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How will new auto loan effect score?


chatter2960
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Hi guys,

I just totaled my car a few weeks ago and I had to buy a new one. It worked out great actually - I had a high interest rate on my old one due to bad credit. My ins. paid it off and I just got a new loan at 5.5%!! The total loan amount was about $14,000. How will this affect my credit scores? The other loan was paid off.

Thanks!

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My Co-worker is an Ex Auto Loan collector and seems to be very knowledgeable about credit scores, ( He's in the Over 700 club.) My co-worker is fairly trustworthy and is not know to fabricate information.

He claims that a new auto loan increases your score 23 points. He also claims that every time you make a installment payment, (Auto Loan,) to a A grade Lender that reports every month to the credit bureaus, your score goes up 1 point. He attributes his high score to the fact that he had to buy four new cars in 2 years, (and paid off 2.)

Does anybody know how accurate this info is ???

:?:

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it seems that from what i have read, you take a dip for a few months util you start showing payments. you become an increased risk to lenders with a new loan, but after a few months, the dips should even out, and with on time payment, you ought to raise your score.

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There's little rhyme or reason to FICO.

True, your score will dip initially because of the balance/loan amount, hard inquiry(ies), new "risk" factor...

Then as time goes on, your score will improve since FICO also calculates the loan type (installment), which it likes to see along with revolving lines of credit (credit cards).

When all this actually happens.... only Fair Isaac knows for sure...

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2+2 almost never equals 4 in FICO world! Just because x+y=z for Joe, Mike could get a totally different outcome. A lot depends on what other info is contained in the reports. Many people think each inquiry is dropping their score 2 points. If they have 30 inq., they think their score will pop 60 points if deleted. It may...then again it may not. Inquiries definitely have a more negative impact on someone with a young, thin file. A person with a 25 yr. history can make a slew of inquiries with less negative effect than someone with an 18 month old file. There are so many variables all you can do is really make generalizations and hope for the best. I've personally had 30 to 40 point drops, scrutinized the before and after reports to no end and found no reason for the decrease!!! And Radio Guy; your buddy's score may have popped 23 points with the new loan but someone else's may drop. What's not uncommon is a steady 1 or 2 point increase month to month. The longer the time period since the bad stuff, the score will rise slowly but steadily providing everything is kept current.

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