Better for Credit: Pay off now or Make scheduled Payments?

I took SnakesCatLady’s advice recently and got a small loan from the bank yesterday. I only needed it to hold me over until the end of the month, though. So I could either pay off the entire loan next month, or I could make the 12 scheduled monthly payments instead.
I realize that if I pay it off over the course of the year, I’m going to spend more money paying it off. It’s a $1500 loan, 12 months at 12%. So if I pay it off gradually, it will cost me like $180 dollars. But will my credit rating receive any benefit from doing it this way instead of paying it off at the end of the month? I would think that a bank prefers me to make monthly scheduled payments, because that’s how they make money. So maybe that looks better to the lender than if I just pay it off right away. Or does paying something off immediately look better?
So which is more beneficial to me? I wouldn’t mind paying the extra money over the course of the year if it was going to boost my credit score like 50 points or something. If not, then I’ll pay it off in full when I get my first month bill.

First off: There are a ton of misconceptions about credit scoring that need to be destroyed and then rebuilt from the ground up when it comes to most people’s (vague) understanding of it.

Do you need a optimal credit score right now to buy a home or a car in the next few months? If not, just pay the thing off and be done with it. A maximized credit score and 50 cents will earn you a morning paper,

Secondly, how bad is your credit right now? If it is bad (say below 650 give or take) then you might want to take what you can get. Otherwise, if your credit score is in the 720 range, getting a better credit score isn’t going to do you any real-world good. There are stories about offers to people with credit scores of 750 and higher but they are really rare and don’t apply to most people and they don’t confer much advantage even if they do.

Back to the basics: Have you gotten your (free) credit reports from the three major credit reporting agencies. If not, you would have been much better served to spend the time to order them (again for free) than to start this thread in the first place. The first time I got mine about 10 years ago, about 50% of the entries were in error. They had me signed up for credit cards before I was born and married to my father’s ex-wife. Disputing those almost instantly brought me up from a credit score of 630 to close to an 800 and qualified me for virtually everything.

Paying off cards over time will establish credit more effectively in some cases especially if you are well below your credit card limits but the money it costs you in interest will not be worth it in most cases.

Again, a good credit score is almost always good enough for real world purposes. Do yo have a specific need to have the best it can be right away?

No specific immediate need. I ran my credit report a little over a month ago. Depending on the agency, I’m in the low 7s or high 6s. ETA: It’s kinda my goal at this point to break 750.

You mentioned credit cards in the reply, but I’m talking about a small loan. In my specific situation, would my credit be more improved 12 months from now if I make the 12 monthly payments? Or would I be better off paying it in full.
Or would paying off 2/3 of it now, and then making small monthly payments to pay the rest of the balance over the 12 months be the best thing to do?

Credit scores are a bit of a black art because no one except for the people that calculate them knows exactly what is used and how. If you have very little credit history, spreading things out over time will help you establish credit. OTOH, so will charging $20 to your credit card every month and then letting it revolve will do the same thing if you just pay it off diligently. The $180 interest seems excessive given that you have no clear goal. Good credit is a little like dental hygiene. You don’t need to do anything drastic. You just have to take care of the basics over time and the rest will take care of itself. Stunts are rarely necessary unless you need to correct a marginal problem under extreme circumstances. No one needs to get the highest score they can at all times. It is just a metric that is widely used but inconsequential unless you are applying for credit right away.

There is no pint in having a specific credit score in mind. A decent credit score is great but a 760 will get you almost nothing in normal circumstances. Lots of people fall into this weird trap. Just keep yours healthy through responsible behavior and everything will be fine. 720 is the common cutoff for great credit and anything beyond that is just a stunt. I have seen people trying to figure out how to consolidate credit cards, cancel credit cards, and schedule optimal payments to get the highest score possible and yet nobody cares.

It is like playing a video game and there is no real world benefit. I actually did this myself once as a game when my company got sold and I just sat in my office for 4 months with nothing to do. I wish that I documented the whole thing because I got myself a credit score of well over 800 (I don’t think that was the FICO score though but it was from one of the reporting agencies before they gave out real FICO scores). Almost every loaning company in subsequent months told me it was the highest score they ever heard of. Still, it was just a stunt and I simply got the same loans and rates as everyone else.