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Credit Score Impact
WaterfallSandSun
Registered User regular
Registered User regular
I have recently purchased a new car and the dealership applied for a car loan for me. (I have since learned that there are many other better ways to go about buying a car but that can be for a whole separate thread.) The interest rate is over 5%, so I would like to pay it off as soon as possible. With my current financial situation, I can pay it off in full within 1 year's time. I have then learned that with the car loan, my "age of credit history" has been greatly impacted (almost halved) with the new line of credit (car loan). I have "excellent" credit (upper 700's to near 800) and have a small amount of "credit factors" that impacts my credit negatively. So I would like to focus on this "credit factor" because I believe I can have control over it.
So my question would be, what would best heal this injury?
- If I pay it off in full ASAP, will it drop off as an impact factor from my "age of credit history" since it will no longer be "alive"?
- If not, then maybe I can pay it off and leave maybe several hundred $'s for the balance and pay like $10 a month just so the "age" of this line of credit can slowly grow, thus slowly heal my "age of credit history"?
- I don't know if the latter solution would work since the loan does not behave like a regular credit card because the next "payment due date" gets pushed over several months depending on how much you pay.
Thank you for your help and advice.
So my question would be, what would best heal this injury?
- If I pay it off in full ASAP, will it drop off as an impact factor from my "age of credit history" since it will no longer be "alive"?
- If not, then maybe I can pay it off and leave maybe several hundred $'s for the balance and pay like $10 a month just so the "age" of this line of credit can slowly grow, thus slowly heal my "age of credit history"?
- I don't know if the latter solution would work since the loan does not behave like a regular credit card because the next "payment due date" gets pushed over several months depending on how much you pay.
Thank you for your help and advice.
WaterfallSandSun on
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Second, your minimum payment amount will not change if you pay off the majority of the loan early, so the strategy you've outlined doesn't actually work.
Finally, if your score is nearly 800 then you're well ahead of the game and honestly you should have qualified for a much better interest rate than you got. Dealerships routinely offer 0.00-1.9% apr with approved credit, which you most certainly would have with that score, assuming you had verifiable income to pay the loan.
Anyhow, the recommendation is to just pay off the loan as soon as possible. If you are worried about keeping some credit history on file then just get a nice rewards card and use it monthly while paying off the total balance every month before incurring any interest charges.
Also, if you are in the U.S. I teccoend making an account with Credit Karma to track your credit score and retrieve your credit reports easily so you can review them for inaccuracies.
Again, your credit score is fantastic though so you should be fine if you just pay everything on time.
Age is about how long the history goes back. If the oldest record is a year old that's not much of a pattern. If you have an account with twenty years of on time payments then you've got a solid pattern that might convince people you're more trustworthy to loan money to.
Utilization is about how much of your available credit you're using. I might think you are a good candidate to loan a $10,000 dollars to with your credit score. Now when you ask me for another $10,000? Well I am less likely to think it's a good idea than before but maybe I still say yes. Then you ask for another $10,000? The more you owe everybody the more worried I am about getting repaid.
I'd pay down the auto loan as soon as you can and just get a credit card with no annual fee to keep an old account around. I use a target card since it's free and I occasionally go to target so it gets some activity on the account.
I used to look at credit reports all day long. Every single report lists those factors. An 849 would list four different factors that are causing a "negative" impact.
They're just listing what separates you from the imaginary ideal.
fuck up once and you break your thumb / if you're happy at all then you're god damn dumb
that's right we're on a fucked up cruise / God is dead but at least we have booze
bad things happen, no one knows why / the sun burns out and everyone dies
I agree with davidsdurions and am kinda shocked that your car loan rate is so high.
who told you your credit score was 800?
if your length of accounts was halved that means you only have two accounts, which means you probably wouldn't have an 800. also you'd have a better interest rate than 5% too
age of accounts is a factor in your score but it's nowhere near the most important factor, which is utilization, and utilization is not impacted by non-revolving debt such as car loans
before you start going hog wild about financial maneuvering, you may want to independently verify the particulars of your situation to see if you actually need to do anything. Don't trust sites like CreditKarma, they can be way off. Go get your actual report.
Agree with the rest, but CreditKarma pulls their data from TransUnion, so it is an accurate representation of that source. If it is significantly different from what you see at Equifax or Experian, you need to dispute it with TU.
If you want to see all three, buy your score from myFICO.com or get your free government-mandated credit report from https://www.annualcreditreport.com/index.action
sry false. i have verified this. creditkarma creates an approximation of your score based on credit profile information obtained from TransUnion. TransUnion does not give them the number. TransUnion gives them the information to create a number. And it's not 100% complete information either.
I had a car dealership hand me the paper with the TransUnion number on it and took it to creditkarma and it was off by more than 60 points.
As far as I can tell, CK either does not receive closed account history, or they undervalue it.
What I learned about credit rating is that at the end of the day, it isn't going to make water taste better and air smell fresher. All it really does is give you more options when you want to sign away your soul. But if your credit rating is really at 800, then all you need to do is continue what you're doing because the only thing that can bring it down is delinquency on payments and/or bankruptcy.
That's possible. My CK score matches what I got with my re-fi last month, but I don't have a ton of closed accounts.
Out of curiosity, how long ago was it that you had confirmed scores that were different in CreditKarma? I know they used to estimate things based on reports, etc, but the language at several places on their site now suggest that they are using scores directly provided by TransUnion (and Equifax as well now). Or if that's not the case, at the very least they are using a standardized model (VantageScore 3, created jointly by the 3 reporting agencies) to calculate those scores.
Specifically, after just now logging in, this is the sidepanel next to my scores:
"About Your Credit Scores
Calculated using the VantageScore 3.0 model, these scores range from 300 to 850. They're calculated by TransUnion and Equifax, respectively, so the scores may vary based on each credit report."
Though the VantageScore model is different from the FICO model, and apparently (I wasn't aware) there are lots of different models that even the same reporting agency may use to calculate a score, depending on the purpose of the inquiry, so even two scores actually from TransUnion on the same day may differ if they're for different purposes.
Also, a credit report is different than a credit score, which can be wildly different based on purpose as Daenris pointed out above. Monitoring your reports gives you the chance to disputes errors or notice if someone has stopped reporting on something that you might want to either have just removed from the report if it's a closed account or to continue reporting if it is open so the report shows your, hopefully, clean credit.
23 months ago. And the difference between VantageScore and FICO is basically what I am talking about. Pretty sure that anything that matters is still using FICO
I guess I will just continue to keep it simple and pay off the loan in its entirety ASAP for less headaches in the near future. Thank you for your responses and help.