Thinking of paying off a lump sum

serapis

Hi all,

Does anyone have any idea how my credit file will be affected if I paid off a long term loan (Car PCP) of Approx £8,000?

Does this amount, with no late payments etc, increase or decrease my ratings with the agencies?

Reason for asking is, a few years ago I reduced some overdrafts as I didn't need them, from £500 to £150 for 2 accounts. I saw my rating decrease due to the available credit having decreased. I don't wish to once again, through trying to better my rating, inadvertently do it any dis-service.

Thanks.

Kim_13

You should be thinking about how much you would save by paying it off and whether you can afford to do so (do you have an emergency fund left if you pay it off?), not what a meaningless Noddle/Experian score says. Lenders make the decisions, not the Credit Reference Agencies.

National_Debtline

Hi

I suspect a partial settlement would make your ratings go down but as Kim_13 says, your ratings aren’t viewed by potential creditors and don’t actually mean anything.

James
@natdebtline

serapis

National_Debtline wrote: »

Hi

I suspect a partial settlement would make your ratings go down but as Kim_13 says, your ratings aren’t viewed by potential creditors and don’t actually mean anything.

James
@natdebtline

Hi,

Sorry for the confusion. I'm looking to pay off the full amount, not partial.

Kim_13

It's difficult to predict. It would lower your available credit (lenders may think that you are a good bet if others are trusting you with large amounts of money.) On the other hand, it would lower your ratio of debt to earnings, which is good. The account will still be visible on your report for 6 years from the date it is paid in full, so the history of your account conduct will remain.

As I say, though your score may go down a little, my primary concern would be how much I'd save and what I'd do if I suddenly needed several thousand pounds after paying off the loan. If you'd be relying on credit card with a higher interest than the car loan in that case, then perhaps only pay off some of the car loan at this time.

Ben8282

Paying off a LOAN does NOT lower available credit.
CLOSING (not Paying off) a CREDIT CARD account does.


Making full repayment of the loan will have a positive effect as it will reduce your debt.