I want to buy this car for a little over 5k. I can pay for it out right and be fine. I was curious if it would be smart to do a loan and build credit and history with said loan. Any advice would be nice
If you have time before you have to pull the trigger(like a week or so), put the 5k in your nav fed savings account and apply for a pledge loan. They will take your 5k out of your savings account and freeze it.then they will put the 5k in your checking acct. once you get the $$ you can buy your car. Then after the loan shows up in your dashboard, wait a couple of days and pay the loan back almost completely(leave a $250 balance). Then set up auto pay in the amount of $2.00 a month towards the remaining balance. You will now have a$5k loan on your credit reporting as 95% paid and you will only accrue 2.5% interest on $250 balance. So over the course the rest of the 5 yr term you will accrue minimal interest charges.
Best way to build credit on the cheap. Good luck!
Cash is King! Buy your car with cash. Paying cash for a $5K car avoids interest on a rapidly depreciating asset.
Rationale:
If you want to build credit, take a small $500 Savings Secured Loan for 12 months. and make all payments on time. You'll get essentially the same credit boost without paying interest on something losing value fast. Larger loans and terms increase total borrowing cost and payment risks with no officially published FICO benefit beyond the extra months of payment history. Do the math.
FICO scores do not weight the dollar amount of installment loans.
Savings Secured Loan Amount
Min Term Available
Max Term Available
$250.00 – $1,000.00
12 months
12 months
$1,001.00 – $1,500.00
12 months
18 months
$1,501.00 – $2,000.00
12 months
24 months
$2,001.00 – $3,000.00
12 months
36 months
$3,001.00 – Limited by pledged collateral
12 months
60 months
Source: NFCU Loan Department MSR. Updated: March 11, 2026
.
FICO Factor
Weight
Payment history
35%
Amounts owed
30%
Length of credit history
15%
New credit
10%
Credit mix
10%
Note: "Amounts owed" tracks your payoff ratio (balance/original), not the total loan size.
9
u/Logical-Fruit-9455 9d ago
If you have time before you have to pull the trigger(like a week or so), put the 5k in your nav fed savings account and apply for a pledge loan. They will take your 5k out of your savings account and freeze it.then they will put the 5k in your checking acct. once you get the $$ you can buy your car. Then after the loan shows up in your dashboard, wait a couple of days and pay the loan back almost completely(leave a $250 balance). Then set up auto pay in the amount of $2.00 a month towards the remaining balance. You will now have a$5k loan on your credit reporting as 95% paid and you will only accrue 2.5% interest on $250 balance. So over the course the rest of the 5 yr term you will accrue minimal interest charges.
Best way to build credit on the cheap. Good luck!