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My dad swore buying a used car in cash was always better than financing. I did it and missed out on building any credit history.
He told me back in 2019 when I was 22, 'never borrow money for something that goes down in value.' So I paid $8,500 cash for a 2012 Honda Civic from a guy in Phoenix. Now I'm 27 and my credit score is stuck at 620 because I never had a car loan or any installment loan history. Meanwhile my friend financed a similar car at 4% and his score is 780 after paying it off. Was the cash move actually dumb long term or am I missing something?
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zarag173mo ago
Wait, but did your friend have anything else on his credit file besides that car loan?... I had a buddy who did the same thing you did, bought a used Corolla cash back in like 2017. He had no other loans either, just a credit card he used for gas and paid off every month. His score was stuck in the low 600s for years, and he couldn't even get a basic apartment lease without a cosigner. Then he finally got a small personal loan for $2,000, paid it off over 12 months, and his score jumped to like 740 after a year. So I don't think the cash move was dumb, but you gotta pair it with some other credit building stuff... maybe get a secured card or something small just to get the ball rolling.
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margaretc423mo ago
Yeah the "gas card paid off monthly" thing barely does anything, it needs a longer history like that personal loan did.
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wade_anderson3mo ago
Man honestly that's exactly what happened with my buddy. He had a credit card for two years paying it off every month and his score barely budged past 650. He ended up taking out a $1,000 personal loan from a credit union paid it over 6 months and his score shot up to 720 within a year.
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