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| *Ostroff, Fair and Company>>>Credit |
What's better for building back my credit - paying off car or going with consistent payments? |
I filed bankruptcy about 3 years ago due to a divorce and extremely expensive custody battle. Since then, I've built my FICO score back up to ~689, financed a car, have new credit cards, etc. I'm trying to further improve my FICO score. I will be receiving about ~12k in July from the ESPP program at work. What is the better move to improve my credit score? Do I pay off my car and save myself some on interest? Or should I leave the payments in place since it will show regular consistent payments and invest the money elsewhere? I think the consistent payment route is the best. Also opem a credit card and use it for groceries, electric bills etc. and pay it off every month. Invest the bulk of your money into something CD's, Mutual Funds. Remember if you have money you can always borrow against it cheaper than if you had none. It's always better to establish a credit history, while at the same time save yourself some money. My advice--take it or leave it--is to continue to pay on the car, but pay more than the required payment each month. This way, your car loan, which has simple interest, earns less interest each month because the extra you add to the payment comes directly off the principal. Bank your 12k and earn interest. If you add even $25 dollars to each month's car payment, you shave months off your loan and dollars off your interest. While you're building your credit back up, use your credit card(s) wisely. Try to avoid paying for groceries or gasoline with credit cards unless you specifically have a gas card. I wouldn't pay it off, consistant payments will help build your credit back up. Investing in short term CD's would be good. It depends on how good you need your credit score to look. If you are anticipating buying another home in the near future. You should continue monthly payments to get your credit score back up. On the other hand if you are not looking for a big purchase and you will be running into some cash soon, it might be wise to pay it off. It just depends on how soon you want your credit score fixed...good luck ;) pay off the car. You've already shown you can pay things on time and consistantly. If you go to make a purchase like a house or boat, they'll see that you're still paying on a car loan and they just might think that that is too much money borrowed out at one time. Just my opinion... make the payments invest else where. try to get auto pay if possible. good luck 689 isn't a bad FICO score - especially 3 years post-bankruptcy - congratulations!!!! If you want to use part of your funds for paying off bills, put all the bills together, and pay the most on the bill that has the highest interest rate, then work your way down the line from there. CDs, Money Market accounts, etc are wise choices if you'd like to set some of the funds aside for the future. |
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