Articles Comments

Debt Relief – Insolvency – Bankruptcy Information » Student Loan Help » An auto loan to improve credit?

An auto loan to improve credit?

I’m currently 22 and am a senior in college (although I’m going for one more year and then possibly grad school). I would like the possibility of being able to buy a house in two to three years, and therefore am looking for ways to improve my credit. I opened a credit card ~9 months ago with a $3,000 limit. Currently the limit on it is $4,500, all payments have been on time, and the balance is my previous month’s purchases (around $100).

In reading, many people recommend having either one or two revolving credit lines, and one or two fixed credit lines, for a total of three lines of credit. My credit card is one revolving credit line. I’m curious if taking out say a four year auto loan and making payments on time would substantially improve my credit score three years from now. The loan amount would likely be $7,000 to $8,000, giving monthly payments of around or under $200, which I can realistically afford. I’ve been paying my own college tuition and rent since the second semester of my freshman year of college, so I somewhat have of a grasp of my expenses.

On a side-note, I’m under the impression that I would be stuck with the interest rate I initially receive. I could refinance, but wouldn’t that close out the line of credit and begin a new line of credit, potentially lowering my score?

The follow-up questions are, would it be in my best interest to open a second credit card for additional feedback on my credit history? Also, I currently have a good amount of student loans, all of which are in deferment until I graduate (if I attend grad school, they will remain in deferment through that period). Do these loans count towards my credit score as fixed lines of credit? Some are federally-funded, while others are through private institutions.

For what it’s worth, Credit Karma reported my credit score at 722 as of a week ago, and TransUnion reported it at 764.


  1. Can i re-build credit after a Chapter 7 Bankruptcy with an Auto lease instead of a Credit Card? I recently declared Chapter 7 Bankruptcy. I re-affirmed my Auto Lease. Will this help to re-build my credit score? I’ve...

  2. Does debt consolidation work and help improve your credit score? I am really bad with paying bills and my credit has taken a hit these past couple years. I make...

  3. Get Debt Relief NOW – Free Yourself From Credit Card Debt NOW and Improve Your Credit Score Get the Simple Recovery guide debt relief. Now you can easily get out of credit card debt and improve...

  4. Auto Loan – expected APR? me and my wife want to buy a used BMW 5 series for about $16k. I can put down about...

  5. How does one get their credit score updated quickly after paying off credit cards? Hi experts! I’m in the process of paying off my credit card debt in hopes of raising my FICO score...

Written by

Filed under: Student Loan Help · Tags: , , ,

One Response to "An auto loan to improve credit?"

  1. Tad W says:
    With those credit scores, I wouldn’t worry about being able to get a home loan in a couple of years!

    The FICO score looks at several different aspects of your use of credit
    * 35% — punctuality of payment in the past (only includes payments later than 30 days past due)
    * 30% — the amount of debt, expressed as the ratio of current revolving debt (credit card balances, etc.) to total available revolving credit (credit limits)
    * 15% — length of credit history
    * 10% — types of credit used (installment, revolving, consumer finance)
    * 10% — recent search for credit and/or amount of credit obtained recently

    The car loan might improve your score by adding an installment loan to your credit mix, but you don’t need the help.

    The student loans will report positively on your credit score, since they are “paid as agreed.” If they report at all.

    If you want more information about how the credit score is calcualted get Philip Tyrone’s “Seven Steps to a 720″

Leave a Reply

Connect with Facebook


You may use these HTML tags and attributes: <a href="" title=""> <abbr title=""> <acronym title=""> <b> <blockquote cite=""> <cite> <code> <del datetime=""> <em> <i> <q cite=""> <strike> <strong>

Not finding what you're looking for?
Do a custom search of our entire site:

Get Adobe Flash player