Right now my credit rating is a little over 800. The only things in my credit history are 2 current credit cards. I am also about to buy a new car and am trying to figure out if it will be better for me in the future (when I am trying to buy a house) if I get an auto loan or if I just pay the car myself.
So if I get the minimum car loan, and just pay it off over 2 years, it will cost me around 8 in interest. So, assuming the fact that for like the next 3 or 4 years my credit rating were to remain the same, which would be better for my credit when I try to get a home loan? Is paying almost 0 now (well, over 2 years) to get an auto loans payments/history in my credit report going to benefit me or not?
If it will get me a lower interest rate on a mortgage I’ll be all for it. If it won’t make a difference, then I probably wouldn’t want to spend the extra 0ish. Anyone happen to know? Thanks!
I never had any payments on my current car. It was gifted to me by my parents. (It is 23 years old)
I’ve heard both that having an auto loan can hurt you when you try to get a home loan and that it can help you because you have credit history in multiple areas. (ie. credit cars + loans vs just credit cards) So I’m not really sure which is true or if both are in different circumstances.
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{ 5 comments… read them below or add one }
Good score !!
The ways the auto loan could hurt you when trying to get a home loan is if you apply for a mortgage soon after applying and receiving the vehicle loan. The vehicle loan would be a new account with little history and you would have recent inquires.
The positive is what you already mentioned – having a good credit history in multiple areas
If you are not planning on a mortgage soon you might consider the vehicle loan if you want to pay the interest on it.
The vehicle loan may bump you up a few points and make your reports look a little more rounded.
One thing to keep in mind, if you are over the 800 mark on your "FICO" scores, you may qualify for the best rates on a mortgage with or without the vehicle loan.
You will already have a good credit rating after paying your present car off.
I’m no expert but as long as your payments are on time every month you shouldn’t have a problem. Your ratings show a change aproximately every 6months- 1year. A friend of mine bought a car last April and she say her score went up. Just don’t accumulate an extra bill besides the car loan, and don’t make your payments outrageous. Make sure everything is in perspective, including the car payment, and any other bills that you have on a monthly basis. Also the highest is about 960 so your interest should be pretty good especially with all these programs out here.
Your credit score is great, but if you have a car loan out with monthly payments it will lower the amount you will be able to finance for a house. Check out a site at http://www.mortgageawareness.com they have a mortgage calculator and helpful information for figuring out how much you will be able to finance on a mortgage loan with a car payment.
Yes it will help your credit. Vehicle loans are installment loans just like mortgages. If you take out a vehicle loan and pay it as agreed for 24-months like you are thinking about it will show willingness, responsibility and the ability to pay installment type loans. This will look great on your credit. Just do not apply for your home loan until your vehicle is paid off or almost paid off and you will be fine. You will get a great rate and it will be the best $478.00 you ever spent.