Which would you pay off first?

[highdel]

If you had $5,000 left on a truck loan at 5.9% interest with a monthly payment of $361 on an unsecured auto loan and

a $5,000 balance on an unsecured credit card at 5.9% interest which you're also paying off at $361 a month,

and you happened to earn an extra $5,000 in cash that you can use to pay off either one,

which would you pay off first if your goal is to increase your credit score?

Does it matter which you pay first with respect to your credit score, or are they both considered the same kind of debt?

[NikoSan999]

How do you get an unsecured auto loan? Is it a credit card? Never heard of this.

Either one but if had to pick one I'd pick the credit card then cut it up.

[Libby]

I'd continue the monthly payments until the debt it gone/paid off - AFTER you've put $2500 on both.

[highdel]

Hmm... maybe it's not an unsecured car loan. I'll have to double-check that since you've not heard of it..

So, as best you can tell, with respect to credit scores, it doesn't really matter which I pay first?

[2ndGenGranola]

If it were me, I would pay off the truck first. The reason is that I could change around the insurance now that I'm the one holding the papers instead of "the bank" and get a reduced rate on that giving me a little extra each month to put on the other.

[brennasmom]

I would pay the auto loan first

[craftypam]

I would pay off the credit card because even though the interest rate is the same you pay more interest on the cc because when you make your payment you are still paying interest on the amount you paid as well as the unpaid balance.

[sinopa27]

how about paying 2500 on each. Then you are just looking at 2500 on a truck and 2500 on a cc.

[lparker]

For credit score purposes, I'd pay off the card. Paying off a vehicle won't do much of anything to your score as long as you are on time with the payments. Paying off the card and not closing it will increase your debt to credit available ratio which is a plus for credit scores. The key to this is to NOT use more than a third of the available balance on the card and pay it off monthly (and on time).

Lee

[highdel]

Thank you, guys.

You know, I never thought that owning the papers on the truck would help with insurance costs, but my goal is to improve the credit score first, so it looks like the card gets the scissors.

Thank you for your help!

[mndtrp]

Owning the title will allow you to change your insurance policy, not being forced into having comprehensive. I don't think simply owning the title will lower your insurance rates.

Regardless, I would pay off the card first.