Does refinancing your car help your credit score or build your credit?

Question

I just refinance my car and lowered my interested and my monthly payment and I was just wondering, does refinancing your car help your credit score or build your credit?

Answer 1

ignore half of what the last guy wrote. im the finance director for a dealership. i arrange 100's of autoloans per month. refinancing the loan can help your credit depending on who the loan was with in the first place and who you refinanced it with. if you moved from a secondary (high interest) lender to a primary lender that alone cane help. but if you refinanced w/ a smaller company it can often hurt your credit. also local banks and credit unions dont help your credit as much as a national lending institution. gmac/toyota/chryser/ford/nissan or some of the national banks. also one of the thing that is measured in your credit report is the time that account has been reported. if you keep paying off loans or refinancing often you dont get a long enough history reported on that account. that alone can pull your score down. usually anything under 12 months hurts. also your credit is measured in percentages. if you financed $10k and you owe $10k then there is a 0% margin. but if you financed $10k and you owe $5k. then you have a 50% margin. that works more on revolving loans (credit cards, mortgages, autos, but mostly credit cards). anytime what you owe is close to the orginal value it will lower the score. the further apart those two are the better it can be for your score. ALWAYS have credit cards. im not saying use them but they are vital to credit scores. they play a large part in debt to income ratio (the % margin i talked about above) the close to 100% avail you have the better you are. (i.e. $4000 high, owe $0, therfore you have $4k avail if needed) that means you are stable and if needed have cash in reserve to get. general rule of thumb. dont refinance unless you can drastically lower the interest rate or reduce the term of the loan. other wise you are just opening another loan.

Answer 2

Yes. Any credit line is a plus provided you pay off the total each month. A zero interest car loan can be a good thing when you can't afford to pay cash. Try to make a sizable down payment if you don't get the zero percent loan. The problem with the zero % loan, new car dealers will not knock off a nickel in the cost of a new car. Do not ever let a plastic credit card own your life. Far too many people can't see the sky from the forest. Separate absolute living necessities from the glitz and glamor you see every day.