[seanmcdirmid]

Car financing is a good way to build credit before buying a home. I regret that my credit score actually went down when I paid off my car loan early. The rules are really weird here. Using some credit is better than using no credit if you think you might need credit in the future (mostly to buy a house).

Also, buying a new car is much less of a hassle than buying a used one. The price difference between used and new ATM isn't so much to cover the extra hassle for many buyers. You want the car to be something that doesn't cause stress in your life, like many want a spouse/partner who isn't a constant drain on their emotions.

And then there are the many conveniences that are nice if you can afford it, but only if you can. It is purely a lifestyle upgrade, and not important to everyone, but it definitely makes some people happier, especially if they drive a lot.

[thesausageking]

> Car financing is a good way to build credit before buying a home.

I've heard people say this, but it's never made sense to me and sounds like something the loan industry has convinced people of just to sell more loans. Is it actually true?

Every time I've gotten a mortgage, they seem to just care about my income and whether I've had any missed payments on credit cards or other bills before.

And credit scores aren’t everything. Even with an >800 and money in the bank, after my startup was acquired, I couldn't get a mortgage because I didn't have any income I could show them.

[seanmcdirmid]

I went through buying a house a couple of years ago and it was really true. That my credit score got dinged because I paid off my loan early was a real head scratcher, but it was on the credit reports I pulled.

Ya, not having income is a blocker, but you also need to take care of your credit score. I basically had no credit score because I was out of country for 11 years (and..unlike new immigrants, they don't give Americans a benefit of the doubt here), so credit cards and an auto loan was really important when I came back (not having had a car for 11 years made my insurance premium go up, also).

[toast0]

Past (Good) payment history on an installment loan is a reasonable indication of likely future payment on an installment loan.

For sure, current income is a more important predictor of future income and future sufficient income is a predictor of future payment.

Installment loans are a decent part of credit scores, but mortgage lenders look into the details, so credit score isn't everything to them like it can be for smaller loans.

[noirbot]

I mean, that seems somewhat sensible? Why would they give a loan to someone with no income to cover the loan payments? Unless you already had the cash to just pay for it in full, but at that point I'd assume they're worried about why you're asking for the loan if you have more than the value of the loan in liquid assets.