Building credit

[SuperBowlNachos]

Any bankers or people familiar with loans and building credit?

I decided I wanted to purchase a jet-ski (well a Yamaha Waverunner). Long story short I have good credit, but I just don't have enough credit as I've never had loans in my name. Just good credit card payments. My parents weren't too keen on co-signing mainly as their way to stop me from getting it (despite being 23...)

I could buy it in cash if I wanted to, but I decided I might as well build some credit out of it. I told the dealer I would have to pass because I wasn't able to attain a co-signer. They came back later in the day saying if I put down about 65% they could finance the rest for 16 months at 4.7%.

My question is what will reflect better on my credit score? Having a $4,500 loan for 16 months or an $8,000 loan for 32? Based purely on credit building, not what the payments will be per month.

[Fresh Tendrils]

Re: Building credit

If you have the cash you're just going to waste money on interest instead. I would worry about that more than building credit with a jet-ski loan personally.

[AUChase]

Re: Building credit

As long as you pay your payments on time, anything over a year is going to help a lot.

Personally, I wouldn't want to pay on something like an ATV or Sea Doo for that long.

They probably told you that you had good credit, but "young credit" without much history.

That 4.7% rate isn't terrible for someone your age, so if you're dead set on financing it, then the first option would be my route.

[cjonesfan921]

Re: Building credit

Personally, pay as much as you can, and finance an amount for 18 months. The benefits will far exceed the interest...I think. And when you factor in the time value of money..the interest is minimal.

[AUChase]

Re: Building credit

Is there anything else you need that is more important ? A friend of mine wanted to buy a house, but he had always just paid cash for everything since he had no real bills besides a fiance and child.

He went to the credit union and took out a small loan and slowly paid it back over a year, even though he didn't need the $$. Then he did the same thing again and within two years he was in much better shape on his house. He's 23 and about to sign the papers next week.

Financing a recreational toy just never seemed like something I would want to do, unless its a nice motorcycle.

[jeremym480]

Re: Building credit

Try this website: https://www.creditkarma.com

First off it's completely free, so no worries there.

Secondly, there's a Credit Score Simulator where you can input a new loan, and see how that effects your credit score. You can even see what impact the inquiry(s) or closing an account will have on your credit.

I started using this a few months ago and while I haven't had my actual credit pulled since using the site, I believe it to be fairly accurate.

Good luck hopefully, you'll be hitting the waves in no time.

Spoiler

[cardsfan2222]

Re: Building credit

Assuming the same interest rate, the 16 month loan would cost you about $150 in interest, while the 32 month would cost $527. I'd definitely go for the shorter loan if you're set on financing.

[superjames1992]

Re: Building credit

How much are you looking at for a jet ski? A few thousand? I'd probably just opt to save up for a few months/year and pay with cash, so you can avoid the unnecessary interest.

However, if you want to finance this, it's best to take the plunge now, especially since the FOMC decided to continue QE3. Once that ends soon enough, interest rates will be going up.

[mgoblue]

Re: Building credit

I have no idea how my credit is amazing now lol.

Mid 2000's I didn't pay my monthly CC minimum. When I finally got a better job I paid that card off and was 100% good about payments from that point forward.

A biggie with my wife is stuff out for collection (from when she was in college). Some medical stuff, a cable bill, random ish she somehow forgot or didn't handle.

Over time it goes away, but now I got a house in my name and we just got a car in my name and my credit was like 760. Insane, but I do make a good salary and whatnot.

I also run every purchase through my credit card and pay it off 100% each month now. That way I get Southwest Airlines miles and earn a ton of free flights.

[SuperBowlNachos]

Re: Building credit

It would be around $12,500. So $4,500 on loan. The interest would only be around $15 more a month on the 16 month route. So it's nothing too crazy if it would help me eventually get a lower interest rate on a much bigger purchase.

[cardsfan2222]

Re: Building credit

It would be around $12,500. So $4,500 on loan. The interest would only be around $15 more a month on the 16 month route. So it's nothing too crazy if it would help me eventually get a lower interest rate on a much bigger purchase.

Good credit doesn't necessarily mean a lower interest rate. It can mean the difference between being approved or not approved for a loan. My wife and I just purchased a house, and our high credit score did not affect our interest rate. It did help us be able to be approved for a higher amount as we are lower risk customers, but we are paying the same interest rate we would have even if our credit scores were lower.

[cjonesfan921]

Re: Building credit

A 4% rate is peanuts, the only issue is you would have to have insurance on it, as well. That's an added cost to the term.

[SuperBowlNachos]

Re: Building credit

A 4% rate is peanuts, the only issue is you would have to have insurance on it, as well. That's an added cost to the term.

That is what might actually slow my role. Being under 25 it's ridiculously high. I would have to actually put it in my parents name to avoid a $1,000/yr insurance policy. So all of this would be a moot point anyways.

Screw it. RC boat it is I guess...

[AUChase]

Re: Building credit

That's a lot to pay for a sea doo at your age, man... It might require a little maintenance, but I'm sure you could find one a little older for a lot less.

I just couldn't do it. I didn't even pay that for my SS Cobalt..

[mgoblue]

Re: Building credit

That's a lot to pay for a sea doo at your age, man... It might require a little maintenance, but I'm sure you could find one a little older for a lot less.

I just couldn't do it. I didn't even pay that for my SS Cobalt..

Seriously...we paid double that for a Honda CR-V lol...Can't imagine paying that for something I use in the summer only. I'd go used IMO.