Author Topic: Does size of auto loan make a difference to establish good credit?  (Read 960 times)

Offline AviStar

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Does size of auto loan make a difference to establish "good" credit?
In other words, if you have a choice to take out a $15,000 loan or a $20,000 loan - will the higher loan help establish "better" credit history [by paying on time] than the smaller loan?

Offline Fan of Dan

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Re: Does size of auto loan make a difference to establish good credit?
« Reply #1 on: November 08, 2011, 11:36:25 PM »
Will make it worse as you owe more initially. Also borrowing less will not decrease the number of payments just the amount. The term will determine how long you will be making payments for. Don't think it makes a dif how large each payment is

Offline gozalim

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Re: Does size of auto loan make a difference to establish good credit?
« Reply #2 on: November 09, 2011, 01:20:14 AM »
car loan should help by diversifying types of credit from mostly revolving (credit cards) to include instalment (car loan)
by that logic bringing the amount of the car loan up closer to the total amount of (outstanding) credit card debt should raise his score

no?

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Re: Does size of auto loan make a difference to establish good credit?
« Reply #3 on: November 09, 2011, 01:25:02 AM »
car loan should help by diversifying types of credit from mostly revolving (credit cards) to include instalment (car loan)
by that logic bringing the amount of the car loan up closer to the total amount of (outstanding) credit card debt should raise his score

no?

...only if you assume that a FICO prefers to see equal amounts of diversified debt as opposed to just seeing it at all.
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Offline scwam

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Re: Does size of auto loan make a difference to establish good credit?
« Reply #4 on: November 09, 2011, 01:38:39 AM »
If you're going to take out a loan, why not take out the maximum and wait one month for it to hit your credit and drop it down to the amount that you would rather have it at. Of course this may push your due date further ahead, but at least you have the inital loan amount recorded permanently. Just manually make your payments if it happens to put your due date too far away.

My car loan is not affecting my credit much as far as utilization is concerned. Originally 12k but now down to 6k. It's almost as if the reduction of that balance has minimal effect on my score. Same goes for an installment personal signature loan I did as I paid it down from 5k to $240 over 5 months. In both cases of getting the signature loan and having it at 100% utilization to now almost 4% the score has not changed much. But I do expect both installment loans to strengthen my score for years to come when new inquiries hit. Most installments are typically helping the profile type, and in my case have minimal effect if the utilization is high or low. It's good to get installments in sooner to benefit from them years later. It's also equally important to confirm that the loan reports correctly as a true installment (I think it's called Non-CFL or something like that - Penfed does this correctly). Again, installment lines are usually calculated differently and separately on your report from card lines. It's like throwing a few oranges in with the apples.
« Last Edit: November 09, 2011, 01:43:19 AM by scwam »