@DoppelgangerD wrote:Ok, so I had a BK7 about 9 yrs 10 months ago.
I've worked hard to rebuild perfect credit over that time.
BK7 already off TU and EX, with scores well into the 800s.
EQ at 771 now, so I'm sure it'll pop right up there with the others next month.
So since the BK7, the mortgage does not report to the bureaus, so no history there to help in that realm.
A few years ago I got a small auto loan to help build up the credit file, but I am down to 1 payment left.
Hope my scores don't tank when it's paid off (???).
I have quite a few very nice credit card accounts, around maybe 150k total CLs and average 1% utilization.
So in a month or so, my only active credit will be credit cards...
Is that ok?
I'm looking to buy another vehicle soon, and I can pay OOP for it, but should I be thinking about another small loan for it?
I'd hate to pay for Interest and fees if I don't have to.
I know quite a lot about credit cards, but certain aspects of how loans are viewed by the credit bureaus and scoring models is my weakest point.
Any advice from experts here is much appreciated. Thanks!
Your best options will largely depend upon what interest rates you can get; I would argue:
- If you can get an auto loan for less than 5%, then you are better off taking the loan than paying out of pocket.
- If you are looking at auto loan percentages in the 5% to 7% range, then it is a judgement call compared to the amount of growth you are getting from your investments.
- If you're only able to get an auto loan above 7%, then pay cash for the vehicle.
- If you opt for paying cash, then open up an SSL with say, PenFed or NFCU, pay it down to under 9%, and let that loan stand as your installment loan for the purposes of FICO scoring.
Eighteen months ago I was faced with a similar decision when I bought a fully tarted out Tacoma; at the time Toyota was offering 2.49% for 48 months so it was a no-brainer, I kept the cash and financed the vehicle.
If your current auto loan is your only open loan, you could lose up to 20 - 30 points (on average) on your Fico 8 (and some other models) scores for "no open installment loan" once it's paid off.
However, you don't have to have an open loan to achieve 800++ scores. Many people around here use the saying "finances over Fico".
Over time, your scores will recover the losses without an open loan on your reports. Once scores go above 760, you're in a tier to get all the best rates and offers where credit cards and most other consumer credit products are concerned. For certain mortgage products the magic number is 780 but that's another discussion.
You could do the SSL loan trick to boost your scores, (some auto loans will also function the same way) which is completely fine, but then you can find yourself playing that game over, and over again.
This is just just my opinion but, why essentially pay for those scores with a loan you don't need when they'll get back up there again all on their own. You could likely put that money to better use elsewhere, like in a HYSA.
@DoppelgangerD wrote:Ok, so I had a BK7 about 9 yrs 10 months ago.
I've worked hard to rebuild perfect credit over that time.
BK7 already off TU and EX, with scores well into the 800s.
EQ at 771 now, so I'm sure it'll pop right up there with the others next month.
So since the BK7, the mortgage does not report to the bureaus, so no history there to help in that realm.
A few years ago I got a small auto loan to help build up the credit file, but I am down to 1 payment left.
Hope my scores don't tank when it's paid off (???).
I have quite a few very nice credit card accounts, around maybe 150k total CLs and average 1% utilization.
So in a month or so, my only active credit will be credit cards...
Is that ok?
I'm looking to buy another vehicle soon, and I can pay OOP for it, but should I be thinking about another small loan for it?
I'd hate to pay for Interest and fees if I don't have to.
I know quite a lot about credit cards, but certain aspects of how loans are viewed by the credit bureaus and scoring models is my weakest point.
Any advice from experts here is much appreciated. Thanks!
I wouldn't take out a car loan if you don't need one. I'd rather have the clean title.
If you want to pick up points in the installment loan realm, it would be better to take out an innocuous, low-cost, share secured loan with PenFed or NFCU, and pay it down to 9% of the original loan amount.
@JoeRockhead wrote:If your current auto loan is your only open loan, you could lose up to 20 - 30 points (on average) on your Fico 8 (and some other models) scores for "no open installment loan" once it's paid off.
However, you don't have to have an open loan to achieve 800++ scores. Many people around here use the saying "finances over Fico".
Over time, your scores will recover the losses without an open loan on your reports. Once scores go above 760, you're in a tier to get all the best rates and offers where credit cards and most other consumer credit products are concerned. For certain mortgage products the magic number is 780 but that's another discussion.
You could do the SSL loan trick to boost your scores, (some auto loans will also function the same way) which is completely fine, but then you can find yourself playing that game over, and over again.
This is just just my opinion but, why essentially pay for those scores with a loan you don't need when they'll get back up there again all on their own. You could likely put that money to better use elsewhere, like in a HYSA.
I have a very aged and thick profile. A few days ago, my newest revolving account turned 1 year old and my FICO scorecard was presumably reassigned to a "no new revolver" segment. My EX8 score went up to 850. No open loans at all, though I have two closed mortgages which haven't dropped off my reports yet.
@FicoMike0 wrote:@NoHardLimits congratulations!
Thanks @FicoMike0 ! It will probably be a short-lived 850 as I am planning to apply for a new card in May. If approved, that will cause me to be reassigned back to a "new revolver" scorecard segment and almost certainly drop my score below 850.
