Background history

I never took a credit card before last year because I have been always fortunate to have sufficient money to cover my expenses and I was under the impression as long as I paid my bills on time, my credit score would grow

Unfortunately,only last year I realized that you do need a credit card. That said, I did get one I have slowly built my credit to about 760 and have also added another credit card to the mix while paying off my bills very diligently.

The need

I plan to buy a car and while I have the money to pay it off in cash upfront, my friends recommend I get an auto loan to diversify my credit lines and potentially enhance my credit suitability as someone who can take pay off loans.

While I can see the value in what they say, I am trying to figure out is there value in taking debt just for the sake of increasing my credit lines.

So the question is should I get a auto loan for diversifying my credit lines even though I have cash upfront

2 Answers 2


You should not seek a kind of debt just for it's appearance on your credit report. If you don't need an auto loan don't get an auto loan.

Getting a credit card for the purpose of building credit is a little bit of a different animal because you can use a credit card such that you never pay any interest or fees. With a loan, you will pay interest. Altering your score by paying interest doesn't provide you with a net benefit.

With that said, depending on the auto loan rate you may want to accept the loan just to fee up your capital. Some promotional rates are so low you may even make money leaving the cash in a regular savings account. But don't let your credit score wag the dog.

  • 1
    And some of those promotional rates are only available if you overpay for the car. Negotiate price first. Only after that should you discuss dealer financing vs. other sources of money.
    – keshlam
    Aug 3, 2016 at 22:32

There is no need to get an auto loan just to try and affect your credit score. It is possible to have a score over 800 without any sort of auto loan. If you can afford to pay for the vehicle up front that is the better option. Even with special financing incentives it is better to pay up front if you can. Yes it is possible to use the funds to make more if you finance with a silly low interest rate, however it's also possible to lose a job or have some other financial disaster happen and need that money for something else making it more difficult to make the payment. It may be just me but I find the peace of mind not having the payment to be worth a lot.

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