@Anonymous wrote:I'm looking at buying a newer car. Credit scores are all in 770's area. No negative hits or inquiries. No installment loans. Would getting a loan on a car help the score and would I be better off with a car loan or personal loan?
No it would ding your scores rather than help them.
We would need to know what other loans, if any, you have, to determine whether it could eventually help your scores down the road.
Maybe I haven't looked closely enough, but isn't the APR for a car loan a lot less than a personal ( unsecured ) loan of the same amount?
@NRB525 wrote:Maybe I haven't looked closely enough, but isn't the APR for a car loan a lot less than a personal ( unsecured ) loan of the same amount?
Depends on your profile and lender. Generally speaking it would be since auto is secured against the car, but some people might get extortionate rates.
as of 1/1/23
@Anonymous wrote:Just a couple credit cards. No other loans.
Then it will hurt your FICO 8 scores when you take it out, and will help your FICO 8 scores when you pay it down to 9% of the loan amount.
@Thomas_Thumb wrote:
@Anonymous wrote:I'm looking at buying a newer car. Credit scores are all in 770's area. No negative hits or inquiries. No installment loans. Would getting a loan on a car help the score and would I be better off with a car loan or personal loan?
Get a car loan. Given your credit scores, a car loan should be a lower APR than a personal loan. What's the point in having a good credit score if you don't use it to your benefit?
Your score is likely to drop near term due to the inquiry and presence of a new installment loan at a high B/L level. Given you have no loans of any type in your file (open or closed), the loan will help with credit mix. That will offset some of the negative impact associated with the new account at high B/L. Your initial drop might only be 10 points. If you had a closed loan on file with no open loans then I would anticipate a higher initial drop due to already receiving some loan related "mix points".
Longer term the loan will boost your score as installment loan AAoA and AoOA increases. Your score might be back to neutral after 3 to 6 months and up after a year. There are likely additional benefits with further aging and with reduction of B/L to below 65% and again to below 9%.
Please let us know what you do and how scores respond.
Leverage your credit to your financial benefit and don't fret over a potential short term drop in score.
.... says the guy with 850's across the board and who hasn't opened a new account since G-d knows when.
The question was "Would getting a loan on a car help the score and would I be better off with a car loan or personal loan?", and the answer to the question is "no".
