When I bought my car in January, I could have paid for it in cash but wasn’t sure I wanted to part with the cash. I now want to pay off the loan, but the guy at the car dealer said that I shouldn’t pay it off right away or I won’t get "credit" for it on my credit report? Is this true? If so, how long do I have to have this loan before I get "credit" for it on my credit report?
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{ 5 comments… read them below or add one }
The question is do you need an installment loan reporting on your credit file to increase your credit score?
If your credit score is already 750+ then if you can pay it off, do so. If you need the car loan to report for credit improvement then you should make at least 12 payments that report to maximize your use of the loan for credit purposes.
Good Luck
I would try to have like 6 months or so of on time payments. I am not for sure though. My credit kind of bites right now.
6 months to a year.
if the loan was from a bank not the dealer you will get credit for it. paying it off will reduce the interest paid so bad for the bank, good for you. you need to get a letter from them at time of payoff stating loan is paid and they release the lien on the vehicle. sometimes motor vehicles needs it, like when you sell the car. also if you do not see it on the credit reports within 3 monts time you will need to ask the bank to please record it with them. they get behind in reporting sometimes. the letter will be helpful to show in that instance as well.
12 MONTHS CONSECUTIVE PAYMENTS