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Will paying down auto loan hurt score?


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Here's my dilemma, I want to pay down as much as I can on my current auto loan to trade in this vehicle on a new one. I currently owe $16, 000 and I want to pay $10, 000 on that loan will it hurt my credit score?

I know paying it off will certainly hit my score. 

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2 things I will ask

1 - do you have other debt that could benefit from being paid down? Paying off other debt like credit cards will help your score more. 

2 - have you valued your current car? Used cars are going for a premium nowadays so you may have a good resell and use the 10k for an additional down payment.

 

It probably won't hurt your score but may no improve it as much until it's paid off. At least in my experience. 

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Posted (edited)

All of my credit cards have zero balances.  

I owe more on my car than it's worth. 

Trade in right now is 6 to 8,000 and I owe $16,000. I wanted to pay it down so when I traded in it will be paid off. 

I know if I pay it off in full right now it would hurt my score. 

 

I financed it in 2018. 

Edited by gdtobefree
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Posted (edited)
13 hours ago, gdtobefree said:

I currently owe $16, 000 and I want to pay $10, 000 on that loan will it hurt my credit score?

 

Other things equal, the lower the balance on your current loan relative to the original loan amount the better it is for your score.  

 

13 hours ago, gdtobefree said:

I know paying it off will certainly hit my score. 

 

If you go from one open installment to zero open installments, you'll probably notice a score decrease (although it's NOT going to be catastrophic).  If you have more than one currently (including a mortgage), your score probably won't flinch.

 

When are you planning to do this?  Now is quite possibly the worst time in history to purchase/lease a new/used car. 

 

Unless your current vehicle is about to die, leaving you immobile and without the means to earn a living, dump the $10k on the current balance anyway, save some money on interest, and trade when the car market is a lot more favorable.  

 

 

Edited by cv91915
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18 hours ago, gdtobefree said:

Here's my dilemma, I want to pay down as much as I can on my current auto loan to trade in this vehicle on a new one. I currently owe $16, 000 and I want to pay $10, 000 on that loan will it hurt my credit score?

I know paying it off will certainly hit my score. 

The short answer is NO.  The best way to reap benefits of an auto loan is to keep it well paid for 3 years.   That amount of time shows ability, stability, and willingness.  Your FICO score will be affected appropriately.

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  • 2 weeks later...

Late to the thread, but for score purposes, I am left with the impression that a vehicle loan is sort of a binary thing to the algorithms...either it is there or it isn't.  Balance remaining does not seem to be calculated like utilization on a credit card would be for score purposes. 

 

Oh, and as I recall from the prior loan that was paid circa 2010, it was barely a double-digit hit when it was zero'ed out...and a few more points when it fell off due to age. 

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