paying loans off.

stebbinsd · #1 (**permalink**) 04-23-2010, 11:22 PM

I could have sworn I had posted this before, but it's not in my "list of all threads by stebbinsd" list, so, here goes nothing.

On a general level, which would have a better impact on your credit, all else being equal? Taking out a five year loan and paying it back right on time, or taking out a seven year loan and paying it back two years early?

I mean, you're paying the same principal, with the same interest, in five years, which was, technically, within the time frame. Does it matter how much time you were actually allotted?

I understand, in terms of how much money you pay, altogether; I'm talking about your CREDIT.

AlFromLA · #2 (**permalink**) 05-12-2010, 02:36 PM

paying back your debt earlier than due date is always a positive point toward your credit.

BAEVentures · #3 (**permalink**) 05-12-2010, 05:54 PM

Quote:

Originally Posted by AlFromLA

paying back your debt earlier than due date is always a positive point toward your credit.

Not necessarily accurate but in this case it would be. If you pay back a 36 month loan in 6 months, it may actually affect your credit negatively. It would reduce the "average duration of open accounts" which is a factor in determining your score. The longer the accounts are open (typically 3 years+ is good) the more beneficial it is to your score. This applies not only to credit cards but also to installment accounts. It may not hurt your credit (actually drop your score) to pay it off in 6 months, but it would be more beneficial to hold it for an absolute minimum of one year.

BAEVentures

investor123 · #4 (**permalink**) 05-29-2010, 01:14 AM

I totally agree with what AlFromLA says. Make sense to me

Sponsors