topic Re: Car loan payments - reporting question in Rebuilding Your Credit

Car loan payments - reporting question

Anonymous — Sun, 12 Sep 2010 20:24:18 GMT

I might be purchasing an inexpensive used car in the 5k-10k range. To help build my credit I might get a small car loan. If I get the loan and 3 months in I pay it in full would that effect the reporting negatively? Would the remaining months on the loan be reported as current, or would they change the terms of the loan to only show a 3 month loan?

And of course, would this have any impact on my credit score?

Re: Car loan payments - reporting question

laz98 — Sun, 12 Sep 2010 21:21:45 GMT

they would only report as many payments as you make. if the account is only open for 6 months (6 payments), that's all that will report.

Re: Car loan payments - reporting question

Anonymous — Sun, 12 Sep 2010 21:24:27 GMT

Thanks for replying...

So would a 6 month auto loan look any different on my CR than a 12 month? e.g. Would a 12 month loan boost my score more than a 6 month?

Re: Car loan payments - reporting question

laz98 — Sun, 12 Sep 2010 21:36:04 GMT

well, installment loans add a little to your credit score, but they are still just a small percentage. if this is the only one you have, or are going to have, for a while, then you might want to keep it open for at least a year. i want to say i read somewhere that 2 years is ideal, but if you just don't feel like it, i would definitely try to keep it open for at least a year. i suppose if someone was manually reviewing your credit reports, they might think it was odd that you only kept your loan open for 6 months, but i think it just makes you odd, not that you are a deadbeat or anything.

Re: Car loan payments - reporting question

Anonymous — Sun, 12 Sep 2010 21:41:01 GMT

Yes I guess it is an odd question.

I want to boost my credit score by getting an auto loan, but at the same token I don't want a payment hanging over my head either. After paying off thousands of dollars in debt already I always have the mentality to pay everything off ASAP.

Re: Car loan payments - reporting question

laz98 — Sun, 12 Sep 2010 21:42:07 GMT

i can see why you would feel that way, & i know a lot of others here have experienced the same kind of thing. if you want, just wait til you have the full amount & pay cash instead.

Re: Car loan payments - reporting question

Anonymous — Mon, 13 Sep 2010 20:37:57 GMT

Maybe get a loan for the smallest amount possible, make sure there are no pre-payment penalties, and make it a 2 year loan. Check on your credit score regularly, and when you get it to where you want it, go ahead and accelerate your payments.

Also consider that revolving credit is going to help you more than an installment loan.

Re: Car loan payments - reporting question

Anonymous — Mon, 13 Sep 2010 20:43:41 GMT

Good advice thank you.

I have one good car loan and one bad car loan - both are due to fall my CR in the next year or so. I want to maintain a 'good mix' of credit types which would include an auto loan. I suppose a small personal loan might also help out.

Re: Car loan payments - reporting question

Anonymous — Mon, 13 Sep 2010 20:56:17 GMT

The mix only accounts for 10% of your score - your revolving utilization is 30% and your payment history is 35%. I don't think there is a real difference between auto loan and small personal loan in the impact.