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Better credit?
Better credit? / Jokes, Polls & Anything Else / 9:13 PM - Monday May 12, 2008
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A Thinker (Female, Milwaukee, 22-25, Who Cares?) asked:


Which will help to raise my credit score? (I don't have bad credit, I'm just younger so I am trying to build credit.)

Should I:
a. Pay cash for a brand new car.
b. Finance a few thousand on it through a loan at the dealer.

I'd like to go purchase a condo in a few years, so I'd like to have better credit. Which would help more?


Update: May 12, 2008.
OK, a lot of you made a lot of valid points and I appreciate them very much. However, I guess I should have mentioned that I do have a credit card (little $500 one) that I use often and pay back on time every time. After having it for a few months, they upped my credit line to $750. Will that really help my credit score? I didn't think it would since it was just one of those beginner ones.


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A Guy Critical (Male, Seattle, 46-55, Managerial) answered:

Screenname: bookman


One of the things they look for is if you already have credit, and how well you keep up with the payments. SO, getting that car loan may be a good idea. Just be sure you keep up with it. NO late payments.

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A Thinker (Female, Philadelphia, Who Cares?, Body Work) answered:

Screenname: myndseye711


b.

You need to prove that you are responsible with credit. The only way to do that, is to get a loan. Just pay on time, and it will actually improve your credit score!

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A Thinker (Female, Los Angeles, 26-28, Who Cares?) answered:

Screenname: lee37


Finance it and make the payments on time for at least a year. If you pay cash for a car there is not credit line open so it will make no difference on your credit rating.

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A Sweet Sarah (Female, Charlotte, Who Cares?, Self-Employed) answered:

Screenname: smartblond


Minds eye is right.. you need to have a credit record.

My mother has excellent credit, my step dad is old school, he pays cash for EVERYTHING and his house has been paid off for over 20 years.. they were helping my niece with her car. They pulled the reports and he couldnt be considered qualified because he had NO credit history.. go figure

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A Hippie Chick (Female, 46-55, Medical / Dental) answered:

Screenname: chchia


b.
There will be a mounly report on your credit rating that you paid on time, every month.

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A Creative (Female, 22-25, Other Profession) answered:

Screenname: leebee


Paying cash for a car will not establish any kind of credit rating whatsoever.
You need to finance something and pay interest, make monthly payments, etc... in order to establish credit.
You need to borrow, not make large purchases.

I ran into this. I got myself the training bra of credit cards, one of those little ones with $500 on it, I would then buy a few things each month on it, pay off all of it except for $10-$20 to show that I could carry a balance and still make my payements. After about 6 months I had every major bank in the country sending me credit card offers, line of credit, loan, and mortgage information. I now have a fairly high credit score.

Do something small to get the ball rolling, just don't let it get out of control on you! Make sure you say no to most of the credit cards!

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A Thinker (Female, 29-35, Executive) answered:

Screenname: janedivided


I'd like to present a third option if you don't mind. Do a secured loan through a bank where you'd deposit the money in their account, they'd hold the funds internally and give you a check to take to the dealership.

There's two benefits to this scenario:

1. You build your credit history. If you're looking to buy a condo your lender will be able to see a steady payment history.

2. The interest rate is likely a lot lower than it would be financing it through a dealership. Most banks will not check a credit report since you're securing the funds internally so you wouldn't be assessed the extra points normally tacked on by dealer financing if your existing credit is not good.

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A Thinker (Female, San Diego, 29-35, Other Profession) answered:

Screenname: silver75


Paying cash will never build up credit unfortunately. So you should get a credit card and use it wisely and pay it on time.

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An Alternative Girl (Female, 29-35, Financial / Banking) answered:

Screenname: stuckinthe80s


definitely get the loan. paying cash won't help establish your credit. and it doesn't have to be a car. you could also get a credit card, make a few purchases, and then pay it off. student loans also show on your credit report.

but if the housing market is anything there like it is here, you're going to need an excellent credit score to get a mortgage. a lot of places are being a lot more strict about loans since so many were made to people that lied about their income and/or shady loan officers giving loans to people that shouldn't have qualified for them.

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A Thinker (Female, New York, 29-35, Who Cares?) answered:

Screenname: zahararica


I am not an expert here, but it seems silly to me to pay interest on a loan if you have the cash. There are other ways to build your credit- such as opening a few credit card accounts, making sure you ALWAYS pay the bills on time, and doing the same with cell phone and all utility bills.

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An Intellectual Guy (Male, New York, 46-55, Science / Engineering) answered:

Screenname: mauddeep


..The more you use finance and pay it back on time the higher you score will be..

..Finance a few thousand on it through a loan but shop around and I think the best deal you will get is from a Bank not the dealer..you being young the dealer will put the move's on you... all the add on's to it and you will pay a few thousand's more for the auto..lol

..If you have the cash you can also put the cash let's say into Cd's and the bank will only up the rate they change you 1 or 2 point's higher then what they paying you on the cd's as long as you have money to cover a loan you will get the best deal..

..Tip do not tell the dealer you have the money for the auto or the loan already for the auto.. act like you going to use there finance till you make the best deal on the auto.. get it in writing then whip out your check and say you rather pay for it..

..You will get better deal on auto if they think you going to use them for the loan after all they make money on the loan if you get it with them..

..Be smart alway's think like they do and who is making the money will save you a ton of money...lol

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A Sportif (Female, Indianapolis, 29-35, Other Profession) answered:

Screenname: missy74


You should finance and get a loan on a car. I did get a loan on my car four years ago and paid it off two years ago. I had one late payment that did affect my credit rating. I did get another car two months ago and paid cash for it because I am paying my student loan payments now along with a full coverage car insurance. I was told that the student loan payments can helped my credit rating get better if I paid it on time all the times with no late payment. I do want to purchse my own home one day in the near future so I am focusing on my paying my bills on time on the times.



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A Player (Female, Minneapolis, 26-28, Consulting) answered:

Screenname: lioness21


Actually, pay cash for the car. Establishing the loan at this point while valid; is actually not a good credit move--you want something that establishes your ability to be a good credit risk; but if you're going to buy something like a condo in the near future you want as LITTLE debt as possible--meaning a car loan now is probably not a good idea. Open a credit card like a Visa or Mastercard, charge maybe like a tank of gas, pay the credit card off. Do this a few times, it establishes credit and a record, without giving you a large monthly balance that accrues interest. In the long run, you will establish the credit record, and have a low enough balance that you qualify for a good size mortgage. But what do I know, I only work with a national trade organization which specializes in the credit industry :)

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A Guy Critical (Male, 56-65, Other Profession) answered:

Screenname: wiserman


B, of course!

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A Mr. Nice Guy (Male, Philadelphia, 29-35, Technical) answered:

Screenname: kjm16216


Finance, don't miss a payment, and pay it off at least 30 (or better yet 60) days before getting your mortgage pre-approval. Regular payments on a loan are good for your credit, but pay it off to bring down your debt ratio.

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A Thinker (Female, Who Cares?, Who Cares?) answered:

Screenname: barbb


NOt paying cash. Paying cash for anything never helps raise your credit score.

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A Thinker (Female, 66 or older, Financial / Banking) answered:

Screenname: nowornever


As a mortgage lender, credit cards are good but only have 2 max with a balance! No late pays! Some car dealers are offering zero to low interest. Make a good down pymt and the make double pymts every month. Lenders want to see you have had more than $5000 lent to you and credit cards won't do that. (Unless you abuse them) The length of time you have credit counts alot. Another big thing is never used more than 60% of your credit limit on a card!!! FHA will make loans to people with low scores. Have a savings account! Lenders can't justify increasing your housing expense if you have no savings. Housing values are going down so try to buy before they go back up, you will get more for your money. Good Luck!

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An Intellectual Guy (Male, Charlotte, 26-28, Technical) answered:

Screenname: shadetreepilot


Don't pay cash in that case. It builds no credit. Get a small, low-interest loan.
Keeping up with any credit card will help your score.

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