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Should I pay-off car loan now or wait to raise score?


Stainless_Steel
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--------------------------------------------------------------------------------I posted this in the mortgage section, but haven't gotten an answer for this yet. I cut and pasted the last part of my post because I'm too lazy to type another post(lol). Can someone please help me with this?

What should I do about this car loan? I got it in January of this year. It was for $6,500. It is for 2 years. I can pay it off now, but was told by the salesman when I got it to wait one year to pay it off because that's the only way it would make my credit score go up. That would mean I would have to wait till January of 2007 to pay it off and to get a mortgage because that $300 a month payment would effect the amount I could get approved for too greatly.

Basically should I pay it off now or wait till January? Or does it even matter? What if I paid it down to like a $500 balance by sending in a lot of payments?

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I kinda replied to this in your other post, but, once again, I'd suggest you make credit decesions based on what's best for your cash flow rather than worrying about FICO. For example, if your car loan charges you less interest than you can make in a savings account (not likely), you're money ahead to keep the loan going. On the other hand, if you keep the loan going, and "power save" your spare cash, you'll have more money to put down on a house...always a good thing. That way, if the house appreciates, YOU get the profit, not the mortgage company...

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Well, again, I'm not an expert on the FICO scoring algorithm, but, I'm sure that "debt to income" doesn't mean what we think it does. Just like auto insurance companies don't want to insure people that have accidents (which is NOT the same as a "good driver"), lenders DO want to lend money to people who have a LARGE debt to income ratio. They want people that pay them interest (which is NOT the same as people that know how to use credit). Obviously, there are limits...if you take home $4000 per month, and make $3000 per month in CC payments, they're not going to like that. But, a few percentage points one way or the other from the "ideal" isn't going to hurt...particularly if you can put 10-20% down.

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