pay it off. One less debt to worry about.

 

[sneaker talk]

sad thing is it will probably lower your credit rating.  Truth is, the longer you keep a line of credit alive, and the amount of credit cards/loans you have outstanding, the higher your credit rating.

The only thing keeping me from a (near) perfect credit rating is that I don't have enough credit cards and/or loans.  Credit is such a scam.

 

[buggz05]

I wouldn't worry about the credit score, especially if it saves you money. You have other debt coming up, and I imagine bills, that will keep your credit "active" enough.

 

[mrkane]

sad thing is it will probably lower your credit rating.  Truth is, the longer you keep a line of credit alive, and the amount of credit cards/loans you have outstanding, the higher your credit rating.

The only thing keeping me from a (near) perfect credit rating is that I don't have enough credit cards and/or loans.  Credit is such a scam.

what he said. when i had 2 car loans, mortgage, and credit cards my credit rating was higher. soon as i payed auto loans and credit cards off my credit score took an unknown hit. this dumb *** system is so fruadulant

 

[doublej96]

I paid off my first car the same way you did. When I financed the next car years later, they gave me a good rate but could have dropped it lower if I had a longer history on my previous car. Funny thing it was both were through Nissan finance so you would think I should have gotten the better rate

 

[soleobjective]

I wouldn't worry too much about how it affects your credit score.  The money you'll be saving on interest can go towards paying your student loans.

Listen to this man.

Also, if you're looking to get into the elusive 800+ FICO Score club then you got some time to wait. No idea how old you are but the average age of your credit accounts needs to be about 25 years old to get into the highest ranks. Do yourself a favor and save on the interest costs and just pay off the loan ASAP. Good to hear about financially responsible people on NT 

 

[qtnettles]

Just paid off the remaining 4,500 on my car note. I have not yet seen my updated credit score which was pretty good before but I would be pissed if it dropped because I did the responsible thing and paid off debt early. 

 

[dakingii]

sad thing is it will probably lower your credit rating.  Truth is, the longer you keep a line of credit alive, and the amount of credit cards/loans you have outstanding, the higher your credit rating.

The only thing keeping me from a (near) perfect credit rating is that I don't have enough credit cards and/or loans.  Credit is such a scam.

what he said. when i had 2 car loans, mortgage, and credit cards my credit rating was higher. soon as i payed auto loans and credit cards off my credit score took an unknown hit. this dumb *** system is so fruadulant

that is some bull

 

[solegit08til]

Just paid off the remaining 4,500 on my car note. I have not yet seen my updated credit score which was pretty good before but I would be pissed if it dropped because I did the responsible thing and paid off debt early. 

While it may be responsible, it shows that you aren't giving "goldilocks" profits to your creditors.

Use your credit/loans, pay on time and watch your score rise over the years. Simple as that.

10-35% of your limit on credit cards.

 

[romedadude]

Random. But, OP I noticed all the threads you create are questions

 

[chochocho11]

paying it off early is a good thing.  the majority of the interest is paid the first year or so anyhow. 

 

[stopit5]

Just pay off like 90% of the principal balance to lower your payments, than have the car payments paid automatically through your bank. Any time you feel like paying it completely you'll have the ability and you can let the loan finish its remaining time .

 

[illicit305]

pay it off screw those interest rates b 18% ftl 

 

[unknwn]

Pay the full amount bro.

 

[wr]

Gotta think about it from the creditors end.

They will give a higher rating to someone who pays more interest faithfully, and longer.

That's what makes them a good candidate for loaning money to and the more interest made, the more money in the lenders pocket.

People who pay stuff of early are not good for them because it will decrease the amount of interest they receive.

So it's bad for them, good for you depending if you're more worried about saving money, or having a good credit score.

And in terms of leverage, it takes money ( good cashflow and finance history) to make money ( get approved for better loans and higher dollar amounts).

 

[jaypesoz]

Gotta think about it from the creditors end.

They will give a higher rating to someone who pays more interest faithfully, and longer.

That's what makes them a good candidate for loaning money to and the more interest made, the more money in the lenders pocket.

People who pay stuff of early are not good for them because it will decrease the amount of interest they receive.

So it's bad for them, good for you depending if you're more worried about saving money, or having a good credit score.

And in terms of leverage, it takes money ( good cashflow and finance history) to make money ( get approved for better loans and higher dollar amounts).

THIS. It's literally a game to get a high credit score so you have to play by their rules if you want to "earn" that 800.

 

[ssjjfar]

Creditors don't make the credit scores(FICO).

But it won't hurt or help your credit score directly.
One factor of your credit score is average age of accounts. Accounts will stay on your credit report for 7-10 years after they are closed(7 for bad accounts, up to 10 for good standing accounts I think). So closing it now, the account still stays there, but in 10 years(2023) it will be gone, where as if you pay it off for 2 more years, it will stay as a good account on your report til 2025.

Having less monthly obligations will help in getting approved for for future credit. That doesn't effect your score but when applying for credit cards or home loans, they will look at your income and payments required monthly and if its too high they could deny you. Also they won't care if you pay of an installment loan(car, student etc.) early and don't pay interest, they only care about revolving credit like credit cards whether your actually using it or not.

End of the day paying of the car loan is probably for the best. Unless your loans APR is under 1%.

 

[thenewjs23]

If you have opportunity to pay off your debt do it. Never know what will happen down the line. It wont hurt you to pay it off and it wont help you credit, but in order for your credit to improve you will have to continue to pay interest. So, essentially you pay for a good credit score.

 

[ninjahood]

sad thing is it will probably lower your credit rating.  Truth is, the longer you keep a line of credit alive, and the amount of credit cards/loans you have outstanding, the higher your credit rating.

The only thing keeping me from a (near) perfect credit rating is that I don't have enough credit cards and/or loans.  Credit is such a scam.

what he said. when i had 2 car loans, mortgage, and credit cards my credit rating was higher. soon as i payed auto loans and credit cards off my credit score took an unknown hit. this dumb *** system is so fruadulant

that is some bull

Its designed to keep you in debt.

 

[mojodmonky1]

I wouldn't worry too much about how it affects your credit score.  The money you'll be saving on interest can go towards paying your student loans.

Listen to this man.

Also, if you're looking to get into the elusive 800+ FICO Score club then you got some time to wait. No idea how old you are but the average age of your credit accounts needs to be about 25 years old to get into the highest ranks. Do yourself a favor and save on the interest costs and just pay off the loan ASAP. Good to hear about financially responsible people on NT 

i managed to pull off 2 of 3 (screw you equifax) in the 800+ range by the time I was 31. I am still chasing the mythical tri-800, but I dont think I can do it because I just dont carry much debt nor do I want to. The only real debt I have on my credit is my mortgage and thats not going anywhere fast. Even though I run all my day to day expenses and bills through my CC for the points, I dont carry any balance over so that I dont have to pay interest. I'm assuming that its still reporting that I carry some revolving debt since I only payoff the prior months balance each month. I look at it as if the CC company is floating me a 30 day loan, interest free, every month. Hopefully that is enough to get me into the tri-800 territory because I dont plan on financing anything else any time soon (knock on wood)

If you have opportunity to pay off your debt do it. Never know what will happen down the line. It wont hurt you to pay it off and it wont help you credit, but in order for your credit to improve you will have to continue to pay interest. So, essentially you pay for a good credit score.

just pay it off. dont get too caught up on credit score, especially if you have a good score right now. closing out one installment line early is not going to be a make or break. better to save that interest money and spend it on scrippers and coke