Credit scores, cars and mortgages..

u0362565

Hi all,

I was just wondering if i bought a car, would it be better for my credit score if i bought it on some kind of finance option? As this would be a positive addition to my credit history? The other option is to buy the car outright which would be cheaper and obviously i'd be free of any monthly payments.

There is a caveat to this which is that i may take out a mortgage within the next year or so, so i am wondering what effect paying for a car through finance would have on my chances of getting a mortgage? One the one hand, it could be good for my credit score which may make the banks more likely to lend? But on the downside if i'm still paying for the car each month then this is extra outgoings that would presumably count against me for the mortgage?

Perhaps i'm thinking about all this too much and it wouldn't make that much difference which way i do it.

Thanks for the help.

Candyapple

If you have the funds to pay for it outright, do that.

If you want to build up your credit history, take out a credit card, use it for your monthly spends and pay it off by DD every month.

As to what effect having car finance will have when you go for a mortgage, any debts on your name the total sum of which will usually be taken into consideration when giving you a mortgage e.g say your loan was for £10k, your mortgage limit would be deducted by such.

DCFC79

Refer to my sig OP.

u0362565

I do have a credit card that i took out specifically to try and build my credit history, so hopefully thats doing something for me. Its whether having more of a credit history i.e. taking out car finance is more beneficial in terms of credit history than the debts against your name when seeking a mortgage. I suspect it would be better to have less debt but less credit history. I don't have any other loans or debts other than student loan which i don't think lenders take into account.

Thanks

Tixy

Agree less debt and less credit history.


In terms of your student loan, a mortgage lender will factor that in to affordability calculations.

jamesd

There are two different positive effects from using credit:

1. Different types of credit in the report is good. So personal loan and credit card is better than two credit cards.

2. When taking out the mortgage the unsecured credit can increase yor deposit and make you a lower risk or let you get to your required deposit level faster. The price for this is reduced affordability because the cost of the loan will be treated as part of your ongoing expenses. So you need to work out whether the limiting factor for you will be deposit or affordability.

u0362565

Thanks for all the comments guys another one for me to stew on.