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Dingler
Posts: 12
Registered: ‎01-04-2013
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Do I need to get a car loan to raise my FICO score to excellent?

I read that within a few years you will need a FICO score of 780 to get the best rates on mortgages.  The minimum score needed for the lowest interest rates just keep rising and rising year after year.

 

Right now my FICO score is about 745 and I am trying to get it higher so when my wife and I decide to buy another home in a few years I can get a great mortgage.  (We don't own a home today or have a mortage.) 

 

When I checked my FICO score they said I had a perfect payment record, a relatively long history with credit and a very low utilization but the only thing that is holding me back from an excellent FICO score above 760/780 is a poor mix of credit.  I only use credit cards.

 

I always paid cash for my cars and never saw any need for department store or gasoline credit cards with 6 Mastercards in my wallet.

 

When I buy my next car in a few months should I get a loan for the automobile even though we can pay cash just to raise my FICO score?  Any other ideas how to increase the mix of my credit?

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Shogun
Posts: 12,952
Registered: ‎04-15-2011
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Re: Do I need to get a car loan to raise my FICO score to excellent?

I really don't like the idea of having a car loan just for a score, but I do understand where you are going with this.  I've seen plenty of scores without an installment loan in the 800+ range.  An installment doesn't really give you that much boost.  You could consider getting the loan, paying it for at least 6 months, and then doing a PIF.


Starting Score: 504

July 2013 score: EQ FICO 819, TU08 778, EX "806 lender pull 07/26/2013
Goal Score: All Scores 760+, Newest goal 800+

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Current scores after adding $81K in CLs and 2 new cars since July 2013
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Valued Contributor
Imhotrodcrazy
Posts: 1,508
Registered: ‎03-11-2009
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Re: Do I need to get a car loan to raise my FICO score to excellent?


Dingler wrote:

I read that within a few years you will need a FICO score of 780 to get the best rates on mortgages.  The minimum score needed for the lowest interest rates just keep rising and rising year after year.

 

Right now my FICO score is about 745 and I am trying to get it higher so when my wife and I decide to buy another home in a few years I can get a great mortgage.  (We don't own a home today or have a mortage.) 

 

When I checked my FICO score they said I had a perfect payment record, a relatively long history with credit and a very low utilization but the only thing that is holding me back from an excellent FICO score above 760/780 is a poor mix of credit.  I only use credit cards.

 

I always paid cash for my cars and never saw any need for department store or gasoline credit cards with 6 Mastercards in my wallet.

 

When I buy my next car in a few months should I get a loan for the automobile even though we can pay cash just to raise my FICO score?  Any other ideas how to increase the mix of my credit?


I no not have store or gas cards and I have not had a car loan in over 20 yrs.  I do have a mortgage and as you can see, my EX score is over 800.  The only reason my TU and EQ are lower is because of a civil judgment on those two reports.  I personally am not a fan of getting loans to try to increase my scores.  I also have a thin file as I only have 3 cc's, but they all have high credit limits.  Hope this helps. 

FICOS
TU 805 10/18/14
EX 812 9/23/14
EQ 829 10/18/14

NASA 30K / / Amex 16.5k / / Chase Freedom 10.6k / / / / / SD'd US Bank Cash+ 20k, LOC 15k
Mega Contributor
RobertEG
Posts: 17,729
Registered: ‎03-19-2007
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Re: Do I need to get a car loan to raise my FICO score to excellent?

I dont think that you can necessarily bank on improved credit mix resulting in an overall score increase.  Other categories are also affected.

 

App for a new loan will most likely cause a hard inquiry, which for higher achievers is usually a larger ding. 

Approval will result in reporting of a new account, with an initial age of zero, thus lowering your average age of accounts.

The resulting net effect is questionable.

 

And, of course, a new installment will result in monthly interest out of pocket.

Valued Contributor
my-own-fico
Posts: 1,237
Registered: ‎01-05-2010
0

Re: Do I need to get a car loan to raise my FICO score to excellent?

[ Edited ]

Clearly your score should be higher based on what you said. Is "a relatively long history with credit and a very low utilization" subjective (your view and wording) or objective (FICO's)? Where did you obtain the score? What's the age of your oldest account and your youngest account, and what's the average age of accounts? How low in percent is your utililzation, and how do you calculate it? How many of your cards report credit limits, and are any of them no preset spending limit or charge cards?

The lost luggage office’s trained professional, “Has your plane arrived yet?”
New Member
Dingler
Posts: 12
Registered: ‎01-04-2013
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Re: Do I need to get a car loan to raise my FICO score to excellent?

[ Edited ]

Here are the answers to your questions:

 

Where did you obtain the score?  (MY FICO) 

 

What's the age of your oldest account and your youngest account, and what's the average age of accounts?  (My oldest two cards are 22 years old and the average age of my nine cards combined is 9.8 years)

 

How low in percent is your utililzation, and how do you calculate it? (3% based on my total credit divided by my balance.  The three percent is just my months charging not ongong balances)

 

How many of your cards report credit limits, and are any of them no preset spending limit or charge cards? (All my cards have a preset limit.  I have over $83K in available credit)

 

I have never paid late and never had any problems with credit other than years of only paying the minimum balance, but now have nearly no debt. But my FICO score is just below the number I need to get the best mortgage rates.

Established Contributor
scenery_guy
Posts: 958
Registered: ‎07-24-2012
0

Re: Do I need to get a car loan to raise my FICO score to excellent?

[ Edited ]

Interesting scenario you have Dingler. I would think an auto loan would help.

 

My score found here on my Fico is nearly identical to yours at 742. I have an recent auto loan from June 2012 and have opened 9 credit cards in the past 8 months. My oldest card is about 9.5 years (guesstimating) and my newest one from a couple of days ago. My combined credit limits are nowhere near yours at $58,000 without AMEX charge in the mix (again guessing as I have a couple of AMEX charge products). I do have a previous auto loan that ran full term and was never late. I do have a couple of 30 day late from 5.5 years ago. 

How can we be so close in score yet you have older and larger lines? I have heavy usage and always pay in full but that has not really important until the last 8 months (PIF prior but I was mainly a cash or debit card user). 

No matter what becomes of this income will factor in the mortgage. You have a nice file and I don't see a lender having an issue with giving you the best rate based on your current score and if income/investments etc. are in line. Have you considered talking to the bank and feeling this out? I assume you have a good relationship with one and would like to use them for both auto and mortgage? Bankers have some leeway and will work with you (or that has been my experience).

 

Best of luck!

 

Edit to correct a sentence that made no sense...

Valued Contributor
my-own-fico
Posts: 1,237
Registered: ‎01-05-2010
0

Re: Do I need to get a car loan to raise my FICO score to excellent?


Dingler wrote:

 

How low in percent is your utililzation, and how do you calculate it? (3% based on my total credit divided by my balance.


 

That works when there are no exceptions. But have you verified with a myFICO report saying the same 3%, on page two I think it's at? The credit limit of one of my cards amounts to one third of my total, and there was a time when it wasn't included, which means the utilization was a good deal higher as I used mostly other cards. The card can be excluded from utilization because the credit limit is too high or because the account type isn't revolving, just to mention two ways it can happen. So you would want to verify with the percentage in a myFICO report.

 

The lost luggage office’s trained professional, “Has your plane arrived yet?”
New Contributor
martinkk
Posts: 68
Registered: ‎08-23-2010
0

Re: Do I need to get a car loan to raise my FICO score to excellent?

could it be that even though you PIF every month, more than one card is showing a balance?

New Member
Dingler
Posts: 12
Registered: ‎01-04-2013
0

Re: Do I need to get a car loan to raise my FICO score to excellent?

Just as an experiment I overpaid the two credit cards that I use for everyday purchases by over $500 a piece yesterday so I will have a ZERO BALANCE or a credit balance on all my cards to see if that increases my FICO Score to that magic 760 level.

 

This will tell me once in for all if it is possible that some people just can't reach that 760 score even thoough they have:

 

A PERFECT PAYMENT RECORD

 

A Long History with Credit

 

A CLOSED Car Loan and Mortgage on their records

 

And ZERO Balances on their credit cards


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