How long will it take an installment account to improve my credit score?
If you want to improve your credit score should you pay cash for a car or get a loan? If you’re trying to improve your credit score an installment loan can be very important.
It really comes back to what is the consumer’s credit goal? If a consumer is trying to improve their credit score so that is some point in the future they are going to make a larger purchase, then an installment loan could be a great addition to their credit profile.
From a financial perspective, I would tell them to pay cash for a car. There’s no reason to get a loan if they have the cash.
From a credit score perspective, if they are trying to gear up for a run at a perfect credit score, an installment loan can be one of the best things that they add to their credit profile. Especially if you don’t have any other installment loans.
The viewpoint of a maximum score attempt, I would say get an installment loan and then wait two years for the full effect on the credit score. That is probably when their credit score is going to be peaking. Then they will be ready for an additional purchase if that is their goal. Otherwise, pay cash for the car there’s no reason to get a loan if they don’t need.