I was recently discharged for a Bankruptcy 7. I have one credit card left that I use occasionally and pay off every month in an effort to try and improve my credit score again. My car is just about on its last leg and I was wondering whether it would be a bad idea to use one of those pre-approved auto loan offers. I received one from Capital One recently, which is where I also have my credit card. I would try to get the cheapest car within the loan requirements so my monthly payments will be manageable. I am wondering whether I am hurting myself even more by taking on the offer or whether it could actually help me, even though I know the interest rate would likely be higher. Also, I was wondering what kind of rate I could expect if I were to go through with this.
Ironically, taking on additional debt like a small auto loan should only help improve your FICO scores as long as you manage it responsibly, just like the credit card you have at the moment. Credit-scoring models like to see that you can use multiple types of credit responsibly, like a credit card, auto loan, home loan, etc. It's called your credit mix and accounts for about 10% of your credit score. Also, the rate you can get approved for will largely depend on where your FICO scores currently stand.
