If I pay off my loan, will my credit go up?
I have been trying to monitor my credit because I am trying to get the best rate on a mortgage. In the last 2 months, my credit has dropped 24 points from 792 to 768. I have a 1% debt to credit ratio. I took out a loan 1 year and 6 months ago to condense my debt into 1 monthly payment of $494 a month. The loan reduced my credit score.
Paying off the loan will not necessarily increase your's credit score, but will definitely increase your options of obtaining a mortgage. Even though your credit score was reduced down to 768, this is on the edge of excellent with regard to the credit bureaus and should be of no concern at the present time. It sounds like you're in awfully good shape to get the mortgage so long as you can put forth a reasonable down payment like 20% plus. I hope this helps and good luck.
Sometimes it is more beneficial to your credit score to show a track record of monthly, on-time payments than to pay off the loan. It doesn't sound like you have much other debt, so it may be better for your credit score to carry this debt. Depending on your situation, your credit score can recover quickly from a drop like that when you start paying off the loan. If you aren't already using it, try www.creditkarma.com. It is a great free resource for monitoring your credit score from two of the three credit bureaus.
As for the mortgage, if you are just trying to get the best rate, shopping around for the right company may get you a better rate than the difference between a 792 and a 768 credit score will. There are so many mortgage companies competing for your business at these low rates that you can play them against each other. Look around online and see who is offering the best rates. Check your local credit union, sometimes they have the best deals. The process is a little time consuming, but it can yield much more concrete results than trying to figure out how the credit bureaus determine your credit score.