Which is better for your credit?

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agp
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Which is better for your credit?

Postby agp » Sun Apr 28, 2013 8:35 am

I am purchasing a car in the near future, is it better to pay in cash, take out a loan and pay it over time, or take out a loan and pay it all down in a few payments? Which is better for your credit?

Main Card: Amex Platinum
For gas: Penfed Platinum Cash Rewards
For travel & dining: Chase Sapphire Preferred


Scoach
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Postby Scoach » Sun Apr 28, 2013 10:27 am

Well,

If paying cash, your credit is not involved. So scratch that idea. Paying over time hurts your credit a bit in the short term as your debt ratio increases, but its offset a bit by having new credit and a better mix of credit. Taking the loan and paying a lot of it right away is probably your best option. I'd quickly pay half of it down, then take my time with the rest. I should probably do that with my current loan, but I am just not that worried about my score right now.
AmEx - Platinum, Gold, Bluebird
Chase - CSP, Freedom
HSBC - Orchard Bank (1999)

cashback
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Postby cashback » Sun Apr 28, 2013 11:21 am

Pay cash. Is paying the interest worth possibly helping your credit? In my opinion, no.
Credit Cards
Amex BCE 25K ---- PenFed Platinum Rewards 15.5K --- US Bank Cash+ 12K --- Discover IT 6K --- Citi Dividend 5K --- Chase Freedom 12.5K --- Amex SPG 6K --- Citi Thank You Preferred 15K

Not Used
Citi Simplicity - 5K, Sam's Club Discover - 10K

Future Cards
Sallie Mae World Mastercard

FICOs
Exp 772 - TU 781 - Equ 781

Scoach
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Postby Scoach » Sun Apr 28, 2013 11:37 am

cashback wrote:Pay cash. Is paying the interest worth possibly helping your credit? In my opinion, no.


I disagree completely. The average car loan right now is hovering in the 2-2.5% category. About 6-8x better than the average credit card rate. You're talking $200 on a $10k loan. How many people on this site would pay an AF on a card with a $10k limit if it was interest free. This is the equivalent. If he pays off half the loan as I suggested, he'd be looking at about $100 in simple interest after a $10k loan. That's an outstandingly low cost to borrow money.

Paying cash would rob him of the ability to:

1. Help his credit mix
2. Keep money in the bank drawing interest
3. Show positive on-time payments on his credit
4. Show new established credit.

I can hardly think of a cheaper instrument to help build a person's credit than a car loan at today's low rates.
AmEx - Platinum, Gold, Bluebird
Chase - CSP, Freedom
HSBC - Orchard Bank (1999)

cashback
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Postby cashback » Sun Apr 28, 2013 11:57 am

That's a good argument. However, if OP does do it your way, I hope he wont just let his money sit in a savings account, drawing a measly 0.5%.
Credit Cards
Amex BCE 25K ---- PenFed Platinum Rewards 15.5K --- US Bank Cash+ 12K --- Discover IT 6K --- Citi Dividend 5K --- Chase Freedom 12.5K --- Amex SPG 6K --- Citi Thank You Preferred 15K

Not Used
Citi Simplicity - 5K, Sam's Club Discover - 10K

Future Cards
Sallie Mae World Mastercard

FICOs
Exp 772 - TU 781 - Equ 781

Scoach
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Postby Scoach » Sun Apr 28, 2013 12:12 pm

cashback wrote:That's a good argument. However, if OP does do it your way, I hope he wont just let his money sit in a savings account, drawing a measly 0.5%.


I would hope so as well, but I am not going to offer investment advice here.
AmEx - Platinum, Gold, Bluebird
Chase - CSP, Freedom
HSBC - Orchard Bank (1999)

agp
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Postby agp » Sun Apr 28, 2013 5:32 pm

Haha thanks for all the advice. You don't have to worry about me putting all my moneys in my savings account. I think taking out a loan is a better deal, 2.5% really isn't a big deal.

Main Card: Amex Platinum
For gas: Penfed Platinum Cash Rewards
For travel & dining: Chase Sapphire Preferred

cashback
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Postby cashback » Sun Apr 28, 2013 6:42 pm

Penfed has used auto rates at 1.74% and they take it down to 0.74% if you use their car buying service.

https://www.penfed.org/used-auto-loan/
Credit Cards
Amex BCE 25K ---- PenFed Platinum Rewards 15.5K --- US Bank Cash+ 12K --- Discover IT 6K --- Citi Dividend 5K --- Chase Freedom 12.5K --- Amex SPG 6K --- Citi Thank You Preferred 15K

Not Used
Citi Simplicity - 5K, Sam's Club Discover - 10K

Future Cards
Sallie Mae World Mastercard

FICOs
Exp 772 - TU 781 - Equ 781

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Z06Biker
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Postby Z06Biker » Sun Apr 28, 2013 7:45 pm

Scoach wrote:I would hope so as well, but I am not going to offer investment advice here.


On the next big juicy dip, do as Jim Cramer does and "buy buy buy!!"
AMEX: PRG Gold, Business Simply Cash, Business Costco, BCE.
Chase: United MileagePlus Club, Sapphire Preferred, Amazon Rewards
Barclaycard Arrival World Mastercard
HSBC Cash or Fly World Mastercard
USAA World Mastercard, USAA Platinum Mastercard
Wells Fargo Business Platinum
USC Credit Union Mastercard

Scoach
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Postby Scoach » Sun Apr 28, 2013 8:53 pm

Z06Biker wrote:On the next big juicy dip, do as Jim Cramer does and "buy buy buy!!"


Well, I'm at just over 12% for the past 18 months, so I'm not complaining. :)
AmEx - Platinum, Gold, Bluebird
Chase - CSP, Freedom
HSBC - Orchard Bank (1999)



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