Optimal Finance Daily - Financial Independence and Money Advice 3187: Should You Get a Car Loan to Improve Your Credit Score? Heck No! by Paula Pant of Afford Anything
Jun 22, 2025
Dive into the surprising truth about car loans and credit scores. Learn why taking on debt for a score boost can backfire. Responsible credit card use plays a bigger role in improving your score. Discover practical strategies for buying used cars, emphasizing financial sense over flashy purchases. The journey of finding a reliable vehicle showcases the wisdom of careful research and smart investments.
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Avoid Car Loans for Credit
- Don't get a car loan just to improve your credit score; it wastes time and money.
- Focus on responsible credit card use, paying balances in full, to build excellent credit.
Credit Score Factors Explained
- 90% of your credit score comes from payment history, utilization, credit age, and new credit, not loan type.
- Installment credit like car loans affects only 10%, so it's not worth taking on unnecessary debt.
Smart Credit Card Practices
- Pay your credit cards in full each month or week to avoid interest and keep utilization under 20%.
- Use automatic payments and keep older accounts active to maintain a strong credit score.