How much does a small used auto loan impact my credit?

beetle1283 - 2007-08-21 06:30:55 - Credit

I am about to buy a 2003 Honda Civic from my uncle for approximately $10,000. I had intentions of putting down 5,000 or 6,500 dollars (depending on what I sell my current car for) and take out a small auto loan for the remaing 3,500 or 5,000 for about 36 months. The rates I am finding are not as good as I would have hoped, through no fault of my own. I am 24 and haven't done anything that would have given me bad credit. I pay back all my bills and whatnot. Am I better off just buying the car outright (I can afford it) or taking out a loan for the sake of taking out a loan. I've heard a few times that a small loan really helps your credit. So put down 5,000, take out the 5,000 loan amount, put 5,000 in a savings account and let the loan cycle? What does that mean.

Best Answer:

Auto finance is what I do for a living and auto loans take 6-months of payments made as agreed to be rated. Your credit will be helped the best after 12-payments made as agreed. This is the first thing lenders look for when they are looking at a application for credit. I would agree with PJ except for the amount of payments you should make. I would make at least 12, and make sure whatever lender you use that they report to all three credit bureaus or you are wasting your time.

Loan - Free Online Quotes

Answer:

P J - 2007-08-21 06:39:34

Put the money to pay off the loan in a savings account, get the loan let it cycle about 6 months then pay the balance off. This gives you a payment history although you will pay a bit of interest it will be a good trade line. Also initially your score will take a 5-7 point hit for the credit report when getting the loan, rebounds rapidly!

SPIFIMAN1 - 2007-08-21 06:49:53