Does it help your credit score to pay off loan early?

[twuoo]

I was just wondering if it would matter much to pay off 5 year car loan, in say 2-3 years?

Does that help the credit rating...or not much?

[BKParalegal]

Not as much as you think. What helps is the amount of debt limit you have compared to how much debt you actually have. For instance if you had credit card limits of $50k, but your total balance on them is $5k, that really helps your score. Also, if you pay off your loan early then you are not receiving a positive for paying on time every month. There are many factors regarding your score. Bottom line is if your interest rate is high pay it off fast, if it is very low, than invest your money to make it work for you.

Good Luck

[soleprop]

bkparalegal makes a good point there; the best way to build good credit is to show long, timely payment history.

also a lot of loans aren't actually any cheaper if you pay them off faster; look into the details of your loan...

[Flamingo]

I was just wondering if it would matter much to pay off 5 year car loan, in say 2-3 years?

Does that help the credit rating...or not much?

What works for one credit wise is paying all bills on time, more than the minimum payment and keeping balances on credit cards at 30% or less of the total credit available. Running up balances and keeping high balances on credit cards, close to your available limit, causes severe damage.

As to the vehicle loan, it all depends on what interest rate you have and what you can afford. If you pay diligently on the vehicle for 2 to 3 years with no late payments, that is a big plus for you but remember that you are paying mostly interest in the first few years of the vehicle loan and the principle does not go down that much. You would have a few things to consider there as to what you want to do as to that loan and your financial position at the time.