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so i have terrible credit its been bad for about 6-7yrs , I purchased a car with high interest but i am almost done paying it, do you think that will help my credit? If so , alot or not much?

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Anonymous

Asked by Anonymous at 3:00 AM on Jan. 18, 2010 in Money & Work

Answers (13)
  • Probably not much, It will free up some debt to income ratio, but it probably wont help a whole lot. You have to clear up your bad debt in order to move your score up a substantial amount. You can settle with collectors for sometimes a 1/4 of the amount you owe, sometimes 1/2, just make sure they'll mark it as paid in full or remove it completely from your report. Once you get that agreement and you pay, you may have to call or write several letters to get them to take it off or put into positive status. It's a long hard road to clean it up, but especially nowadays, clean credit is a must to get anything anymore. Good luck.
    Anonymous

    Answer by Anonymous at 3:10 AM on Jan. 18, 2010

  • The other thing that will help your credit score is closing and cutting up ALL but ONE credit card! Even if you have $0 balances on some of your credit cards, the fact that the account is open and a certain amount has been extended to you, increases your "credit risk" and can be used to weigh your income to (potential) debt ratio.

    My husband and I have only ever had American Express as a credit card--you are forced to pay your balance off each month, and if you don't they freeze your account until you do--which is really a good thing--it helps you to manage your money and you never pay high interest fees on your balances.

    When you call to cancel your cards, as them to send you a letter stating that your account is now closed--in case the major credit rating agencies do not get that information. You're entitled to one free credit report per year. You should request it to make sure there aren't any outstanding issues!
    LoriKeet

    Answer by LoriKeet at 8:40 AM on Jan. 18, 2010

  • Actually-they say NOT to close out your cards- that this will make your score drop.
    charlotsomtimes

    Answer by charlotsomtimes at 10:17 AM on Jan. 18, 2010

  • charlotsomtimes

    Answer by charlotsomtimes at 10:19 AM on Jan. 18, 2010

  • I have worked in Mortgage loans and have seen and analized so many credit reports.. yes paying off your car will definitely help your credit, especially if you have no late payments on it. What really helps your credit is credit cards ( Installement loans) with low balances,, if you use your card, pay it off the same month or most of it.. you never want to be maxed out on a card or have bare minimum available credit on it... that is what hurts your credit. Once an acct is paid off, it shows you were respondible...but what creditors really want to see is open trade lines who are paid on time.. they wanna know you pay your bills on time and keep low balances on them. I hope this helped a lil.
    V8ELLISON

    Answer by V8ELLISON at 10:26 AM on Jan. 18, 2010

  • From your link:

    "Once the outstanding balance is reported on the credit report as zero, the FICO score will no longer include that closed revolving account in its calculation of utilization rate. Just to be clear, the formula always tries to include any open revolving accounts in its utilization rate calculations, whether those accounts have outstanding balances or show a zero balance."

    ***
    Like I said. simply closing credit card accounts won't help you, but having ZERO balances AND closed accounts will! Sorry if that wasn't clear.

    It's important to have a MAJOR Credit Cart, at least one utility bill in your name, and be named on a mortgage or lease to establish decent credit--that, and be sure to pay those bills on time every month! :o)
    LoriKeet

    Answer by LoriKeet at 10:51 AM on Jan. 18, 2010

  • The only way I know to help your credit is to pay your bills on time Like your mortgage,vehicle payments, anything you took a loan out to pay. If you don't have a credit card, get one with a low amount like a couple hundred dollars and only use it to pay bills, then pay the credit card on time. That will get your credit up in no time. Good Luck!
    lilybug524

    Answer by lilybug524 at 11:26 AM on Jan. 18, 2010

  • It may not because you may have financed it through a buy here pay here dealership. It take 7 years for things to fall off your credit.
    ambr2006

    Answer by ambr2006 at 11:39 AM on Jan. 18, 2010

  • It depends. We purchased our van in 2003, and finished paying it off July of 2009. Since it has been paid off it didn't help much to boost the score, however what I would suggest is pulling your one time a year credit report, and using the money you'd otherwise use for a car payment toward paying off any outstanding debts. If all that is on your credit report is your van payment having been late over and over then you can explain this to the place you're applying for a loan, however they do take into account how you were late so many times. If a debt is over 7 years it can be removed off your report since your report isn't supposed to show debts of over 7 years with exception to bankruptcy.
    Knightquester

    Answer by Knightquester at 11:49 AM on Jan. 18, 2010

  • If you are going to close credit cards close the ones that are the most recent and had a bad history if applicable.
    They do look at available credit as well as how much you owe and your payment history.

    It really depends on what else is on your credit score as far as paying off the car goes.

    Your best bet is just to stay away from debt in general. That way you don't have to worry about your FICO score. It saves you tons of money in interest and you'll find that you have a much more peaceful life.

    Check out DaveRamsey.com for more info. or the Dave Ramsey group on Cafemom.
    Anonymous

    Answer by Anonymous at 11:59 AM on Jan. 18, 2010

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