Should my son get a credit card to help get car loan or will it hurt?

Dallybally

Hi. My son is thinking of applying for a car loan. He works for the NHS, lives at home and has plenty of disposable income but no credit history. I told him ages ago to get a credit card and pay it off each month but he didn’t. If he gets a card now, will it look worse on credit history as he’s applied for credit card close to applying for loan for the car? Or will it help him if he builds up say 3 months history? Thanks a lot. 

Brie

Why get a loan and pay interest on a loan when a credit card might cost him nothing?  Maybe if he applied for one with a 0% money transfer he could use that to top up whatever he needs to buy the car.  

Dallybally

Brie said:

Why get a loan and pay interest on a loan when a credit card might cost him nothing?  Maybe if he applied for one with a 0% money transfer he could use that to top up whatever he needs to buy the car.  

It’s 0% finance on the car, and it’s a 39k car. He’s got over 20k saved up but I really hope he doesn’t spend all the savings on a car. Just wondering if it’s worth trying to build up a few months credit history or if 2 applications in a short period will look worse?

Brie

Ah!  he won't get a card with a limit that will help much with that!!  

In that case get the loan then wait 3+ months to get the card.  Suggest too that he might need to focus on the lower rated cards particularly if he's going to pay it off in full each month.  He could work his way up from there.

Dallybally

Brie said:

Ah!  he won't get a card with a limit that will help much with that!!  

In that case get the loan then wait 3+ months to get the card.  Suggest too that he might need to focus on the lower rated cards particularly if he's going to pay it off in full each month.  He could work his way up from there.

Once he has the car that will also build up history. Not worth getting the card first and wait 3 months? The car has been 0% for a long time. 

Mark_d

So you son is considering a credit card purely to make his credit report look better for the loan application.

I think a credit card is a great thing to have.  I've had one as soon as I was old enough.  But I don't think it would look good if your son takes out a credit card within 6 month of taking out a loan.

Your son has enough savings and disposable income to get finance on the car he wants.  Generally a good credit history would mean a lower interest rate for your son - but as the finance deal is 0% this is not a concern here.

I don't know how much finance your son would be able to get - maybe £20k-£30k - but I doubt this would be dependent on his credit history.

Dallybally

Mark_d said:

So you son is considering a credit card purely to make his credit report look better for the loan application.

I think a credit card is a great thing to have.  I've had one as soon as I was old enough.  But I don't think it would look good if your son takes out a credit card within 6 month of taking out a loan.

Your son has enough savings and disposable income to get finance on the car he wants.  Generally a good credit history would mean a lower interest rate for your son - but as the finance deal is 0% this is not a concern here.

I don't know how much finance your son would be able to get - maybe £20k-£30k - but I doubt this would be dependent on his credit history.

Thanks a lot. That is what I was thinking, they’d frown more on recent credit application than look favourably on a couple of months payment history. Credit scores are such a joke, got him to check ClearScore and it’s almost 600, with nothing on there. 

BrilliantButScary

Has your son seen this website:

https://healthservicediscounts.com/Joinfree-1?utm_source={google}&utm_medium={cpc}&utm_campaign={G-HSD-Acquisition-Keywords}&utm_content={Keywords-NHS}&gad_source=1&gad_campaignid=9361733191&gclid=Cj0KCQjwlYHBBhD9ARIsALRu09pHeK25XAHAyG9ro4hTNno5IcvXek0NGpNHd4Dr16GfkBxxL2ty9XAaAm3XEALw_wcB

Dallybally

BrilliantButScary said:

Has your son seen this website:

https://healthservicediscounts.com/Joinfree-1?utm_source={google}&utm_medium={cpc}&utm_campaign={G-HSD-Acquisition-Keywords}&utm_content={Keywords-NHS}&gad_source=1&gad_campaignid=9361733191&gclid=Cj0KCQjwlYHBBhD9ARIsALRu09pHeK25XAHAyG9ro4hTNno5IcvXek0NGpNHd4Dr16GfkBxxL2ty9XAaAm3XEALw_wcB

It’s the manufacturer doing the discount and 0%, I think it’s better than the NHS rates. I’m very tempted by 16k off a Lexus though. Maybe I should buy him his and make him get me a Lexus….

Desmond_Hume

Dallybally said:

Mark_d said:

So you son is considering a credit card purely to make his credit report look better for the loan application.

I think a credit card is a great thing to have.  I've had one as soon as I was old enough.  But I don't think it would look good if your son takes out a credit card within 6 month of taking out a loan.

Your son has enough savings and disposable income to get finance on the car he wants.  Generally a good credit history would mean a lower interest rate for your son - but as the finance deal is 0% this is not a concern here.

I don't know how much finance your son would be able to get - maybe £20k-£30k - but I doubt this would be dependent on his credit history.

Thanks a lot. That is what I was thinking, they’d frown more on recent credit application than look favourably on a couple of months payment history. Credits scores are such a joke, got him to check ClearScore and it’s almost 600, with nothing on there. 

They are. Quite literally. 

CliveOfIndia

Dallybally said:

Credit scores are such a joke, got him to check ClearScore and it’s almost 600, with nothing on there. 

As is repeated ad nauseam on here, the credit score dished out by the CRA is absolutely meaningless - it's not even visible to lenders.  Credit history is what matters.

And to that point, responsible use of a credit card is probably the easiest way to build up a favourable history.  However, a history of only 3 months will make only the tiniest difference in terms of being accepted for further credit - it's a slow process, you ideally need at least a year or 18 months before it begins to make a meaningful impact.

Dallybally said:

Brie said:

Why get a loan and pay interest on a loan when a credit card might cost him nothing?  Maybe if he applied for one with a 0% money transfer he could use that to top up whatever he needs to buy the car.  

It’s 0% finance on the car, and it’s a 39k car. He’s got over 20k saved up

0% finance always sounds attractive, but £39K is a heck of an expensive car - even if you're not being charged interest, that's a lot of money in anyone's books.  The more financially prudent approach would be to use the £20k savings to buy a (still very nice) car outright, then pay back into his savings each month.  In the meantime, use the credit card responsibly (just for everyday spending) to start building up a decent credit history, which will put him in a better place the next time he wants credit of whatever type.