Understanding FICO® Scoring

[lanah]

I have to buy a new car. I could finance through the dealer or a bank and get a 5.5% or 5.9 % rate and get multiple credit inquiries on my credit or use my credit card to pay for the same car @ 3.9%. I'll have 3.9% for the life of that purchase by using a check provided by the credit card company. The negative to that is it will push my credit used to 75% of the credit limit.

Which is worse on my credit score? A standard 60 month car loan at a higher rate or a credit card with 75% of my limit used. I will be able to make a larger payment on my credit card but it will still take about 48 months to pay it off. I stand to save about $2000 over the life of the loan going the credit card route.  The purchase price is about 14000 for the car.

Any advice would be appreciated.

[masdeocho]

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lanah wrote:

I have to buy a new car. I could finance through the dealer or a bank and get a 5.5% or 5.9 % rate and get multiple credit inquiries on my credit or use my credit card to pay for the same car @ 3.9%. I'll have 3.9% for the life of that purchase by using a check provided by the credit card company. The negative to that is it will push my credit used to 75% of the credit limit.

Which is worse on my credit score? A standard 60 month car loan at a higher rate or a credit card with 75% of my limit used. I will be able to make a larger payment on my credit card but it will still take about 48 months to pay it off. I stand to save about $2000 over the life of the loan going the credit card route.  The purchase price is about 14000 for the car.

Any advice would be appreciated.

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Welcome,

No doubt, the high util on the credit card for at least 2 years will do some carnage on your score, although you haven't said what your score is or what the rest of your report looks like.

Isn't there a big cash advance fee on the credit card?

If you miss just one payment on the credit card, the rate will skyrocket for the rest of eternity.

Don't worry about the inquiries; multiple inquiries for car loans over a 14-day period count as a single inquiry so that you can comparison shop for rates.

See this thread for more info on auto financing.

http://ficoforums.myfico.com/fico/board/message?board.id=ficoscoring&message.id=1231

[Brammy]

They are offering 3.99 but if there a BT fee?  Is tere a cap on the fee. The 75% utilizatin would do worse in the short term.  Do you have any other open installment loans?  If not, I would definiely go with the dealer.

[lanah]

my credit is @ 690 now.  i don't have any other installment loans at this time. I have two credit cards that have high limits but low balances. There's a $45 dollar transaction fee.  No other fees.

But iguess what you guys are saying is that an installment loan is better than credit debt even if the interest rate is better.

Message Edited by lanah on 08-23-2007 02:42 PM

[masdeocho]

It all depends on what your objective is -- saving money or having groovy credit?  Personally, I generally favor the first, provided you are not intending to apply for major credit (mortgage) soon.

[Brammy]

Sorry I thought the question was geared towards improving FICO scores.  For scores sake, the installmentwould be better.  But of course I'm sure you realize for savings, unlesthe card has a fee associated with the transaction, its a better option.