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Trading in car, should I continue to pay more than the minimum?

January 03, 2011 Yahoo Answers by CEO

Open Question

Trading in car, should I continue to pay more than the minimum?

I am in the process of paying off debt to improve my credit score. I also plan on trading in my car in about a year. I generally pay $100.00 over the minimum payment on my car. Should I continue to pay more than the minum payment on my car or just make the minimum?

I cant figure out which is more important my revolving debt (credit cards) or my Car Payment?
Answer
Great question paying off your debt early its not always the best way to improve your credit scores. Revolving debt is always better to keep at a balance 0 or with a very low balance. Installments build history but until they don't have enough months of good payment history they are actually not helping that much your scores. Revolving debt is considered as more of a risk because if you were to become unemployed chances are that you might start living off your credit cards and even default on them. As compared to an installment loan that was maxed out from the beginning and you are paying down on a balance and you don't have access to the money you have paid to the bank. As far as the trade in your scores might still get affected at the moment you trade your vehicle because the old loan will be closed or paid and a new loan will be open and until it start building history its going to be a new account. I recommend you open mycreditkeeper.com if you want they have a credit tool called the what if scenario where you can run different scenarios of what will happen if you pay off debt or if you pay off collections its a great tool you should check it out and btw i am in no way affiliated to mycreditkeeper i just recommend it since its an amazing tool to check scores and to keep an eye on your scores without having hard inquiries every time you pull your report.

Source(s):

mycreditkeeper . com
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