Is financing a car a good way to raise my credit score?

Asked by Gina

3 Answers

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Answered by Chad Freeman, Branch ManagerPRO+ in Bethesda, MD
Hi Gina:

I can give you the answer from the perspective of a mortgage loan originator - Generally speaking, anytime you utilize credit and you pay that credit within the required time (i.e., monthly), this will bode well for your credit score. However one thing to be cognizant of is that generally speaking, you want to be careful as to how high your credit balances can get because this can weigh down your score. | 02.27.14 @ 19:58
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$commenter.renderDisplayableName() — {comment} | 12.11.16 @ 00:22
Answered by Ted Rood, Mortgage BrokerPRO+ in Maryland Heights, MO
One of the mistakes I see often is prospective buyers with large car payments compared with their income. Yes, a car loan paid as agreed can be a great credit reference, but that's not the reason to buy a car. It's important to remember that the friendly car salesman might be able to get you approved for a car with $500 payment, but that payment COULD keep you from qualifying for a home loan if your debt to income ratio is too high (typically over 43% total liabilities to gross monthly income). So, short answer, buy a car if you need one, be smart about the purchase price and the car loan (a 25% interest rate car loan is NOT a good idea), and pay each month on time. Hope that helps! | 02.02.15 @ 06:43
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$commenter.renderDisplayableName() — {comment} | 12.11.16 @ 00:22
Answered by Paul Carson, Loan Officer in Conshohocken, PA
If you are taking out a car loan ONLY to boost your credit scores, then I would not make that move. There are far more effective ways to start building positive trade lines than signing up for a Car Note. | 05.26.16 @ 01:47
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$commenter.renderDisplayableName() — {comment} | 12.11.16 @ 00:22
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