Posted on: 21st Apr, 2010 01:51 pm
Which would be better to pay off first to raise credit score -- car loan or heloc?
Welcome tam,
Whether you pay off your car loan or your HELOC, both will have a positive affect on your credit report. Paying off both will help you in increasing your credit scores. I would suggest you to make payments towards both the loans and pay them off asap.
Whether you pay off your car loan or your HELOC, both will have a positive affect on your credit report. Paying off both will help you in increasing your credit scores. I would suggest you to make payments towards both the loans and pay them off asap.
Based on my research and experience, paying off/down your HELOC may have more positive impact on your score than paying off your car.
30% of your score is based on your debt utilization ratios. In other words, your balances in relation to your limits. Because your car loan is a fixed payment loan and not a revolving credit loan, the models don't really factor it in your overall debt utilization. (From what I can tell).
Your Heloc on the other hand is treated like a credit card in many cases. It has a limit and a balance and those factor into your debt utilization ratios. If your balance is high in relation to your limit, you should experience more improvement in your score by paying on the HELOC. However, the bureaus have varying rules behind the scenes that can treat HELOCs differently depending on the limits.
Short answer, paying revolving debt should help you more than paying fixed debt. From an accounting standpoint, pay the one thrging you the most interest!
30% of your score is based on your debt utilization ratios. In other words, your balances in relation to your limits. Because your car loan is a fixed payment loan and not a revolving credit loan, the models don't really factor it in your overall debt utilization. (From what I can tell).
Your Heloc on the other hand is treated like a credit card in many cases. It has a limit and a balance and those factor into your debt utilization ratios. If your balance is high in relation to your limit, you should experience more improvement in your score by paying on the HELOC. However, the bureaus have varying rules behind the scenes that can treat HELOCs differently depending on the limits.
Short answer, paying revolving debt should help you more than paying fixed debt. From an accounting standpoint, pay the one thrging you the most interest!