Should I pay down my car loan?

[sedge]

I have $12k left on a $35k loan, so about 30% credit utilization on installment loans.

 

My CC credit utilization is less than 10%.

 

I'm planning on purchasing a new car in the next 3 months.

 

I could pay off the car payment but I want to keep the installment credit on my report for credit-type diversity and credit history length.

 

Would it help my score to pay it down to 10% or less of the original loan amount?

[breeze]

Utilization on installment loans isn't really important unless it has a bad effect on your debt to income, which is not a consideration for FICO. So as long as you can afford the current installment payments, and the car loan, you should be fine. Use your money for a down payment on the new car.

[MarvBear]

Agreed with breeze. The longer an installment loan stays open and well paid, then the more rewards you will reap for FICO benefits. That demonstrates not only the ability to pay, but the willingness to pay for extended periods of time.

[cv91915]

Don't pay interest on an installment loan just so you have one reporting.

[sedge]

Doesn't the amount of the installment loan factor into my total credit utilization?

 

It shows as a factor in my myFICO assessments.

 

Since I'm planning on trading in the vehicle in the next couple months, I won't have the account for the remaining two years so I see no benefit for maintain it for length-of-payment status.

 

Also, paying it down with cash will increase the equity in the trade-in.

 

And I missing something?

Edited June 13, 2015 by sedge

[Dario]

From what i have read on this board length of time you have your loan and on time payments will be what drives your debt score higher. Since installment loans have fixed amounts the utilization on them should be a non issue. The only way I could see it being an issue is a 20k original high and a current balance of 25k which would lead a lender to think there are payment problems or some sort of fees were added.

 

In your case it would be best to keep making the payments as usual, then use what ever money you would have used as extra payments use towards your down payment if necessary.

 

A side note if you are trading in your old car consider taking it to carmax as they have a history of paying more for used cars than what a dealer will generally offer. Wosre case is you can get a written offer from car max and use it to negotiate with the dealer when you get your new car. Naturally if you want to go through the headache of selling it private party you will get more but you have the extra headache of selling it yourself. One last tip leave your trade out of the negotiations all together work the best possible deal on your new car purchase. Work all aspects from price, rebates, special rates, "trunk money" a care term used for money paid to dealers from the. Once you negotiate the best possible deal in your car then say by the way I have a trade then work that deal until you get the most possible for the trade. Dealers have a habit of shifting dollars around example I will give you an extra $1000 for your car but I can discount this car you're buying any further. When they really can. Anyway good luck with your purchase let us know what you end up getting.

 

 

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Edited June 13, 2015 by Dario

[MarvBear]

If you are going to trade it in a few months just use your money for a down-payment on the new loan.

 

6 of one 1/2 dozen of the other. You will just be replacing an installment loan with another.

[shifter]

Doesn't the amount of the installment loan factor into my total credit utilization?

Hardly at all.

[sedge]

Thank you all. Great advice and taken to heart.