Will it make a difference?

[Anonymous]

(If a mod can delete my original post here, don't know how to delete my own thread)

The last time I had financed a car was 9 years ago and it is not showing on my Equifax, but only on TU and Experian reports.  In between now and then, I had purchased cars 100% cash, used.  I'm considering buying a home in a couple of years, and it is reinforcing my desire to have a newish car financed, so I can have a healthy mix of credit types on record as paid in full / current when that time comes.   I have zero derogs and always on time for all lines of credit.  

When I requested my TU and Equifax today, it was reflecting around 46% utilization of my available credit (split in 3 major credit cards).  With recent payments I had made on my cards, I should be around 35% utilization and I imagine my score should be a touch higher.

Will it make much of a difference in the financing terms my lender will provide me if I were to have an average score of ~735 as opposed to say, a 760+ (as a result of lowering utilization to 15%) at the time of requesting a loan?  I intend to apply for a 48 month auto loan and pay it off in 24 or less.  I understand my score will drop after getting the loan-- once the auto is paid off, will the ending score and my financial reputation be higher/stronger than before?

[Anonymous]

Hi, Mifune!

I think you're doin' pretty good with your credit reputation right now!

Buy a newish car only if you want a newish car...don't do it just for a tradeline reporting good history. 

The biggest bump up for your score would be to pay down your existing balances.  Once they're under 10%, IMO, you're golden.  (I'm assuming you've had these cards for a few years or more?)

Pay off to about 1% or so, you're super-golden!

When you hit 760 (which it sounds like you would, with a pay-down), anything over that is just for brag.  You'll get the best rates with a 760, they won't get any better than that with a higher score.

Good luck with everything! 

[Anonymous]

Thank you for the response!

Yeah, it's a definite non-necessity and just a want.  I'd like to treat myself to a sporting car again, but since I veer towards extreme frugality, it helps me psychologically justify the purchase if I know it will help my credit down the line (despite knocking it down temporarily).

My credit is somewhat limited, with only 3 active CCs (6 years, oldest acct), 2 CCs that are closed+inactive (2 years), and one 9 year old paid auto loan.  So a total of 6 lines of credit ever obtained in a roughly 10 year history, with only 3 active and all CC's at the moment.  I had avoided opening up any credit cards until i was in my early 20's, so I feel my history is kind of light for my age, i'm not sure i'd qualify for a home loan with this kind of profile. 

[Anonymous]

You should PM or post in Mortgage loans, and see was a lender would say for your file. If you add a new auto loan, it may bring down your AAoA, and affect your DTI. Ask a lender without having them pull your reports and get a couple of opinions on what they look for. IMO you look awesome. :-)

[Anonymous]

By the time I go shopping for a mortgage, I intend for the car to be completely paid off, with maybe 5-10% credit utilization and no outstanding loans.  Mortgage is the big bad for me. While I'm confident I will be able to pay a reasonable mortgage when that time comes, I frequently worry about being properly prepared for it and want to have zero doubt in my mind about getting approved. Thank you for the advice!