How much drop will I see if I apply for a car loan?

[Red1Blue]

I have 650 avg Fico among the 3 CRA's. My CL is around $15k. Balances are less than $500. I am planning on buying a house around Apr/May of next year. If I were to get for a car loan of $8K, how much drop will I take on my Fico? Will the score bounce back by the time I am ready to buy the house? Any suggestions? If the score is going to drop and does not come back in time, I can make other plans to buy the car instead of taking a loan.

[Anonymous]

Try to consider all of the factors; inquiry (hopefully not too big of a deal unless you have a lot), new account (affects age/history), and the biggest in my book would be the additional debt, as that's going to affect your debt-to-earning ratio.  If you're buying in 5-6 months, you may consider an outright purchase or waiting until your house closes.

As far as how much of a hit you'll take, it depends on what your history looks like.  I refi'd my truck and bought a new car last month and took about a 10 point hit, but have heard people taking as much as 40 points.  I wouldn't want to venture a guess on that.

[Red1Blue]

Thanks for the response. As per the Debt / Income ratio, I am not worried. One way I look at it as I understan the car loan would add value over a period of time.

If it does not help when I am ready to buy the house, what If I pay off the loan in full or reduce the loan amount substantially. That way I would have built a new tradeline for about 6 months and possible another few months at reduced payments.

I am waiting for couple of baddies to drop off my report. I was going to pull all 3 Fico Reports at the end of this month and take a look at numbers and see what is the right plan of action.

I saw a beautiful 2002 Jaguar S Type with very low miles. I really want to get it if the price is right. It is tempting, I am not sure.

[fused]

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concorduser wrote:

I have 650 avg Fico among the 3 CRA's. My CL is around $15k. Balances are less than $500. I am planning on buying a house around Apr/May of next year. If I were to get for a car loan of $8K, how much drop will I take on my Fico? Will the score bounce back by the time I am ready to buy the house? Any suggestions? If the score is going to drop and does not come back in time, I can make other plans to buy the car instead of taking a loan.

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There are a lot variables here. Do you have another open or closed installment in good standing on your reports? If no, this might be a good thing as this will help your credit mix. The downside I see here will be your reports being re-aged. The new debt will have a minimum impact to your scores, however. From my personal experience, I have never experienced much change in my scores when I apped for unsecured loans but your experience might be different.

[Anonymous]

concorduser wrote:

One way I look at it as I understan the car loan would add value over a period of time.

I'm not sure what you meant by this, but consider this, as well; a car is, 99% of the time, a poor investment as far as long-range planning.  I'm a stickler for buying used due to devaluation but am the only person I know with $4000 equity on a used truck .

If you meant the car would somehow carry equity or provide value monetarily, this is pretty rare for a vehicle, and looking long-term, a Jag isn't normally a sound investment (but MAN is that a beautiful vehicle!).  Just something to keep in mind...Oh, and if I'm way off-base, ignore me! 

[Red1Blue]

What I meant by the value with the car loan is "though I would take a hit on the fico scores in the short term over a long period as the payments start showing up for 2-3 years it would help the fico scores to increase.

As per the car, I agree with you, it is a bad investment. I bought a brand new jaguar in 2002 and I lost it due to the repo in 2004. I paid off the remainder of the loan and got the judgement removed. When I saw this car for sale the old memory's came back. It is exactly identical car with the same color and low miles. It is almost like the car I lost in the repo.

I guess it is more of a sentimental feeling to have a car back like the one I lost. When I mentioned to my wife she said, go for it and get it. She has seen last 2 years how much it bothered me loosing the car. I was surprise to get such a support from her. First thing I thought she would say no way. I am so surprised to say go for it.

When I go back to work on Monday I'll look and see if that car is still available for sale and talk to the owner about it. I promised my self I would not make any foolish decisions. But some times it is a feeling of content, I guess. This time, I am sure, I probably will pay cash for it and buy it, though a car loan would increase my fico, the fact that I own the similar car free and clear would be a great feeling to my sole.