Whats the best way to re-establish bad credit…paying off a loan or making payments?
I dont have any credit card debt, but I do have a few loans out that are kind of killing me, My credit score is much less than desirable. Im moving in with my parents soon so I can work on re-establishing credit and get approved for a home loan within the next couple years. My question is…is it better to pay loans off in full, or to make payments monthly? Any added input is appreciated!
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So long as you pay enough on the loan to keep it current, your credit will be fine either way.
If you have late payment notations on your credit report, you need to realize that once those lates are 12 months old, their effect is reduced significantly. Once they reach 24 months old, their effect is minimal.
Thus, all you need to do in order to buy a house in 2 years is get current and stay current.
I mean, you can always pay off your loans early if you like, but you might be better served by getting a credit card and keeping your utilization at 30% of the total balance or less. Pay it off every month and by the time you’re ready to buy a house your FICO will probably be in the 700’s.