Will a car loan help or hurt?

[redbeard]

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@Anonymous wrote:
My credit profile is clean, no derogatories of any kind, but short--my oldest account is only 14 months old and my AAOA is 10 months, across 6 accounts (in siggy). Score is 736 now, with 4 of 6 Experian inquiries due to age off.

I'm hoping I get back 15 to 20 points for the inquiries aging, which would put me in 750 range when I do this app spree.

So it sounds like the car loan would help? At least eventually?

If I can get flexible payment terms one thing I could do is get a bigger loan than I need, make a smaller downpayment than I have, and then immediately pay off a lot of the car loan.

I'm bringing 75% of the purchase price in cash and borrowing 25%, I could borrow 50% and then pay off half the loan within the first month.

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A couple of things....

- Unfortunately, you are unlikely to get any points for the inquiries aging off.  Inquires for score purposes tend to age off in 12 months.  

- The car loan won't help your FICO if you have a PLOC already, or in addition to.  Either one gives you an installment loan for credit mix.

- If not for the app spree, you will gain points as your AAoA increases.

My suggestion is to skip the PLOC and get the car loan since you can probably get a 0% interest rate on the car loan.  Put less down, keep cash in reserve.

I don't think the impact of the utilization of an installment car loan is significant.  I think the age of the car loan is a much bigger factor.  

Dan

[Anonymous]

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@redbeard wrote:

- The car loan won't help your FICO if you have a PLOC already, or in addition to.  Either one gives you an installment loan for credit mix.

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Can you please provide a source for this statement?

Or tell us where to get a PLOC that reports as installment?

Thank you.

[Anonymous]

When I opened my car loan I didn't see any increase. At least EQ score doesn't change. I tell even more - my car loan still didn't report to TU and TU was my highest score except last few days when TU score dropped causeless.

[Anonymous]

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@redbeard wrote:

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A couple of things....

- Unfortunately, you are unlikely to get any points for the inquiries aging off.  Inquires for score purposes tend to age off in 12 months.  

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By age off, I mean I have four inquiries about to age to one year over the next month. I figure they are costing me about five points each and I am hoping to be in the 750 range when I app, up from 736 today before the inquiries hit one year.

I'm going to get the PLOC no matter what. It is my plan to move my banking to the CU and I need a PLOC there to backstop overdraft. It is my way of ensuring a CC autopay or rent check never bounces, not even if I screw up my budget, not even if payroll is unexpectedly delayed.

The question is what to do with the car loan, and really it depends on FICO impact. The only reason to do it would be to set myself up for a mortgage and so my question is how long before the auto loan starts boosting my score? I know initially the inquiry, new account, and utilization will depress my score, but for how long?

Also my score will get to the 750s on its own. Presumably that is good enough for a mortgage?

I have three more apps to complete the set of cards I think I need, and one day a mortgage. At that point I may honestly never apply for credit again. Add Discover IT and CITI Double Cash to the cards in my siggy and I think I have it covered.