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Do you plan to buy a car? A car loan will establish your credit history. Car lenders will lend to anyone because they can always repossess the car. If you co

Do you plan to buy a car? A car loan will establish your credit history. Car lenders will lend to anyone because they can always repossess the car. If you could buy a car with cash, take out a auto loan at any interest rate. Pay off the entire balance except $1. You’ll have no balance due each month, but each payment will be recorded as having been made on time. Then pay off the last $1 in the last month. Double check to whether this actually works, I haven’t done it and I’m just regurgitating something I saw in Reddit. Also make sure there’s no sort of prepayment penalty on the loan.

cmeacham98 4y ago
Your first paragraph is largely true if you're able to make a down payment (your car depreciates a ton as soon as you drive it off the lot, lenders will be much more willing to lend if amount of the loan is less than the value of the car sold _used_). The second is close to true, but you should actually leave a little over one month's payment, not $1. This SE answer explains it better than I ever could: https://money.stackexchange.com/a/59311 https://money.stackexchange.com/a/59311 (ignore the "Accepted" answer which contains awful advice).
- NavinF 4y ago
  > ignore the "Accepted" answer which contains awful advice Yep. I love how the accepted answer with 130 votes totally ignores how credit scores work. I suppose it would be excellent advice if the OP never intends to get a home/car/cards and is too mentally impaired to handle a $1 loan.
- philsnow 4y ago
  Do you have any idea having two new car loans improves your credit score any more than having one new car loan? OP might have enough income / savings to not be bothered at the idea of buying two new cars (they don't have to be Bentleys, people take out loans on Civics too). My gut says that having two of the same age wouldn't be much/any better than one, but then again it's the credit industry and my intuition has bitten me in the past.
  - cmeacham98 4y ago
    Basically, yes: the returns are diminishing. There are two types of debt (for the purposes of your credit score): revolving (you regularly borrow money and pay it back, like a credit card) and fixed (you borrow a lump sum and make regular payments). Just having any type of fixed debt at all (car loan, mortgage, even a personal loan) is a huge boost to your score. Thus, a second car loan will make much less of an impact because OP would already be getting this boost from their first loan. (Similarly, having any type of revolving debt at all provides a boost, so for anybody new to the credit score game try to get any shitty credit card that will approve yoy and buy at least one thing with it each statement). On top of that, getting approved for a second car loan (at the same time) is wayyyy harder than the first. I have no idea why this is, as the economics should be the same, but maybe lenders have some data that shows people with two car loans are more likely to default or something. I generally wouldn't recommend this strategy to OP unless they were already going to buy a second car for a spouse/family member/etc. Cars depreciate very quickly even if you don't use them at all and the score boost won't be very big.

cmeacham98 4y ago

Your first paragraph is largely true if you're able to make a down payment (your car depreciates a ton as soon as you drive it off the lot, lenders will be much more willing to lend if amount of the loan is less than the value of the car sold _used_). The second is close to true, but you should actually leave a little over one month's payment, not $1. This SE answer explains it better than I ever could: https://money.stackexchange.com/a/59311 https://money.stackexchange.com/a/59311 (ignore the "Accepted" answer which contains awful advice).

NavinF 4y ago
> ignore the "Accepted" answer which contains awful advice Yep. I love how the accepted answer with 130 votes totally ignores how credit scores work. I suppose it would be excellent advice if the OP never intends to get a home/car/cards and is too mentally impaired to handle a $1 loan.
philsnow 4y ago
Do you have any idea having two new car loans improves your credit score any more than having one new car loan? OP might have enough income / savings to not be bothered at the idea of buying two new cars (they don't have to be Bentleys, people take out loans on Civics too). My gut says that having two of the same age wouldn't be much/any better than one, but then again it's the credit industry and my intuition has bitten me in the past.
- cmeacham98 4y ago
  Basically, yes: the returns are diminishing. There are two types of debt (for the purposes of your credit score): revolving (you regularly borrow money and pay it back, like a credit card) and fixed (you borrow a lump sum and make regular payments). Just having any type of fixed debt at all (car loan, mortgage, even a personal loan) is a huge boost to your score. Thus, a second car loan will make much less of an impact because OP would already be getting this boost from their first loan. (Similarly, having any type of revolving debt at all provides a boost, so for anybody new to the credit score game try to get any shitty credit card that will approve yoy and buy at least one thing with it each statement). On top of that, getting approved for a second car loan (at the same time) is wayyyy harder than the first. I have no idea why this is, as the economics should be the same, but maybe lenders have some data that shows people with two car loans are more likely to default or something. I generally wouldn't recommend this strategy to OP unless they were already going to buy a second car for a spouse/family member/etc. Cars depreciate very quickly even if you don't use them at all and the score boost won't be very big.