Building Credit - Finance Car or Not?

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13 posts

Finance the car for an extra $500?

Poll ended at Thu Nov 20, 2014 6:55 pm

Yes
1
10%
No
9
90%
 
Total votes : 10

GoCreditGo!
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Building Credit - Finance Car or Not?

Postby GoCreditGo! » Wed Nov 05, 2014 6:48 pm

In the process of buying a new car, I find myself where Discover's FICO score monitor is telling me:

Your report shows no open or recently reported non-mortgage installment loans. People responsibly using different types of credit are generally less risky to lenders



Should I pay an extra $500 in admin fees just to get to pay the car off monthly and have it hit my credit, or is it better to purchase it without financing?

*Please assume all payments will be made on time, or just 1 payment to rule them all.


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Vattené
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Postby Vattené » Wed Nov 05, 2014 8:46 pm

I think if you can afford to buy the car outright, you should. No need taking on debt when it isn't necessary. That is a lot of money to pay just for a higher FICO, and there is no telling if having that higher score will save you more money down the road.
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GoCreditGo!
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Postby GoCreditGo! » Wed Nov 05, 2014 8:52 pm

I appreciate that. I really wasn't sure what to do. I think the $500 could buy years of the credit monitoring program.


Vattené wrote:I think if you can afford to buy the car outright, you should. No need taking on debt when it isn't necessary. That is a lot of money to pay just for a higher FICO, and there is no telling if having that higher score will save you more money down the road.

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Postby Nixon » Wed Nov 05, 2014 9:30 pm

GoCreditGo! wrote:
*Please assume all payments will be made on time, or just 1 payment to rule them all.


One large payment wouldn't do a darn thing for you and in fact would lower your score due to AAoA drop and inquiries.
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whit
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Postby whit » Wed Nov 05, 2014 11:29 pm

I'm going to go against the grain here and say it's a good choice

If you pay a down payment on a car, and get a loan on it, even if it's a small one (say, car is 20k and you put 10k down)

It reports to your credit for one
Two, frees up cash flow for you so the extra cash can stay in investments or, keep it in account for rainy days down the line.

but that's assuming you have little to no credit cards open, no student loans, mortgages or auto loans so having this auto loan would be beneficial

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Postby Nixon » Wed Nov 05, 2014 11:30 pm

whit wrote:I'm going to go against the grain here and say it's a good choice



I would only do it on a 0% Auto Loan under the OP's circumstance.
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whit
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Postby whit » Wed Nov 05, 2014 11:36 pm

Ten years ago? Yeah, I would feel the same

I was a coowner or authorize user, heck I don't know I was 16 and my mom got a credit card for me, by the time I was 18, I applied for my own cc and got approved, also same with Amex, and most recently discover

Never had an auto loan, or student loan, and my CL is decent (not just a few hundred or a few thousand) for each card

However, these days I'm seeing students, adults, Americans and non residents have difficultly getting a credit card--building credit

I don't know what the magical formula the underwriters use and maybe the pple I speak to don't always tell the truth, even when my guts tell me they have no reason to lie but not having much on your file--

Is obviously not going to get you the 0% that is usually associated with excellent credit

And so yes. oP will need to pay 3-7% (hopefully on the lower end) but, you can't buy credit with cash, this is as close as you can get.

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Postby Nixon » Wed Nov 05, 2014 11:42 pm

whit wrote:
Is obviously not going to get you the 0% that is usually associated with excellent credit

And so yes. oP will need to pay 3-7% (hopefully on the lower end) but, you can't buy credit with cash, this is as close as you can get.


Oh, believe me. I have 3 Auto Loans which paint a picture of my credit as it's improved over time.

12.14%, 4.49%, and 0% on our newest car.
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whit
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Postby whit » Wed Nov 05, 2014 11:49 pm

So you started out on the bottom and rose to the top

I'm sure that you did a stellar job the first time and then the second time around you got a lower rate, and now 0

But you can't expect everyone to get the same 0 out the door, it's gotta be worked for

I've seen people whose been through bankruptcy get a car loan before they're approved for a credit card

It's easier because there's collateral, it's "secured" and will build credit

If OP already had a couple of credit card, the history, etc..probably can get a mortgage without having to do an auto loan so yeah he can pay cash for the car

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kcm7
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Postby kcm7 » Thu Nov 06, 2014 9:56 am

For me, it would depend where my credit is at currently. If your credit is excellent and you just want to obsessively polish it to a shine, I don't think it's worth $500. Credit Karma has been shouting at me for my lack of installment loans, as well, but if I can afford a new car with cash, I'm paying cash.

If your score is not so hot, an installment loan may be a good way to help it grow.
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