Salesperson offers bad car loan advice

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Dear Terry,
I just bought a 2008 car and paid cash. Thanks to a bankruptcy, my credit score is 640. My car salesperson suggested I take out a loan at the bank and use the new car as equity to increase my credit score. Is this true?


Dear Debra,
It is true that one way to raise your credit score is to show an ability to pay off a loan over time. A car loan helps that process. But because you were able to pay cash for your car, I wouldn’t suggest taking on a loan just in pursuit of a higher credit score.

Instead, look to pay down some other credit balances. This can help raise your score.

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