It may seem like somebody who can pay for a car with cash is good at managing money and should have a high credit score. However, cash payments do not affect a person's credit score.
Credit Report
Lenders report loan amounts, credit lines and payment history information to credit scoring bureaus. This information on an individual's credit report can be used to compute a credit score, which estimates how much of a risk it is to lend to that individual. Paying for a purchase in cash never affects a credit score because the payment is not included on the purchaser's credit report.
Benefits
Although buying a car with cash does not increase your credit score, it saves you money because you do not have to pay interest on the purchase as you would with a car loan. In addition, reselling the car in the future is simpler because you hold the title instead of it being with the lender.
Considerations
If you are looking to build credit, consider getting an auto loan, even if you have enough money to pay for the car in cash. Building a positive payment history on the loan and managing more types of credit will increase your credit score in the long run.
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