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Auto Loan Help

New Member

Auto Loan Help

I'm purchasing a new car and I can afford to purchase the vehicle without taking out a loan but I want to finance the vehicle to establish some credit history.  What I'm trying to figure out is how the loan amount and loan term will affect my credit score.  The vehicle is roughly $45k and my original thought was to take out a $20k loan for 5 years but I just pulled these numbers out of thin air. Will paying off a larger loan give me a better credit rating ?  Would paying it off in 1 year vs. 5 years make a difference ?

 

Thank You,

Hexray

Message 1 of 4
3 REPLIES
Super Contributor

Re: Auto Loan Help


hexray wrote:

I'm purchasing a new car and I can afford to purchase the vehicle without taking out a loan but I want to finance the vehicle to establish some credit history.  What I'm trying to figure out is how the loan amount and loan term will affect my credit score.  The vehicle is roughly $45k and my original thought was to take out a $20k loan for 5 years but I just pulled these numbers out of thin air. Will paying off a larger loan give me a better credit rating ?  Would paying it off in 1 year vs. 5 years make a difference ?

 

Thank You,

Hexray


The amount of the loan won't have any impact on your FICO score ~ however if you think you might need to borrow down the road then it helps to have larger amounts borrowed.   

 

You can always pay the loan off in 6 months or 1 year, depending on how much interest you want to pay.

March2010 FICO® ~ 695 TU, 653 EQ, 697 EX
Message 2 of 4
New Member

Re: Auto Loan Help

Thank you for the information, in that case I think I will try to go for 100% financing for a 1 year term.

Message 3 of 4
Highlighted
Super Contributor

Re: Auto Loan Help


hexray wrote:

Thank you for the information, in that case I think I will try to go for 100% financing for a 1 year term.


You can always take out a 3 or 5 year loan and just pay it off early too.

March2010 FICO® ~ 695 TU, 653 EQ, 697 EX
Message 4 of 4