freshman year i did the credit card thing and it hurt my score a little, everything has since been taken care of and everything but now im concerned about fixing and building my score. ive read a few things that say auto loans are a good way to build good credit, but other things that say the opposite. i can afford to pay cash for another car, but if a low interest auto loan is a good way to build credit then i will just go ahead and finance through my credit union. i am not borrowing more than i can afford, and wouldnt ever risk missing or being late on a payment.

is an auto loan a good way to help build my credit score?

(i realize that i will get all kinds of answers, but im hoping that one or two responses are from people who actually know or possibly even work in this field)

5/2/2007 3:03:39 PM

yes

5/2/2007 3:04:42 PM

no

5/2/2007 3:05:56 PM

yes a loan that you pay in ful/on time will help your credit score - the only way it will hurt it is if it puts your income/debt ratio past the mark that whoever is checking your credit finds acceptable

5/2/2007 3:06:55 PM

keep in mind that the credit union won't finance any car you want, usually it has to be less than 5-7 years old. interest rate will probably be between 8-10%

5/2/2007 3:07:51 PM

and i guess the only way to determine that mark is to go to the loan officer with all of my income and debt stuff and get his opinion?

^any car, 6%

[Edited on May 2, 2007 at 3:08 PM. Reason : .]

5/2/2007 3:08:14 PM

It will help your score. You should finance it and invest the difference.

5/2/2007 3:29:14 PM

Yeah, SECU was 6.25% when we did our auto loan. And I'm pretty sure they will finance any year, but they just won't finance under a certain amount (this all assumes that the vehicle you want to finance is worth the amount that you are financing it for, which is something that they research). But I digress...

5/2/2007 3:29:43 PM

i'll probably just borrow about $6k, im assuming thats way above the minimum a credit union would finance.

5/2/2007 3:34:58 PM

they usually will want to run the VIN number and make sure the vehicle is actually worth the amount you are borrowing against it. vehicles are a good way to build credit, if nothing else.

5/2/2007 3:49:25 PM

This shouldn't be an issue, but make sure the credit union reports to the credit bureaus before you take out the loan.

I have only financed one car in my lifetime and I found out after I paid the loan off (2 years) that the bank I used does not report to them. So basically I was 22 years old and I had no credit whatsoever on my credit report.

5/2/2007 4:43:23 PM

i guess i don't get it. if you already qualify for 6% on a used car, you credit score is good enough for prime loans, now you'll be adding debt which may lower your score in thius case.

5/2/2007 5:37:15 PM

Dispute the negative entries from the paid/closed accounts. Say they are inaccurate, say they were never late, etc, etc. If the account is closed and paid there is a good chance at least two of the three bureaus will remove the delinquencies from your report.

They have to verify all the information each time you dispute it and often times the company that reported it will not bother responding if the account is paid in full.

5/2/2007 6:46:03 PM

What don't you get sd?

5/2/2007 6:53:21 PM

Auto loans will help your credit score but as said before if you want to do an auto specific loan you need a few things. Depending on the bank you use they have minimums on how much the auto is worth in order for you to qualify. On most occasions it is $5k, and you will need to know all of the info like the vin, year, make, model, etc for them to approve you. Also from working at a car dealership it is well known that SECU gives the best rates.

Also I am not sure, but at Wachovia when I just got a motorcycle loan they would only finance you up to something like 80 or 85 percent of what the motorcycle was actually worth. I am not sure if that applies to auto loans too, but you might want to check that out.

5/2/2007 6:59:21 PM

he says he can get 6%, which is a prime rate. why would he add debt to help raise his score? there are better ways to raise a FICO than adding debt. if someone (mom or dad) adds him as an authorized user to a credit card by providing an ss#, that card will report to the credit bureaus under his name and reflect their positive payment history, acct standing, etc.

5/2/2007 6:59:35 PM

as mentioned before - SECU typically does not report car loans to the credit bureau

5/2/2007 7:36:37 PM

Quote :

"he says he can get 6%, which is a prime rate"

That rate is for payroll deduction and advertised on the secu website. This is a standard rate advertised to its customers. If the OP were to apply for something more specialized, such as a mortgage, he would more likely to pay more as a result of his dinged credit score. Furthermore, it makes sense to borrow at 6% since you can almost certainly do better investing in the market.

5/2/2007 8:01:47 PM

imo, you're better of getting a small personal loan and investing it in something you'll get an equal or greater return on or a credit card that you make a few small purchases on a month, such as gas, food, etc.

i don't think a car loan is the best thing if you're main goal is improving your credit. you've got to consider the added cost of insurance, maintinance, and depreciation. there is the greater risk of major mechanical failure, then you're stuck in a loan throwing your money away. now, if you really need a car, that's another story.

also, any loan officer worth a damn can give you some tips on the best ways to improve your score as quickly as possible.

5/2/2007 8:16:22 PM

My SECU car loan shows up on all three of my credit reports. But they may choose to report based on the amount of the loan. Mine was ~$20k.

5/2/2007 8:20:32 PM

^^i could only get a very small personal loan, and i already have a credit card that i use for bills that gets paid off monthly.

i have to pay for insurance, maintenance, and take a depreciation hit whether i finance the car or pay cash. i will probably get a 36 month loan on a used car (and one that holds its value well) so depreciation isnt going to make me upside down on the loan. even with just poor or average returns*8 on the money a 6% loan over 36 months isnt going to cost me that much, so if i can get my score up 15-20 points (i guess?) then its worth it to me. i dont need the car, but i sold my 5 series awhile back (just a short term thing, made a little money on it) and the e30 is starting to get a little rough as a DD.

im already doing everything i have been told, but the auto loan is something that i have received mixed advice on. i can afford the car outright, but wanted to get more opinions on financing to fix credit.

^yeah, i guess i should check because im not interested if this isnt going to help my score.

*and it looks like i can get a 5.5%-6% CD

5/2/2007 11:39:50 PM

buy a house

5/3/2007 1:36:42 AM

i dont really make enough money, and im not sure if im in the area i will be staying

5/3/2007 6:02:45 AM

Quote :

"*and it looks like i can get a 5.5%-6% CD"

Unless you need the money soon, don't invest in conservative things like cds.

5/3/2007 7:20:34 AM

i was just using that as an example, it would mostly offset the interest for the loan and would be a sure thing return. i may be able to beat that investing elsewhere, but a CD removes the risk.

5/3/2007 10:40:49 AM

True, but then you are losing money instead of gaining.

5/3/2007 10:44:05 AM

well if i cant get one for 6%, but it would be losing very litte instead of possibly gaining. i was giving a no risk example.

5/3/2007 10:45:53 AM

buy a condo/townhome

5/3/2007 11:30:45 AM

im not buying anything until i can afford a much larger down payment than i could swing now

5/3/2007 7:14:39 PM