If you're eagerly searching for ways to restore your credit, it might be tempting to buy a new car. New cars typically (though not always!) break down less frequently than used cars, usually require less up-front maintenance, and don't come with a pesky monthly car payment. But just because you might have lucked into some unexpected cash, doesn't mean that buying a new car--or any other large item--outright, is the way to go. In fact, to rebuild your credit, you're actually going to want to take out a loan.
Say what? Why would I take out a loan, and risk credit rejection, if I have the money for a new car today?
Create a Positive Paper Trail With a Monthly Car Payment
Simple: taking out a car loan and repaying it faithfully is one of the best ways to begin re-establishing your credit. A monthly car payment essentially creates a paper trail that other lenders can look at and review when it comes time to making a larger life purchase--like a house--or getting more favorable interest rates down the line. Paying outright for a new car doesn't create a paper trail, and therefore is a missed chance at restoring your credit score and credit reputation.
If your cash flow is enough to purchase a car, but your credit says you probably shouldn't, consider applying for a car loan from a reputable lending firm that will report your good repayment behavior to the major credit bureaus.