getting car loan to help mortgage chance?

nobodycares

Hi
I was made bankrupt in February 2009. I have been in FT employment since then and now earn 25k per annum. I have a credit card and a phone contract that are always paid in full on time and have been running my finances in a healthy manner. i have been putting away regular savings each month with an aim towards getting back on the property ladder in 2015 with my wife who has an excellent credit rating.
My question is this would getting a car loan and paying it over the next 2 years have much of a helpful impact in applying for a mortgage when the car loan finished in 2 years?
My thoughts were applying for a poor credit history car loan and buying a car for around 5 or 6k with a deposit of £3000 and paying it off over the next 18-24 months. Im aware the interest rate would be quite high and i am prepared to pay this as a means to an end Would this have much of a beneficial affect on my credit rating and helping towards my number 1 priority of getting back on the property ladder in 2015.
Any thoughts or advice would be greatly appreciated
Thank you in advance

ValHaller

I don't think that there is a clear cut answer to this. Consumer credit will naturally be scored differently to mortgage credit. So while a car loan could improve your prospects with other consumer credit, it might have the opposite effect with mortgage credit. And mortgage lenders will score differently to each other.

On the whole, for a mortgage, if you can buy the car without credit, then I think this is the way to go. Better not to pay the stupid interest rates.

droiderm

Agreed. I wouldn't bother with the loan.
Put that saved interest towards a deposit which will be the most important thing .

nobodycares

Thanks Guys
You have given me some more food for thought.
I am still undecided though and i will elaborate a bit more to give you the full picture.
Option 1.
I currently have a good car worth £3000 that is fine for me to drive for the next 2 years and carry on saving as i have been doing.
Option 2
Use my current car as a deposit against a newer car. The newer car would be more economical in terms of fuel , tax and insurance and hopefully have less things go wrong with it. This would counteract the cost of repayments and high interest rates.
Option 1 would allow me to save more each month but at a guess i would say £2000 max over the next 2 years. Option 2 would hopefully show that i was capable of paying a monthly repayment that was a bit more substantial than my mobile phone repayments.
We hope to have a deposit of around £35000 in 2 years so a £2000 difference would not be huge. But would i be more likely to get a mortgage with option 1 or option 2? Its a difficult question but again i would like to know anybodys thoughts on this.
Thank you

PippaGirl_2

I can't say as I am not a lender and I guess only they could answer rather than us here, but be aware some types of credit adversely affect your credit score. Payday loans tend to show lenders that you are not managing your money, or managing to save for a rainy day etc. and there is a view that taking out a car loan would be saying the same thing. Also that you possibly might not have learnt from your BR experience and are still willing to take out unecessary credit which a lender might not like. There is more than one way to look at whether or not taking out a car loan would help your future mortgage application, but there is the possibility that by taking one out, you have actually made a negative effect on your credit rating even if paid off and all on time.

Personally I think by demonstrating an ability to save money, stash it away and not use it, you have proved far more to a potential lender and is the more likely way to improve your chances of impressing a lender in the future.

ValHaller

nobodycares wrote: »

We hope to have a deposit of around £35000 in 2 years so a £2000 difference would not be huge. But would i be more likely to get a mortgage with option 1 or option 2? Its a difficult question but again i would like to know anybodys thoughts on this.
Thank you

£35000 is a good deposit. I really cannot see any sense in paying high interest rates to take a loan for the sake of 'improving your credit rating' while you have such a deposit building up. It might help you for consumer credit but if I was scoring you for mortgage credit, I would weight you with a heavy numpty factor if you did that.

Do what is financially prudent for the car. If you don't need credit, don't take it. And don't sway yourself with false arguments about reduced costs of a new car. Depreciation of a new car will outweigh any notional savings on fuel tax and insurance.

If you are after a mortgage, I would put that ahead of a new car.

droiderm

Can't agree more.