Paying off auto loan early
Question: Will paying off my car loan early (as in 4 years early) negatively affect my credit score or credit history? I opened the loan in part to build a stronger credit history. While I don’t have a bad credit score (I’m above 750), I don’t have a whole lot to show – no other loans, no mortgage payment, and I pay my credit card in full each month. The big plan is to purchase a house in the next 5 years and I’d like to line up a good credit history when the time comes to shop for a mortgage. Your thoughts? Jason, East Glacier Park, MT
Answer: I’d get rid of the auto loan. First of all, you shouldn’t let concerns about your credit score stop you from practicing good personal finance–eliminating loan payments early.
Secondly, paying off the auto loan won’t have a negative impact on your credit score. Once again, you’ll have demonstrated that you’re a good borrower. More important, you pay off the balance on your credit card every month–a boon to your credit score. You don’t need to carry a credit card balance to keep a high credit score.
Last, I can tell you from personal experience it’s a good feeling to get rid of an auto loan early.
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