Worst Idea in the World

I see this all the time, so I am going to complain about it. Why in the world would someone apply for a car loan when (in the last 60 days) they have stopped paying one or more of their other credit obligations? The logic behind this blows my mind.

Falling behind one of your credit card or loan payments, even for just 30-days behind, tanks your credit rating. The more accounts you are behind on, and the further you get behind on them, the more it affects your credit rating.

I have seen it happen with all different credit types. Some people have a current auto loan at 6%-9%, which is pretty decent. So obviously they had solid credit at one point. However, because they have fallen behind by 30-60 days on a couple of small credit cards, their new car loan interest rate (if they can even get one) will probably have an interest rate around 20%. The thing is, even if they get the cards or loan caught up, it will be about a year before there credit has recovered enough to get a decent interest rate.

Here is my advice for the day: Pay your bills on time. Even if you only pay the minimum payment, pay your bills on time. You will be much more credit worthy because of it.