To Pay Off or Not To Pay Off

[nat8199]

If you have enough down and the thing being purchased can provide a security for the loan, banks don't give a hoot about your credit score.

If you have no debt at all, after the credit history falls off your credit report, you have a thin fine and your credit score can plummet from the 800s to the 600s. But, it is also very noteworthy that when you have no debts and you are not paying interest, barring a drop in come, your savings piles up rather quickly.

I have no interest owing debt in my name and my credit score is above 800. My name is not on our mortgage, we do not have car loans, and I pay our credit cards off in full each month. There is no need at all to pay interest to have a high credit score.

 

[OrangeBirdGirl]

My vote, pay it off as fast as you can!

Our last debt was our house. Our home was paid off last year when it was 15 years old (on a 30yr mortgage). I have heard numerous people say not to pay off debt when it isn't a high interest. For us, I don't want bills. I want to own everything we have. I can't imagine taking another loan out again. I don't recall what my credit score was prior to paying off our mortgage but I just got an update last week and mine was at 836 without any loans. So credit score isn't an issue to me. My credit card is used for everything, so usually a minimum of $1500/mo, but now this month we had alot of prebooked tours for an upcoming trip and some other larger purchases so the bill is currently at $5,500. It's paid off each month. I'm assuming by using the credit card for everything it keeps up my good credit score.

We got married very young and I remember literally being broke, not even $10 to us a few days before payday. As much as it sucked 20 years ago, that experience has turned me into never wanting to be in a position again where as soon as our paychecks hit the bank account it's immediately going out for debt.

 

[mikehn]

There is good debt and there is bad debt, which has already been pointed out

 

[Ms Bibbidi]

Same. This is an old myth.

Ok.

 

[Ms Bibbidi]

I have no interest owing debt in my name and my credit score is above 800. My name is not on our mortgage, we do not have car loans, and I pay our credit cards off in full each month. There is no need at all to pay interest to have a high credit score.

Ok.

 

[Ms Bibbidi]

I have no interest owing debt in my name and my credit score is above 800. My name is not on our mortgage, we do not have car loans, and I pay our credit cards off in full each month. There is no need at all to pay interest to have a high credit score.

Oh, I agree. There is no need to pay interest on a loan to have a high credit score.

I recently learned about “thin files.” Say a person had decades of on time payments. They paid everything off in full. They had no mortgage, installment loans and did not use credit cards. After 7 to 10 years, that good credit history falls off their credit reports. They end up with a “thin file.” The credit industry was aware this could be a problem for seniors.

I just know that debt free is a nice way to live.

 

[Mackenzie Click-Mickelson]

I've been with the same insurance company since I was 16. I think that counts more than my credit rating.

This depends on what state you live in. If you live in a state where credit is part of the rating structure or is required to be rerun then you would be surprised because your credit can very much be a part of your rate, trust me I used to see people's credit scores and could see exactly how that would affect someone's rate. And with the newer products while I couldn't see the exact score in states that use credit it was a frequent reason we knew (and would advise on) for why someone's rate was what it was. And I could see when the customer requested their credit to be rerun unfortunately there were times when their rate would increase as their credit was worse than it was (a reason why we strongly suggested never requesting that unless you were positive your credit had improved).

For example when I was working at the insurance company Missouri required auto and home insurers to rerun people's credit score every 3 years. Now an insured could request their credit to be rerun in between that time BUT it would restart the clock. When the insurance company I was working for was transitioning to a newer auto product this rule along with other state's rule became very important as the states where credit is used (an FCRA notice is usually required when this is the case) may prohibit someone from being moved to that newer product. This was the case in Missouri where we had policies that would not convert over for years because their credit could not be run more frequently than 3 years.

A state like CA for example prohibited the usage of credit scores for insurance purposes thus the newer product for the auto could not be used there since a key component in the rating was someone's credit.

Your longevity with an insurance company really doesn't mean much anymore, and if you see a discount on your policy chances are it's a depreciating one and probably means little to nothing to your rate at this point. Longevity with a company can however impact decisions related to non-renewals (so long as it doesn't place the insurance company out of compliance with the DOI) or risk evaluation for additional policies.

 

[Mackenzie Click-Mickelson]

I was raised to pay cash for everything. My parents managed to do that,

Yeah and times change and paying for cash for everything used to be a lot easier most especially when your parents did it. The world also didn't utilize credit scores the same way. That has changed over the years but we're still talking in the 1970s/80s/90s,etc. You can get through life just by paying with cash if you have the cash on hand but you will run into problems when you need that credit score. The score is impacted by length of time too.

We had excellent credit when we got our house in 2014 but one of the dings to both of ours was "length of credit history". I had had credit history since 2006, my husband since 2007. Again excellent credit but just not a huge amount of time relatively speaking due to our age even though we both started with credit when we were 18.

I used to hear agents complain to me that their insured was upset that their rate was higher and we could tell the credit was a big issue, from the older older crowd it was usually that they just paid cash throughout their lives thus they lacked a credit score. Possible to do it but it doesn't mean it ends up being the best decision either.

I was raised that you don't put something on a credit card you don't have the cash at hand but that doesn't mean don't use the card. And these days the rewards and incentives really help out. Our cruise next year? We've paid for the flights there and back for 2 people on points earned and some cash combo through our CC by converting the points to the respective airlines, we are also planning on booking our hotel in Venice entirely on points the exact same way. We had the money to pay cash for the tickets but the points were more advantageous in the amount used (the point per dollar good) and it was due to the specific CC we got that earns more points on travel purchases.

 

[Anthony1971]

I have never seen a credit hit for paying things early.
we paid our Mortgage off i believe it was 4 years. Did the same with a Condo which was my first purchase. We pay cash for new cars. Anything on credit cards is paid monthly etc. With a car although you pay cash (personal check) you still need to fill out a credit application when taking the car the same day. Bought a new car in February after my credit cards increased our limits . Honestly don‘t look at our credit scores anymore i can say after paying off our mortgage years ago they were very high. If you pay on time or early I don’t see how anyone would need to be concerned about having a score that hurt them in any way to get another loan or credit for ?. If you are building from bad Credit maybe there is a difference?

 

[lurkernj]

I voted to pay it off as fast as possible. Unless the interest rate is very low. As far as your credit score taking a hit from paying off debt, I don't see that as true. I have had no loans for over 3 yrs and my credit score hovers around 830. We do charge almost everything so we can play the points/miles game, but always pay off the bills at the end of the month.

 

[Carol_]

For all those doubting the credit score hit:
My score went from over 800 to a different number over 800 but 10 points lower after I payed off my student loans. It wasn’t a big deal except to me because I’m desperately trying to beat my husband’s credit score so I can have bragging rights.
Bragging rights are important.

 

[Mackenzie Click-Mickelson]

For all those doubting the credit score hit:
My score went from over 800 to a different number over 800 but 10 points lower after I payed off my student loans. It wasn’t a big deal except to me because I’m desperately trying to beat my husband’s credit score so I can have bragging rights.
Bragging rights are important.

I think the credit score drop is something that isn't a myth but nor is it universal.

When I looked it up it was basically going into someone's credit score portfolio. The variety of "accounts" as they call them account for something like 10% of the score (don't quote me on that, I think that's what I remember seeing) so when you pay off a debt that account is closed and your credit score portfolio is less diversified. If you've always made on time payments the dip, should it occur, would be likely a very small one and would be temporary.

For those who saw no impact they may have a different situation than yours.

I had to chuckle on the bragging rights because not going to lie when we were getting our mortgage I was slightly jokingly and lovingly of course poking that I had a slightly better credit score than my husband. The reason I guess I felt that way is because my debt to income ratio was a lot higher than his because he was always making $30K+ more than I was. And we only had 1 year's difference in length of credit history. But that was all a more playful poke to him

 

[robinb]

I voted for "pay off ASAP", but I would have voted for something like "pay debt in a timely manner" instead. I don't see a reason to put yourself in an uncomfortable situation paying every penny into debt (ala Dave Ramsey) if your only debt is something like a mortgage or a car. Of course, if you can pay down your debt faster and still live comfortably, that's cool too. We are now 100% debt free and it feels great not throw money away on interest.

Oh, and my credit score is over 800 and we have not paid credit card interest in over 30 years.

 

[MrsPete]

Just because none of what @DLgal is talking about applies to you now because you are retired and own a house doesn't make it not valid. It was directed at you buy people in general as most people do actually need to be concerned about their credit score and helping it grow. That's why there's places on redit and elsewhere about doing exactly that. No reason to be dismmisive of it. It it no longer applies why say it doesn't matter? Why say anything at all as it takes away from the question the OP asked about paying off their loan?

My larger point, which is being lost in this discussion:
People mistakenly think a good credit score means you're financially stable -- it doesn't. It mainly means you can be trusted to pay bills on time. You can have an excellent credit score and zero money in savings.
It's way smarter to focus on financial stability -- paying down debt, living within your means, putting money in savings every month -- instead of the credit score.

Anyone here talking about how they have good credit and always have GOT LUCKY as much as they "worked hard to pay off their bills and live within their means.

Mark Twain said, "I’m a great believer in luck, and I find the harder I work the more I have of it."

 

[Mackenzie Click-Mickelson]

People mistakenly think a good credit score means you're financially stable -- it doesn't. It mainly means you can be trusted to pay bills on time. You can have an excellent credit score and zero money in savings.
It's way smarter to focus on financial stability -- paying down debt, living within your means, putting money in savings every month -- instead of the credit score.

You're def. correct people's credit score does not mean they are rollin' in the dough. But you don't have to be all or nothing either as in never care about your credit score or only care about your credit score.

I don't worry day to day or month to month about my credit score but it was incredibly important what my score was in order to get the house I live in. Sure I could put a lot of cash down but not enough to get away without a mortgage not even close the days of a first time homebuyer being able to do that have been long over in many cities of the nation. That score is what allowed me to get the house I live in, so sure to you you don't have to care about it. But I did. The credit check was also part of the several apartment complexes I lived in and while I'm positive the threshold for credit scores was lower than the mortgage it was still part of the equation.

In 1989 FICO created the credit score model used for what we basically consider credit scores are comprised of. If the bulk of your formative credit history years were before you're, and forgive me if this sounds abrupt, likely out of touch with things. This goes for anyone and likely is the reason people can have drastically different experiences. For those of us later on our lives were structured on this score and the opportunities even available to us hinge on that score. It matters to me because it has to. Society has to change in order for it to not be.

 

[cvjw]

And just FYI, pre paying a year's worth of rent is NOT something that makes you an attractive renter. It would be a huge red flag. You know who typically offers to do that? Criminals.

And people who have enough legitimate money to pay in advance. I paid my kids college rent 6 months at a time. No discount, just didn’t want to fool with having to remember to pay it.

The apartment complex didn’t see it as a red flag. They loved it. Always had their rent on time.

 

[barkley]

In 1989 FICO created the credit score model used for what we basically consider credit scores are comprised of. If the bulk of your formative credit history years were before you're, and forgive me if this sounds abrupt, likely out of touch with things. This goes for anyone and likely is the reason people can have drastically different experiences. For those of us later on our lives were structured on this score and the opportunities even available to us hinge on that score. It matters to me because it has to. Society has to change in order for it to not be.

i have at least 10 years of credit history prior to '89-i am intimately familiar with FICO scores because like most adults of that era- i've both experienced it's initial implementation and the consequences of it's successes and failings for over 3 decades. i've been 'in touch' with it for over 3 decades of it impacting my adult life and am likely more intimately aware of it than many who simply know it in it's current form.

FICO was founded in 1956-in 1986 it went public on the nyse. 1989 is only significant to it b/c that is when it debuted it's first general purpose score. consumer advocates and some in the lending industry have long questioned the accuracy of FICO credit scores. FICO credit scores have shown racial disparities, with minorities having lower overall scores. additionally, several studies show that many consumers' low scores are because of unexpected life events that affect their ability to pay bills for an isolated period of time but once they get back on their feet, they are a good credit risk.

having lived as an adult pre FICO, pre actual enforcement of laws that prohibited unsolicited credit cards being issued (laws were created in the 70's but we were still being sent cards in the 80's and early 90's that we had to not only fight to be closed but then fight FICO to not use as a basis to ding our credit-which as a woman, let alone a (GASP-unheard of ) late 20's unmarried woman-was already a horrendous uphill battle) the opportunities afforded now despite FICO exceed much of what we ever dreamed of.

 

[Ms Bibbidi]

.

 

[Mackenzie Click-Mickelson]

i have at least 10 years of credit history prior to '89-i am intimately familiar with FICO scores because like most adults of that era- i've both experienced it's initial implementation and the consequences of it's successes and failings for over 3 decades. i've been 'in touch' with it for over 3 decades of it impacting my adult life and am likely more intimately aware of it than many who simply know it in it's current form.

FICO was founded in 1956-in 1986 it went public on the nyse. 1989 is only significant to it b/c that is when it debuted it's first general purpose score. consumer advocates and some in the lending industry have long questioned the accuracy of FICO credit scores. FICO credit scores have shown racial disparities, with minorities having lower overall scores. additionally, several studies show that many consumers' low scores are because of unexpected life events that affect their ability to pay bills for an isolated period of time but once they get back on their feet, they are a good credit risk.

having lived as an adult pre FICO, pre actual enforcement of laws that prohibited unsolicited credit cards being issued (laws were created in the 70's but we were still being sent cards in the 80's and early 90's that we had to not only fight to be closed but then fight FICO to not use as a basis to ding our credit-which as a woman, let alone a (GASP-unheard of ) late 20's unmarried woman-was already a horrendous uphill battle) the opportunities afforded now despite FICO exceed much of what we ever dreamed of.

I'm aware of FICO before 1989. 1989 is when they created the model that is used by pretty much everyone for everyone. Essentially that is when it became a standardized generalized method used and lenders favored it and have ever since. If your history is before that you were not under the same hmmm...pressure I should say because lenders may not have even used a credit score, they may have used different calculations,etc. Yes women were often barred or discriminated against many decades ago, the conversation was about your credit score itself though. Most of the people who are cavalier about saying your credit score isn't that important seem to be from a different era. One of which their ability to get or do things was not reliant on the actual score. Unfortunately at some point it became virtually required and almost universally adopted in its usage.

I was born in 1988, by the time I was 18 (which was the legal age back then for a credit card now it is 21 without parental consent) my whole world around me was about credit scores. It's a bit easier now because of authorized users but that was not nearly as common back then but in order to get credit you had to have credit and so the vicious cycle went.

Credit scores in general have severe societal issues, I can't control that, precisely why I said it won't change until society does. But try to get a house or a car even a cell phone and hard to live within your means to begin with if your housing places have minimum credit scores and you've never cared about it. To not care about it right now in this very moment likely means you had much of your life without the actual need for it because it was not used the same way. When the PP said about being privileged about not having to care she was right.

 

[barkley]

I was born in 1988, by the time I was 18 (which was the legal age back then for a credit card now it is 21 without parental consent)

where is this the law? in the united states-

The federal agency- CFPB (consumer financial protection bureau) has established special restrictions for banks providing credit cards to those under the age of 21. these restrictions require that they either have an independent ability to make minimum payments or have a co-signer who is at least 21 and agrees to become liable for the debt on the account.

this typically means that those age 18-20 can only report:

• Personal income from current work or regular allowances.
• Residual amount from scholarships and other financial aid (not student loans) after paying tuition and other college expenses.

there are countless under 21 year old members of the military, otherwise employed as well as college students who have applied for and independently secured credit cards.

But try to get a house or a car even a cell phone and hard to live within your means to begin with if your housing places have minimum credit scores and you've never cared about it. To not care about it right now in this very moment likely means you had much of your life without the actual need for it because it was not used the same way. When the PP said about being privileged about not having to care she was right.

you're right-credit scores were not used in the manner they are today but for some of a certain age/gender it would have been a moot issue when it came to buying a house or a car or engaging in anything related to credit anyway. it wasn't until 1974 that a woman in the u.s. could legally obtain a mortgage without a male co-signer. as well-credit generally couldn't even be established by a woman w/o a male co-signer until the mid 70's (thank you for helping us out with that ruth bader ginsburg). a woman might be able to rent a place to live but was still hard pressed to get a landline in her own individual name back then, same went with utilities. i witnessed many widows of my mom's age who had spent 50+ years working and contributing timely to their household's expenses and financial obligations yet once their husbands died they were invisible and not credit worthy (a widow never disclosed to a credit card company, mortgage company or utility that their spouse had died-the implications were dire). women did not consider themselves privileged then or now in hindsight to have been w/o the implications of a fico score.

the implications and challenges fico places on individuals is a separate issue from the difficulty of living within one's means. an individual can have a stellar fico score but still be barely scraping by financially, an individual can have no or a low fico score and be financially secure.

just my opinion.