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Car loan or personal loan better for score?

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New Visitor

Car loan or personal loan better for score?

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?

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Super Contributor

Re: Car loan or personal loan better for score?


@Billythefatty 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.


Total revolving limits 653000 (575000 reporting)

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Super Contributor

Re: Car loan or personal loan better for score?

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?

High Bal Jan 2009 $116k on $146k limits 80% Util.
Oct 2014 $46k on $127k 36% util EQ 722 TU 727 EX 727
April 2018 $18k on $344k 5% util EQ 806 TU 810 EX 812
Jan 2019 $7.6k on $360k EQ 832 TU 839 EX 831
Message 3 of 10
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Established Contributor

Re: Car loan or personal loan better for score?


@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 10/13/20
Current Cards:
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New Visitor

Re: Car loan or personal loan better for score?

Just a couple credit cards. No other loans. 

Message 5 of 10
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Super Contributor

Re: Car loan or personal loan better for score?


@Billythefatty 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.


Total revolving limits 653000 (575000 reporting)

Message 6 of 10
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Senior Contributor

Re: Car loan or personal loan better for score?


@Billythefatty 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.

Fico 9: .......EQ 850 TU 850 EX 850
Fico 8: .......EQ 850 TU 850 EX 850
Fico 4 .....:. EQ 809 TU 823 EX 830 EX Fico 98: 842
Fico 8 BC:. EQ 892 TU 900 EX 900
Fico 8 AU:. EQ 887 TU 897 EX 899
Fico 4 BC:. EQ 826 TU 858, EX Fico 98 BC: 870
Fico 4 AU:. EQ 831 TU 872, EX Fico 98 AU: 861
VS 3.0:...... EQ 835 TU 835 EX 835
CBIS: ........EQ LN Auto 940 EQ LN Home 870 TU Auto 902 TU Home 950
Message 7 of 10
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Super Contributor

Re: Car loan or personal loan better for score?


@Thomas_Thumb wrote:

@Billythefatty 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".


Total revolving limits 653000 (575000 reporting)

Message 8 of 10
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Senior Contributor

Re: Car loan or personal loan better for score?

Get a car loan

Fico 9: .......EQ 850 TU 850 EX 850
Fico 8: .......EQ 850 TU 850 EX 850
Fico 4 .....:. EQ 809 TU 823 EX 830 EX Fico 98: 842
Fico 8 BC:. EQ 892 TU 900 EX 900
Fico 8 AU:. EQ 887 TU 897 EX 899
Fico 4 BC:. EQ 826 TU 858, EX Fico 98 BC: 870
Fico 4 AU:. EQ 831 TU 872, EX Fico 98 AU: 861
VS 3.0:...... EQ 835 TU 835 EX 835
CBIS: ........EQ LN Auto 940 EQ LN Home 870 TU Auto 902 TU Home 950
Message 9 of 10
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Super Contributor

Re: Car loan or personal loan better for score?


@Thomas_Thumb wrote:

Get a car loan


Smiley Happy


Total revolving limits 653000 (575000 reporting)

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