hareese86

2 Contributions 96 People Helped

Member Since: August 2013

Most Helpful Contribution

Beyond your credit score

Aug 16, 2013
Helpful to 96 out of 98 people

Yes, that is probably why you aren't over 800. You have no history of installment loans like auto loans or mortgages. Creditors weight those more heavily than credit cards.

And, there are a couple of good reasons to finance a car instead of paying cash besides building your credit.

1) If you have an investment, say a money market or mutual fund, which gives you a higher APY than the nice low APR you could get the auto loan for with a 789 score, then you'll actually make money by gaining more interest from your money sitting in your investment than what you're losing on the loan.

2) You can save money on the car's purchase price. Car dealers make money from your loan. There are incentives from lenders which make a sale to a financing customer more lucrative than a sale to a cash buyer. You will have more negotiating capital if you make it clear that you can pay cash but will finance if they give you more for your trade (They're also generally more willing to add to a trade than reduce a sale price, FYI, even though it has the same effect for you). I've actually financed a car before just to get my trade up 2000$ more, then paid it off two weeks later.

Activity (2 Total Contributions)

Beyond your credit score

Aug 16, 2013
Helpful to 96 out of 98 people

Yes, that is probably why you aren't over 800. You have no history of installment loans like auto loans or mortgages. Creditors weight those more heavily than credit cards.

And, there are a couple of good reasons to finance a car instead of paying cash besides building your credit.

1) If you have an investment, say a money market or mutual fund, which gives you a higher APY than the nice low APR you could get the auto loan for with a 789 score, then you'll actually make money by gaining more interest from your money sitting in your investment than what you're losing on the loan.

2) You can save money on the car's purchase price. Car dealers make money from your loan. There are incentives from lenders which make a sale to a financing customer more lucrative than a sale to a cash buyer. You will have more negotiating capital if you make it clear that you can pay cash but will finance if they give you more for your trade (They're also generally more willing to add to a trade than reduce a sale price, FYI, even though it has the same effect for you). I've actually financed a car before just to get my trade up 2000$ more, then paid it off two weeks later.

Credit card utilization and your credit score

Feb 24, 2015

I use this trick myself and also never pay interest. It's just important to be clear about what we mean by "all but 5$ of your balance". The balance on your bill and the balance by the time you pay it are often different. Then by the time the card company reports to the credit bureaus, your payment is subtracted so it's going to be a different amount again. So there are 3 relevant balances.

Say your billing cycle closes on the 1st. If you owed $300 on the 1st, then $300 is what will appear on your bill and how much you have to pay by your due date in order to avoid interest. Say your due date is the 21st. If you charged anything between the 1st and the 21st, your "outstanding balance" will be higher than $300 by the due date. Let's say it's $450. 

If you pay $445 and do not use the card again until the company reports to the credit bureuas, then the balance reported on your credit report will be the optimal $5 and you also pay no interest. If you pay only $300, your reported balance will be $150, which is of course not as good as $5. If you pay $295 trying to micromanage your credit score, you just incurred interest.

So pay at least your full "statement balance" (the one on your bill) and leave some tiny amount of your "outstanding balance" (the up-to-the-minute one on the website) for next month.

If you're an autopay aficionado, just autopay your outstanding balance in full and then use the same card to autopay something small like Netflix on a date right after your credit card's due date. Done.