If I pay off my car early will this hurt my credit score?
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I received a fairly big tax return which I’d like to use for paying off my car loan early to save money on interest. If I pay off my car loan early will this hurt my credit score?
It won’t hurt your score, but it won’t help it either
Paying off a car loan early in order to save money on interest payments makes perfect sense. However, it does nothing extra to your credit. In fact, on the long run it might even hurt it.
What build and improve your credit is a stream of timely payments. Installment loans such as car loan are great score builders. When you prepay car loan (or any other installment loan for that matter) you stop making on-time payment. While this in itself doesn’t hurt your credit, it stops building it.
With that being said, I’d go ahead and pay off that loan w/o worrying too much about my credit score. A good credit score is a nice thing to have, but saving money on interest payments should come higher on your priority.
Good luck.
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