Don’t worry… I’m not going to do it. Not now, anyway. But I am thinking about it.
Ever since I found out that my credit score wasn’t as perfect as I thought, I’ve been pondering changes I could make to improve it. I know my score is still really good, but it’s not excellent. My payment history is spotless, my ratio of available credit to credit in use is very high, and I’ve had credit established since about 1997. I have a mortgage, credit cards, and a couple store credit cards. The one thing I’ve never had is a car payment.
My husband’s credit score does fall into the “excellent” category. For the most part, we have the same credit history for about the last 6 – 7 years, as we started combining our finances in 2002. But he had a car loan when I met him, and it still shows up on his credit report. He hasn’t had a car loan since the summer of 2002, so I assume that will be coming off of his credit report sometime this year. But for now, we think that is what is giving his credit score a boost compared with mine.
I’ve always been proud of the fact that I’ve never had a car loan. We bought my 1991 Civic with cash ($2300) in 2003, and it’s still cruising along. Before that, I had a 1989 Hyundai Excel, which my sister still drives. I just can’t get my head around the idea of paying interest on a depreciating asset like a car.
But I’m wondering if having a car loan might be worth it in terms of boosting my credit (our credit, since we would get the loan together, and I think that my husband’s old car loan won’t be on his credit report much longer). We’re currently putting money aside so that one day when we need to replace one of our cars, we’ll be able to afford it. Both of our cars are closing in on 20 years old, and we know they won’t run forever. Our plan had been to just pay cash for another car one day.
But now I’m thinking about perhaps getting a loan instead. We would pay it off quickly – perhaps making a total of 10 or 12 payments. This would minimize the amount of interest we had to pay, while still building an auto loan segment of our credit history. If I look at the interest as a fee paid to increase my credit score, it doesn’t bother me as much as the idea of paying interest on a car normally would. If we went this route, we would still only finance as much car as we could afford to buy with cash. But instead of paying cash, we would make payments for a while.
Right now, both of our cars are running just fine, and we have no intention of replacing either of them until they aren’t running at all. We put very few miles on our cars, and don’t anticipate having to buy another one for at least a few more years. So there’s plenty of time to mull this over (and build up our car replacement savings account). And who knows – maybe there will be zero percent interest offers again by the time we need another car. One of my girlfriends bought a car in 2002, paid it off in 2007, and never paid a dime of interest. A deal like that would definitely make me reconsider my “never finance a car” stance. (Although I think that those offers were limited to new cars, and we would only be interested in used vehicles).
Any thoughts on this? We don’t often need our credit score, since we rarely apply for credit. But since we’re preparing to sell our house and buy another one, it’s been on my mind a bit lately. Anyone have any experience with changes in their credit score following a financed car purchase?