Did I screw up?

[DickyT]

I just paid off my car loan 18 months early. My credit rating which I have been rebuilding after my life fell apart in 2004 dropped 14 points as a result rather than go up for satisfying a loan.

What I have managed to find is a car loan is revolving credit which is great for helping your rating. With no revolving credit now, my rating suffers. 14 points is a big hit too.

I thought I was doing a good thing by removing a high interest loan and having more cash available monthly, not be taking a sizable step backwards which hurts my ability to improve the life for my family by getting us out of our rented shoebox and into a home.

What is a good and fast way to get these 14 points back?

 

[Hulldiver]

More food for thought. Its better to keep a credit card open, even if its paid off, than close the account. Another revolving credit thing. What i do is just put enough money to pay it off in a seperate account and set up the payment to come out automaticly.

As far as building it back real quick? It takes 6 months for anything to show on your credit, as far as helping. Only takes 1 month to mess it up. Kind of rediculous.
Get a credit card, even if its high interest, and pay the whole balance off at the end of the month and you will not have to pay any interest.

Hope this helps.

 

[DickyT]

More food for thought. Its better to keep a credit card open, even if its paid off, than close the account. Another revolving credit thing. What i do is just put enough money to pay it off in a seperate account and set up the payment to come out automaticly.

As far as building it back real quick? It takes 6 months for anything to show on your credit, as far as helping. Only takes 1 month to mess it up. Kind of rediculous.
Get a credit card, even if its high interest, and pay the whole balance off at the end of the month and you will not have to pay any interest.

Hope this helps.

This I am aware of. I have one and do exactly that with it "thumbsup"

 

[EeePee]

Gas station card. Like Shell or BP, etc.

 

[Meatwad]

Not having a car note can help when buying a home, more cash freed up to pay a mortgage. Can be a double edged sword.

On my lowest interest credit card I don't mind paying the interest on small amounts, its like buying the credit score.

 

[Mr.Joshua]

I did the same thing Dicky-T...what helped a lot was going to a Credit Union that actually looks into your finances. Wells F-O just looked at the score and that was as far as they went. A real banker can look at the fact that you paid it off. Its jacked that sometimes bad credit is better than no credit.
We're trying to get debt free so the credit score doesn't matter...gotta love cash!

Good luck!

 

[The Violator]

Your credit rating will swing month to month just because. Research how credit is scored, its kinda like voodoo, witch craft, and bullshit all in one.

 

[CrawlinMike]

Your credit rating will swing month to month just because. Research how credit is scored, its kinda like voodoo, witch craft, and bullshit all in one.

Mostly bullshit. But awesome description.

 

[Hoosierdady]

x2. Did you know that missing one house payment can drop your score by as much as 100 points! All of the advice above is true. I've been selling cars for several years now, and managed to work my own score up almost 200 points in that time. We preach credit counceling for return customers and I practice the same ethics myself. The comment about buying your credit is pretty damn close. All of the above listed tactics are spot on. Get a 0% home depot card or like a 0% 5/3rd card. Make a few purchases, pay for a couple of months and then pay it off. Just like you're doing now. I do the 0% cards when they come out in advertisements vs. the high intrest cards.

 

[binaryterror]

You are thinking debt to income...less debt and same income as you did is a huge step.

Problem is credit score is more about available credit. They don't care if you owe the world more than you'll ever make, just make those payments on time and credit scores increase.

As to 14 points being big? Not really, find a proper mortgage company who looks at more than just raw credit scores, but also financial situation. They do exist out there or find a credit union to join and use them for the mortgage.

 

[Duuuuuuuude]

Credit score bullshit is a game. Fawk 'em.

 

[DickyT]

Your credit rating will swing month to month just because. Research how credit is scored, its kinda like voodoo, witch craft, and bullshit all in one.

I have, I still don't get it I am quasi intelligent at best though...

You are thinking debt to income...less debt and same income as you did is a huge step.

I understand the difference, which is why I paid the car off early. I wanted the improvement on debt to income. I did not realize I would take a point hit from it though.

After a little more research I will continue to use my credit card and pay it off monthly. I am also going to get a couple small personal loans, set up a bank account and dump the money in there, then setup automatic payments and let them pay themselves off running full term. When the account balance gets low, I will add a couple hundred dollars from my main account to cover the interest on the small loans. I have a meeting with a financial adviser tomorrow to help me set a plan and find the loans that have the best returns for my score. Just another way to buy your rating.

I also have a buddy that owns a buy here pay here lot. He and I spoke this morning and he is willing to sell me a cheap car off his lot for zero down, do a 1 year finance, then buy the car back from me at the end. This should help too. The car will stay in his back lot so I do not need to store it, and he will go drive it around the block once a week to keep it good so he has it as a valid sale in a year.

I will discuss all these options with the adviser tomorrow and move forward on the one or two that over 1 year will have the biggest effect for me.

Thank you everyone for your input. As always RCC is the best shrink "thumbsup"

 

[mark reel]

Your credit rating will swing month to month just because. Research how credit is scored, its kinda like voodoo, witch craft, and bullshit all in one.

"thumbsup""thumbsup""thumbsup""thumbsup""thumbsup" bastards :evil::evil::evil::evil::evil:

 

[CREEPERBOB]

Fact is , if you don't have at least 4 active debts being payed on they think your trying to do it without them and they will penalize you :shock:.
My sis in law is the head of the loan dept. at her bank and this is what is the standard, if you are'nt benifiting a credit sucktion device "You will be screwed".

 

[Chi Town]

Paying off your loan did not "hurt" your score, not having an installment loan that continually shows payment history hurt your score.

Having revolving debt and installment debt is an important part of building credit. Car loans are not revolving debt unless the place you financed thru set it up that way.

Carrying a balance on your credit card does a little to help, having the credit card company report monthly payments means more.

Another big factor impacting credit is available credit compared to balances. Having 1 credit card with a limit of $1,000 and then carrying $600, shows that you are using 60% of your available credit.

Credit is not too complex but can be difficult to understand.

I do love it when people bash a bank for declining them just based off of their "score". I have worked for a large bank for years and we have never declined someone just for score...it is always what they did to their credit, causing the score to be low.

Hope that helps.

 

[Chi Town]

Also,having 3 active trade lines is important. Not because they want you to be in debt, but because it shows the credit company what your credit behaviors are. Have to show you can handle the new debt you are applying for.

14 points isn't going to prevent you from getting credit...just may impact the rate.

 

[C*H*U*D]

Credit score bullshit is a game. Fawk 'em.

This may be true, but unfortunately it's a game we all have to play.

One thing to do is find the credit card you've had the longest, and hang onto it. This is the one you don't want to close, even if it has no balance. This obviously isn't a quick fix but does help down the road. I've had one credit card since 1987, so that makes about 25 years of "time in file" which makes up 15% of my FICO.

When you dropped your car loan, you lowered your loan diversity. Greater diversity boosts your score because it shows you can manage different types of credit.

It's a stupid system, but one you can't really fight unless you plan to buy your house with cash.

 

[bob1961]

i have had a personal loan going since 1993 non stop and my credit rating has jumped to 768 from 624 "thumbsup" ....most of the time i kept refinacing it to keep it going untill the total repay back balance got to be to high then at end of it's term i paid it off....then the following month i get a new 3 year loan for what ever a 150.00 to 200.00 a month payment gets me which rides between 2500.00 and 3000.00 dollars....i was shocked to find out how high my rating went up :shock: ..........bob

....

 

[bob1961]

also one key factor in keeping your rating steady and going up is not to keep appyling for credit here and there....every time you apply for credit and some place has to look at your credit history you get points chopped off....this was what was told to me by my loan company i have from post above, don't keep trying to get credit by going here and there and having them looking at your credit history....only time i have done anything like that is when i redid my loan with them....find one personal loan and take it for a 3 to 4 year term and pay it off or refinance it with a month left on it....also get your credit report at least every two years if not yearly for your own records......bob

....

 

[Duuuuuuuude]

This may be true, but unfortunately it's a game we all have to play.

It's a stupid system, but one you can't really fight unless you plan to buy your house with cash.

You don't "have" to play it. So many people live on the ragged edge of being broke because they think they have to own a big new house and have new cars every 2-3 years. I've got several friends and a family member or two like that, and all they do is work to pay off their crap and then turn around and buy more crap. They don't have the time or the money to do hardly anything outside of work.

The "gotta be in debt" mindset is pure insanity.