Hi Bitches! Credit score question: I'm set to pay off my car loan this summer (1.5ish yrs early) and with snowballing my student loans should be gone by end of next year (3-4 yrs early). I'm pretty proud of my 'excellent' credit score, but those two loans are my older lines of credit. Can/will there be any negative impacts from not having them any more? I always see debt=bad, but also old credit=good???? Is there any logic in the whole system?
Oh man, this is like the classic logic question of personal finance. "If having debt is bad and a high credit score is good, but paying off debt too fast suddenly causes my credit score to dip, is it better to stay in debt for my credit?" It's infuriating and unfair.
So first thing you should do is read our primer on credit:
Dafuq Is Credit and How Do You Bend It to Your Will?
Next, you should remember what credit is for. You need good credit to get loans, open a credit card, secure a mortgage or apartment lease. So while your credit will definitely take a brief dip when you pay off those student loans and car loan, you need to weigh that dip against your need to have really high credit. Like, do you have time for your credit score to recover before you need to use it to apply for a loan again? If so, then don't worry about paying your debt off in a hurry!
Also? If your score is already great, a small dip won't matter. And it won't hurt you as much as having that debt paid off will help.
Here's more for anyone who got lost at "snowballing":
The Best Way To Pay off Credit Card Debt: From the Snowball To the Avalanche
