Does it affect your credit score positively to pay off a loan early or not?

I have a car loan with a Credit Union that has a year or so left, and I'm curious if paying it off early will significantly effect my credit scores, or it really doesn't matter very much?

Thank you.

You save money and probably already have good payment history from it so go ahead and pay it off. Plus you'll have less debt on your credit report.

Yes, paying off a debt will increase your score. Ideally, the less debt you have the better your score will be. Though early, depends on how early. While you may boost your score, you may be shocked to discover that some loans penalize you for paying in advance because that means they make less money off your interest. (Be sure to check the fine print) But in the area of your credit score, you're sure to get a nice little boost whenever your debt is gone.

It doesn't take long for short term changes like account balances, payments, and available credit to show up on your credit report and effect your score -- likely these are the things to have impact over the short term, and you have a better change of fixing your score if you try to address one of those issues, which you can do easily in a matter of weeks.

Let me share with you my tips that you can use to build your credit score quickly. I raised mine to well over 700 points fro 500 using these steps in less than a year -- :

# Know and Track Your Credit Score (be sure to sign up for the free trial of your credit score tracking listed below. It really helped my get my score up.)
# Never Miss a Payment, Starting Today
# Never use more than 20% of your Available Credit
# Keep Credit Cards that Have No Annual Fees Open For as Long as Possible
# Extend Your Credit Limit on Cards You Already Have before You Get New Ones
# Get Credit Cards that Have CashBack Rewards to Contribute to your Balance
# Transfer Your Balance to a Credit Card with a Lower Interest Rate and a Higher Available Credit-
# If You Think You Are Going to be FORCED to Pay a Bill Late Ask for an Extension or Payment Plan
# Take out a Small Personal Loan and Repay it Over a Year
# Ask Someone With Good Credit if They will Account Shadow you

Read more here:
10-Ways to Boost Your MyFico Score
http://millionster.com/articles/debt/increase-fico-credit-score/

When you're trying to build a solid credit score it's important to get a comprehensive view of what is actually effecting it...
Your Credit Score (also known as your MyFico score) is calculated with the following breakdown:
35% - Payment History
30% - Credit to Debt Ratio
15% - Credit History
10% - New Credit
10% - Credit Types in Use

If you excel in one area and lack in another, only fixing the areas which you lack are going to improve your score

Hope this helps!

It depends on the amount and the length of the loan.
I would recommend paying it off because then you will have extra money each month and you can start putting it towards saving or your next car.

It does and it doesn't. How? It depends on your definition of "early." Since you did not indicate the range of time, it would be difficult to give a straight and simple answer. However, I will assume your definition of early means, say, after 24 months. If that is the case, then it would affect it positively since your account would be showing 0 balance; provided, of course, there's no clause in the contractual agreement that says, you can't pay the debt off "before a certain period of time."

If, however, your definition of "early" means, less than a year, then, I am afraid, it might not.

Therefore, my advice is this: If you must pay off the loan, first, make sure there's no clause in the contract restricting you from doing so early. Second, if you are using the loan to build your credit, please, ensure to pay for at least 24 months (on time - no late fee) before going on to pay the loan off. This would improve your credit score significantly.

Derrick

Paying off a debt early is always a good thing, and it does impact your credit score in a positive way. Just like if you pay your credit card bills early, instead of you having to wait untill 6 mos. to be able to be reviewed for a increase in credit, they just might increase it early. I just got an increase today, did not even know until I checked my account today, and I have only had my credit card for 4 mos. You are showing the creditor that you are responsible, and worthy. Keep up the good work. And if you are thinking of trying to pay the car off sooner than expected.....Go for it.

Auto finance is what I do for a living and as long as you have made at least 18-24 payments on your loan, you have established the payment history so you might as well go ahead and pay it off.

It will help your score because you will lower your debt.

Make sure you don't have a early pay off penalty..Most credit unions dont..

If you are currently trying to build your credit it will actually hurt your credit to pay it off early. One of the things that companies look for in your credit file is whether you make your payments on time, and if you don't have any open credit they cant see if you are currently making those payments with no problems. If you have other items on your credit then yes it can help to pay off some of your open debt.

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