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I have a 48 month car loan started 2 months ago, with a 50% down payment. I have a credit score of 790, but this didn't mean much because the bank said I have no "credit depth." I don't have a mortage, but do have 3 or 4 credit cards with balances, the oldest one being since 2001.
I took out a car loan to build credit even though I had saved up money very carefully to pay for a car in full. How long should I keep this loan to build up credit? Is 1 year okay? I would rather pay off this car loan and not pay interest for my car -but I also want to build a credit history for getting a mortgage in the future (whenever that might be, not sure).
You have 3 or 4 credit cards WITH balances? Yet you are concerned about paying off your Car Loan?
Am I misinterpreting something?!?! You better be working to pay off the CC's as I doubt the Car Loan interest is any higher than those CC's!
P.S. How is it 3 OR 4? Do you not know how many credit cards you have? Also, a 790 credit score is very good. Do you mean 690? Sort of sounds like you might be trolling.
You have 3 or 4 credit cards WITH balances? Yet you are concerned about paying off your Car Loan?
Am I misinterpreting something?!?! You better be working to pay off the CC's as I doubt the Car Loan interest is any higher than those CC's!
P.S. How is it 3 OR 4? Do you not know how many credit cards you have? Also, a 790 credit score is very good. Do you mean 690? Sort of sounds like you might be trolling.
The interest rate on the car loan is 3.5%.
What I meant to say is I use 3 credit cards and rotate them, so I don't have credit cards that don't get used, which can be bad also. I have been working to increase the credit limit on those also once my income increases. I do not have credit card debts, I pay those off in full every month. My credit score lists a 4th credit card which I don't remember canceling, and don't have it with me.
Yes, my credit score is 790. Why in the world would I be trolling about credit scores and car loans on a messageboard-isn't that boring?
People on these forums need to stop using this word. They are mis-using it.
Quote:
Originally Posted by Jay321
I have a 48 month car loan started 2 months ago, with a 50% down payment. I have a credit score of 790, but this didn't mean much because the bank said I have no "credit depth." I don't have a mortage, but do have 3 or 4 credit cards with balances, the oldest one being since 2001.
I took out a car loan to build credit even though I had saved up money very carefully to pay for a car in full. How long should I keep this loan to build up credit? Is 1 year okay? I would rather pay off this car loan and not pay interest for my car -but I also want to build a credit history for getting a mortgage in the future (whenever that might be, not sure).
What do you mean by depth? Like not enough accounts? Or length, as in average age?
Because if I'm not mistaken, they also take into average age, which goes down every time you open a new account since that new account has an age of 0 starting off. The longer you keep your accounts, the better for the score.
And I don't understand why the bank is downplaying your score. You got the loan for the car because of it...
1. Every card over 2 lowers your credit score. (or consumer loan, etc) Why do you need all the cards? You need ONE.
2. You building your credit "depth" in silly way. No one says you need to be in debt to build it. You need to use it and pay on time. Not "make payments on time". Pay on time. So you want to build a score - start using your CC as your debit card, and simply pay balance off every month. Btw, you can find a card that will give you cash rewards or else. My in laws have one. But it's ONE, not 3 OR 4.
Sorry, but why do I have that feeling, that whoever told you about that credit depth was either an idiot, or pulled a quicky on you to get you into higher loan rate?
My kid built over 800 FICA score in matter of 6 month, by method I described. He bought a car, he had 1.4% rate and no one was trying to bs him with some "depth" thing.
If one card offers you say a $500 limit then you should get more cards. If your one card has a $20,000 limit then you only need one card. You want to use your cards and keep your utilization low so in example one all you could do is use it for $50 max before hurting your score.
Best strategy is get a number of cards, adding one or two a year. Ask for limit increases every year. Once you get a total limit high enough to keep your normal month use down to 5% you can stop adding and think of reducing cards. Reduce them properly though getting rid of newest cards first so you keep the age of accounts long.
When you do this you realize the car loan is pretty useless to your credit building. It won't age once you are paid off and does not add to availability. Car loans are there to be used when needed, but can't see how they benefit your score down the line.
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Quote:
Originally Posted by davebarnes
1 year is good.
If the interest rate is "too high", then pay off a huge chunk now and then the small remainder over the next year.
^this
In the FICO scoring models, 10% of your score is based on 'types' of credit a person has .... revolving accounts (both major and retail credit cards), installment loans and mortgage loans. Yes a person can have excellent scores if they never have an installment loan or a mortgage, but it will take longer to get there.
35% of the scoring model is based on payment history. FICO tends to discount loan payments that are less than one year, they still factor in but not as high as they would if the payment history is at least one year.
IF that 790 score is a FICO score (is it?) then it's an excellent score. There really isn't much difference between a 790 and an 800+ FICO, other than the warm fuzzy feeling of knowing you have a FICO that's over 800.
Quote:
Originally Posted by ukrkoz
1. Every card over 2 lowers your credit score. (or consumer loan, etc)
Where did you hear such misinformation???
Quote:
Why do you need all the cards? You need ONE.
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