credit score question (financial question)

[Grumpy's Gal]

Help settle a discussion.....

would 10K in car debt hurt a credit score equally as 10K in credit card debt?

If you had both and you were going to pay one off, would one be preferable as far as credit scores are concerned?

 

[sarmat1]

They're both installment debt so it really shouldn't matter either way to a credit score. As to which to pay off first, that's easy. The one with the higher interest rate.

 

[elgerber]

They're both installment debt so it really shouldn't matter either way to a credit score. As to which to pay off first, that's easy. The one with the higher interest rate.

A credit card is not installment debt, it's revolving, which I would payoff first.

 

[marmalade]

The car is secured debt, with the vehicle being the collateral where the credit card debt is unsecured, making the CC a riskier debt to hold. I would pay off the CC debt first, it also probably has a higher interest rate.

 

[heartsy77]

The car is secured debt, with the vehicle being the collateral where the credit card debt is unsecured, making the CC a riskier debt to hold. I would pay off the CC debt first, it also probably has a higher interest rate.

 

[AshleyD1983]

DEFINITELY pay off credit card debt first! Credit cards have a much higher impact on your credit score because of the fact that they show financial responsibility or a lack thereof. Paying off an auto loan would not raise your score near as much.

 

[Pesky]

The car is secured debt, with the vehicle being the collateral where the credit card debt is unsecured, making the CC a riskier debt to hold. I would pay off the CC debt first, it also probably has a higher interest rate.

This exactly. One is secured debt, one is unsecured. They are not seen equally. CC debt as unsecured is viewed as a more risky proposition and there is only so much they want to see any individual holding in unsecured debt (including available but not used amounts).

 

[kathie859]

To improve a credit score (if that is the goal) one would pay on the credit card to reduce the utiliization percentage of revolving debt. That's one of the major components of the credit scoring process.

If you have a great score anyway and it doesn't matter to you, pay whichever one has the higher interest rate.

 

[Planogirl]

I agree that the utilization rate could be impacted by the credit card unless you have a huge limit. I would pay it off.

 

[aea71]

Credit card debt is revolving and the higher the balance carried as a percentage of your credit limit, the more impact it will have on your score. Vehicles are secured and considered installment debt and don't have the same impact as revolving debt.

 

[sookie]

They're both installment debt so it really shouldn't matter either way to a credit score. As to which to pay off first, that's easy. The one with the higher interest rate.

Not true.
The car is installment. The credit card is revolving and unsecured. Much riskier.
The car should "hurt" worse than the credit card. Especially during a manual review (like a mortgage).