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Quick question. Which is more beneficial to your credit rating...paying off a loan or debt early, or making the regular payments and paying it off over the originally allotted amount of time? I remember hearing a while back that it is actually not good (credit rating wise) to pay off a note early. Is there any truth in this?

Also, can anybody give a brief description of how the credit rating system works (other than the obvious like paying your bills on time and such)? I believe the credit rating system works on a 1000 point scale. What are roughly the break points of what is considered good, ok, bad, and "we ain't loaning you s^&t"?

I'm not looking to buy anything at the moment, but I was talking with my bank today and some things that was mentioned made me curious.
 

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There are several ways to look at this question.First of all if you have a loan with high interest it benefits you to pay it off early.If its a normal(interest) loan through a bank or GM or FORD etc then make the payments for at least half the term or more and then pay it off.The reason companies dont want you to pay it off early is they loose money.The first part of a loan that you pay back is mostly the interest that they are charging you.For instance,a 30 mortage loan,the first 10 years is primarily interest very little of the monthlys goes toward principle(the amount borrowed)they are going to get theirs back first.On a mortage loan if you make 1 extra payment a year, a 30 year note will be cut to 17 or so but you have to specify on the 1 payment apply to principle.Your ability to get a loan is based on a beacon score that also determines your interest rate.Your beacon score reflects your past/present credit history.If you have not paid your loan payments on time or you dont have much credit the lower your beacon score,and the higher your interest rate will be. And obviosly ,the better, the better.I hope this helps and I didnt ramble too much and confuse ya.
 

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No.2 It isn't bad to pay early, just doesn't give as many entries on the report of on-time payoffs. The more on-time payments made, the higher the overall score.
 

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A credit score of 700 plus is considered good by most. This is commonly referred to as a "beacon" score. In general, creditors want to see stability (in terms of time on job and living location), no slow or late payments, and multiple accounts with some existing balances. Home ownership is also a big plus. Of course other factors, like household income and debt to income ratio also come into play. If you have great credit, but appear to be overextended, creditors might cap the loan at a lower amount, or not issue credit at all for fear of default. Every case is different, so one size does not fit all. The creditors would provide a full professional analysis and report(by law) once credit was applied for and processed. Hope this helps...
 

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THere is alot of great information on credit scores and reports on www.bankrate.com . All the info is free and very informative.
 

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Yeah, I think the max score is 700 also. Why? I don't know.

If you are young and want to build credit, it really is a simple as paying on time, always, plus be financially responsible. Save.

Paying early might have hurt your credit. I've heard that and personally chock it up to urban legend - or perhaps it was true many years ago. Don't really know.

You will not help your credit by getting lots of credit cards, in fact you'll HURT it.

Credit cards are unsecure, meaning if you default, they cannot repossess something. They extend credit to you based on the fact that you have a track record that shows you'll pay it back. Because your credit cards are unsecured, the basis of your credit score ASSUMES you have SPENT that money.

So if you go off to establish credit and you get eight different credit cards at 10k each, your credit score assumes you are in debt by 80K even if you only have a low $300.oo balance.

You may think your doing well, you've paid your bills on time, you've got all these cards,

..and get denied that car loan because they assume your 80 grand in debt. Whoops.

Have two or three cards max. Use them for everyday living if you pay the full balance every month, otherwise, use the cards for emergencies, car rental, hotel reservations and such.

If you really want to understand your credit, I would suggest buying a service from one of the three credit agencies, (there are only three.)

Equifax, Experian and Trans Union. Using Equifax as an example, purchase one of their packages and get savy on the info posted about you. Not everyone posts their info to all three agencies. Some posts go to just one but any one of these agencies can provide you with a "3 in 1" type report. Don't use Free Credit report dot com or other places, they are a service and not an agency or bureau - again, there are only the three I listed.

Lastly, guard your identity with the ferocity of a lion protecting her young.

You don't know hell on earth until your identitiy has been stolen.
:mad:

Rick.
 

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Some time during this year you will be able to get your credit report free from each of the three agencies once a year. Starts on left coast first. If you stagger them at 4 months you will be able to keep a close eye on your history identity etc...
 

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Joe,

The only time the three share is when you log a Fraud Alert. The data in one report may or may not be seen in or by the other two. It is true that (by state) you may be able to get a free report from each of the bureaus once a year.

I would strongly suggest that subscribing to one of the three and purchasing quarterly 3-in-1 reports be a part of everyones home over-head.

At something like 50-70 bucks a year, it serves to protect you well.

Rick
 

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Rick, if you got all three at the same time for free once a year would that be the same as a 3 in 1 report or would that still not provide everything needed. I definately need to do something as I never have checked them before.
 

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Yes, you could do all three at the same time but then you would miss out on the timing aspect of things.

All info goes to one of those three, some info will go to all three, some doesn't. You need to decide what you want out of this.

If you want to be cognizant of your credit history then do one a year at different times with each of the three providers. Each will cover a large percentage of your history. This will tell you two things, where the data comes from and how it tallies up. It will not do anything from the perspective of protection.

For protection, you need to buy one of the services that will report any transaction sameday or weekly. If matters get worse, you'll need to buy services from all three.

I had a phone call from the NH Attorney General Consumer Protection & Antitrust Bureau in response to a claim I filed against <enter name>. I complained that <enter name> issued a credit card to me unsolicitated, unauthorized.

The AGs office said, they don't do that. They said my identity had more likely been stolen.

Great. Just great. Welcome to hell.


Rick.
 

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I'm far from an expert, but I tell you what I got when I purchased a credit report. I went through equifax and got thier 3 in 1 which SUPPOSEDLY (looks like all three, but I didn't get another report from another company to verify) tells you what all three say. It will show you what information is reported to which. In some cases it's all three, in others it is not. You could also get some score, I don't know if it's the same one you guys are talking about since it's higher than 700 (mine was over 700). I think it was like $30 and you could get it on line almost instantaneously. I was happy with it, if you are just curious to see what your credit is like. Granted, not the best for watching out for identity theft.
 

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As others have stated here, a 700+ score will get you a better rate, every time. Especially when refinancing a home loan or equity loan.

Paying off a credit card balance is to your benefit, and no there is no penalty for this. The credit report will show those late payments, and these late payments will affect the score.

A bit of advice, if refinancing or buying a home, have a few credit card accounts with zero balances helps. It portrays to the lender you have available credit totaling the amount of max credit the account can handle. The lesser accounts, the lesser available credit, the more the risk.
 

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Not to brag, but when I applied for my home loan. The morgage broker gave me this weird look, and I though I crud I don't qualify...nope I have a 906 credit score. he said this is the second highest he has seen in thirty years.
So yes there is a score higher than 700 and the higher your score the more the bank will trust you (sorta).
 

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I used to work for a major credit card co and have a little knowledge. The rating system is based on several factors. Some of which are the average length of time your accounts have been open, when the most recent one was open, the balances versus the limits and how high they have been, as well as the late (and how late 30 60 90) or on time payments that have been made. This can be complicated by a spouse or other person whose credit is somehow tied to yours (via joint/cosigned purchases). Also if you have had any debts dishcharged or written off, written any bad checks, filed bankruptcy in the last 7 years etc. I am not sure how far the report keeps information on your record I can't remember.
In sum it is very complicated and the best advice I have is to make your payments on time, not open any new accounts (unless needed), close unused accounts (more than 5 cc's will generally lower your score) keep loans as long as you need them or until you can pay them off, but never make a late payment if at all possible it will haunt you.
 

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also about 6 years ago I worked at a car dealership and any score above 730 was an automatic 50k regardless of debt/income ratios
650 and up was leaseable
6-650 was high risk
below 600 was almost impossible to get financed
 

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and the # of inquiries on your credit will decrease your score. This has been modified a little within the last couple of years to allow unlimited in like a 2 wk time frame by the same type of co (I think) because many people shop around and it is difficult to get anyone to give you a rate on anything without pulling a report and the rate can be determinative of what you can afford and therefore want to look at.
 
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