Bank told me to pay off my car loan before applying. That was bad advice.

Six months ago I was getting ready to buy my first house in Spokane. My loan officer at Wells Fargo said I should pay off my $4,200 car loan to lower my debt-to-income ratio. So I did it. Used my savings. Then when I applied, my credit score dropped 30 points because the account closed. That made my rate go up instead of down. I called a different lender and they told me I should have just kept making payments and let the balance go down naturally. The whole thing cost me an extra $60 a month on the mortgage. Has anyone else had a lender give them advice that backfired like that?

2 comments

2 Comments

sage_lewis101d ago

Yeah it's like nobody tells you that paying off debt early actually hurts you in the short term. I see this all the time with people trying to do the right thing but the system is set up to punish you for it.

tylerw721d ago

My buddy Mike paid off his car loan six months early last year. A week later his credit score dropped 40 points for no reason he could find. Now his insurance rates went up because his credit based insurance score tanked. He basically paid extra money just to get punished for it.