2006-11-18 15:07:03 · 6 answers · asked by E E P 1 in Business & Finance ➔ Credit
Yes, if you do it consistently.
2006-11-18 15:09:04 · answer #1 · answered by HearKat 7 · 0⤊ 0⤋
Not really. It's probably the biggest misconception about credit there is.
What really helps your credit rating is the LENGTH of good credit history you've had. Say you got a 5 year loan (60 months) and made every payment on time from day 1 until the loan was paid off - your credit report would have 60 entries (one each month) of an on-time payment history. Now, if you paid it off in, say, 3 years, your credit report would only have 36 months of on-time payment history.
Getting a huge loan and then paying it off in 2 months is not going to do anything to significantly improve your credit rating over keeping to the regular payment schedule.
Yes, you will save on interest by paying more each month. Yes you will end up saving money. Yes it is financially smart to do so - but that's not what you asked. No, it will not really help your credit rating that much, but it's not a bad idea.
Think of it this way - people are refinancing their mortgages all the time now, right? Well, when you do that, you're taking a loan that was going to be paid out over 30 years and paying it of in, say, only 2 years. Logic might dictate that someone that can pay off a 30 year loan in 24 months should represent no credit risk, but that just isn't so.
The final answer is to pay off the loan as quickly as you can (unless the interest rate is under 4% at which point it's better to keep the extra money in a high yield savings account) to save some money, but don't expect your credit score to become golden overnight.
2006-11-18 15:29:51 · answer #2 · answered by MyKrAi 1 · 1⤊ 0⤋
Only by lowering your debt-to-income ratio. If your auto loan is for 24 months or shorter, DO NOT pay extra as you need the length of credit to enhance your report. If you're paying 36 months or more, start paying it off faster to bring down your debt-to-income ratio. If your interest rate is 6% or lower, you're better off investing that money because you can earn more than 6% and actually make money instead of saving it. If you're over 6% interest, pay that sucker off.
2006-11-18 15:25:00 · answer #3 · answered by warmwardbound 3 · 0⤊ 0⤋
Not a lot.
Paying the loan off early will free up you existing credit and THAT will improve your credit rating. If you make your payments in a timely fashion and make more than the minimum payment then that could help your credit rating.
2006-11-18 15:09:30 · answer #4 · answered by Dan S 7 · 1⤊ 0⤋
Yes, because you are paying on time (35% of your credit history is based on that), the amount you owe will be lower (which means your debt usage compared to credit availablity is lower), and your account is active. Keep up the good work.
2006-11-18 15:15:13 · answer #5 · answered by Mariposa 7 · 0⤊ 0⤋
Yes as long as you are not defaulting on your other debt to do so.
2006-11-18 15:09:00 · answer #6 · answered by Anonymous · 0⤊ 0⤋