My dad told me not to pay off my car loan because it will hurt my ability to get...

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Brad

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...credit in the future. True? I technically have 3 years left on my car loan, but I'm sitting on enough money to pay it off, so I was going to, but my dad told me not to. He says if I do, I will not be able to get credit for a home purchase or another car in the future, as I need to establish good credit by paying the loan off for the whole 5 years (been paying for 2 1/2 actually).

Is this true, or can I pay it off?
 
Your dad is a little bit right and a little bit wrong.
Showing that you can make long term payments timely does help increase your credit score.
However, by having them paid off, that shows that you are willing to take care of the loans.

Plus, if they are paid off, then credit companies are More willing to give you another loan because you are not maxed out in credit card debt.

In other words, you have established a good history so far, by paying this off you show that you are a good risk and this makes credit companies like you more. The less you have in debt, the more they think they can loan you.
 
Auto finance is what I do for a living and 90% of your score is based on the last 24-months of activity so since you have been making regular payments for 2.5 years you have already achieved the most benefit score wise that you can get.

So, having been in this business for over 9-years and looking at credit every day It's my opinion that you should pay off the loan and save the interest.

Or at least double or triple up on your payments and pay off the loan as soon as possible.

Good luck.
 
First off, good for you. This was an important step in gaining a good credit history. Depending on the interest rate you are paying on the car loan, it might be a good idea to stretch those payments out a bit. Make your monthly payment and an additional amount on the principal of the loan. This will shorten your loan and reduce the int erstt you are paying over the life of the loan. It should be a really good rate though (under 4%) You could instead, pay off the car and apply for a low interest credit card offered through your bank or credit union(always better deals at credit unions and establishing a financial relationship with one gives you an edge when it comes to futre transactions). Use the card and pay off the balance each month to avoid accruing interest. This will give you a steady report of paying your bills on time, a big factor in credit history.
 
It will NOT hurt your credit, in fact it will help it a great deal. I just paid off 2 car loans and now have a credit score of 837, it was 790 before.
 
The cost of the credit (interest) you will be paying *now* is to be weighed against the interest rate you will pay in the future.

Your dad thinks another 2.5 years of on time payments will be worth it.

I don't.

The problem is, neither one of is right.
 
Would you be willing to borrow money and pay interest on it for 2 1/2 years to improve your credit score??? That is essentially what you would be doing by not paying off the loan.

Pay it off and be debt free.
 
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