Bankruptcy and Credit Rating - The Bills.com Blog

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Bankruptcy and Credit Rating

Monday, Apr 23, 2007

Question: I have a dismissed bankruptcy in 2003. My score now is 694. I have a $17k auto loan - should I pay it off now or continue making payments?

Answer: Answer: If you have made all payments timely on this secured auto note, the account has likely already improved your credit score. Payment history and length of credit history are two of the most important factors used in calculating your credit score, accounting for 50% of the total score. The longer you continue to make timely payments on your auto loan, the more your credit score should improve. Paying off the account should not hurt your credit score, but it will probably not improve it either. If your credit score is your only consideration, continuing to make timely payments is likely the best choice.

However, we do not live in a vacuum, and your credit score should not be the only consideration
when deciding how to manage this loan. For example, paying off the account now could save you a lot of money in interest payments. If the loan has a favorable interest rate, the positive credit impact of continuing to make payments may be worth the small amount of interest you will pay on the note. On the other hand, if the interest rate is high, paying the loan off now would likely be the better financial decision. To decide which option is best for you, I recommend that you review
the terms of your loan and determine how much interest you will save by accelerating your repayment of the loan. Once you know how much each option will cost you, you can better decide which choice is right for your circumstances.

For more information about credit reporting, credit scores, and ways to improve your score, I encourage you to visit the Bills.com Credit Resources page at http://www.bills.com/credit/

I hope this information helps you Find. Learn. Save.

Best,
Bill

Also, make sure to get a free financial health check-up with Bills IQ!

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Bill has answered all sorts of questions and has been able to provide those in need of financial guidance with helpful and valuable advice and information on their specific financial area of interest. If you need specific guidance on any of the above mentioned financial areas, feel free to Ask Bill your financial questions and get better informed. Also, make sure to get a free financial health check-up with Bills IQ!

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