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Credit Scores and Vehicle Financing

Kirstie_HKirstie_H Posts: 10,913
How does your credit score affect your financing rate for new or used vehicles? Ask questions and share your stories here.

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  • ingridringridr Posts: 20
    Hello!

    I am a 30 year old single woman in Montana with sub-prime credit. I believe that my FICO score is around 600-610.

    A little history: Supported myself through law school and relied heavily (and stupidly) on credit cards. I also had several late payments - up to 90-120 days on a couple occasions. Once I graduated and got a year long judicial clerkship (AKA lots of prestige and low low salary), I realized the severity of my money predicament and entered a dept repayment program through Consumer Credit Counseling Services.

    This was two years ago. I repaid all my credit card debt within a year. I also purchased a home a year ago. I do have two credit cards again with a small balance but pay significantly more than the minimum and will have it paid off by the end of the year. In the last two years, no late payments etc. Also have been in a well paying job for the last year and a half as a prosecutor.

    I currently own a 99 Subaru Forester outright and would like to purchase a used van (cost would be no more than 3K - 7K). I would not be trading in my Forester as I would be using the van to travel to dog shows and the Forester for all my other driving. However, I would need to finance the van.

    Applied on Capital One Auto Finance and got turned down but RoadLoans said they would loan me up to 25K but at 16.49% (yikes!). Realistically, is this as good as it is going to get for me at this stage or are there other financing opportunities/places that I should look at? I wondered if I should apply at the bank that holds my mortgage since they would have evidence that my payments were direct withdraw and the money was always there.

    I would be looking at a 3-4 year loan and it would be a direct withdraw deal (if possible). I have budgeted this out and would like to spend no more than 220.00 per month on car payments.

    I am not sure that it is worthwhile to do it at 16.49% but I also do not know how long it is going to take me to get out of the sub-prime category. What is everyone's advice?

    Thanks so much!

    Ingrid
  • danf1danf1 Posts: 935
    Well nothing we can tell you will be guaranteed because we can't see your credit. On that note your interest rate is going to be higher because of your credit history. It will be higher on a used car vs an new car as well.

    In order to get out of sub-prime you will have to bite the bullet and pay higher rates to reestablish your credit. You can try your bank, but typically they do not do sup-prime lending so you may be stuck with what you've got already. Don't be afraid to let the dealer try too as they will have more than one lending institution to deal with and can usually secure a better approval than what you can find on your own.

    Are you a member of a credit union? They are easier to get along with in a lot of cases and your rate would probably be lower through one.
  • ingridringridr Posts: 20
    Unfortunately I bank at a traditional bank. However, I work as a government employee and I know that we are affiliated with a local credit union. I will have to check with HR to see if they have any info on potential loans through that credit union.

    Are credit unions more willing to lend to sub-prime buyers versus traditional banks or is it dependent on the bank/union and person applying?

    Should I be concerned with applying at too many institutions (ie more inquiries on my credit report)?

    Also, will my utilizing a sub-prime loan (and responsibly paying it off) specifically help me in the future with car loans or will it in a general sense just improve my credit rating which will than improve my chances of not being considered sub-prime?

    Sorry for all the questions - can't tell I am a lawyer ;-)
  • danf1danf1 Posts: 935
    Credit unions make up their own rules and criteria. They can be very different than standard banks. I would definitely look into it if you have one available to you.

    You definitely don't want to run too many inquiries in a short period of time. I would say to check into the credit union first, then try a dealer, if all else fails you have a pre approval in hand already.

    As far as rebuilding your credit rating, it won't matter where the loan comes from as long as it reports to your credit. Ask about that at the credit union because not all of them do. If they don't than you will not be helping yourself in the future by saving a few dollars today.

    Feel free to ask questions. I may need a lawyer someday.
  • Kirstie_HKirstie_H Posts: 10,913
    Hi ingridr,
    Many years ago, we were in a similar situation as my S.O. had just moved to the United States - he had no credit history at all here, but had a job and had started to establish a few credit cards. Still, his credit score was way low. We worked with some dealerships and we were up-front about our credit situation. The F&I guy at the store was extremely helpful, and talked with Volvo Finance to approve us at a reasonable rate (~7%) for any used vehicle with under 60K miles.

    Obviously, everyone's situation is different, but if you go to a dealership, the most important thing is to be honest with them like you have been with us. They will be more willing to go the "extra mile" to try to help you if it is clear you're not trying to be deceitful.

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  • cwpostcwpost Posts: 11
    I am no expert but I got financing 2.5 years ago via Toyota Financial with a 605 credit score. The interest rate was 12% but I refinanced with my CU within one year and got that knocked down to 5.1%. I was approved from Ford with a similar score for up to $33K. The mortgage on your credit should definitely help since that counts as a major purchase. I beleive Ford, GM, and Chrysler will offer you a rate of no more than 9%, which is high but not as high as 16%. Good luck. Please let us know how things work out.
  • Hey Ingrid. I'm no credit expert but will throw in my 2 cents. I just recently financed a new car purchase and am very glad that I pulled all 3 credit reports prior to seeking financing. Luckily I did. There was an error that was not there when I'd pulled the reports the previous year.

    I found some useful info on the impact of inquiries here. There are some allowances made for several inquiries over a 2 wk period when auto or loan rate shopping. See the "What to know about rate shopping section".

    http://www.myfico.com/CreditEducation/CreditInquiries.aspx?fire=5

    Hope this helps and good luck!
  • Kirstie_HKirstie_H Posts: 10,913
    Thanks so much for sharing that information. I'm sure it will be helpful to many of our members!

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  • on your offerred rates.

    We got a mailing from our (former) mortgate /(current) car lender with an offer of $50,000 pre-approved out of the blue in Dec. This was while I was "between jobs" too.

    The only reason I can think of was our credit score and history. When I called them about it it was for real (ended up spending about $35,000.00 at 4.3%) not "great" compared to some "new car" rates, but this was for a "pre-owned" car and I didn't have to bother with F&I at the dealership.
  • ingridringridr Posts: 20
    Thanks for all the info/advice! I am printing it out and following up on it. Keep it coming :-)
  • Any time! Glad to help. I have received great info from these boards myself.
  • cticti Posts: 134
    It's obvious that you have done your homework on what you can afford. I ran some numbers through Excel and $6000 financed for 36 months at 16.49% is $212 per month.

    I was curious about how much of the loan would be interest. For 36 months, your total interest paid using the above numbers would be $1650 - 27.5% of the loan amount and $2250 for 48 months - 37.5% of the loan amount. Saving 10% of the loan amount by reducing the term one year is pretty good.

    Also, by reducing the interest rate to, say, 10% - possible from a credit union - you reduce your interest paid to $970 on a 36 month loan and to $1300 on a 48 month loan. The savings are 11% and 15% of the amount financed!

    Add the savings up and by getting a better rate from a CU and shortening the term, you can save $1280 with a 36 mth/10% loan vs. a 48 mth/16.49% loan - all for $22 more per month.

    So - Get to a CU and get a low interest rate loan NOW.

    Also, there are many knowledgeable people here that can point you in the direction of a good used van (or are you looking for a minivan).

    Lastly, where are you in Montana? I lived in Billings for 15 years.

    Jason
  • I was just at a dealership and I'm still in shock! I had a case of identity theft a few years back and got it all sucessfully removed.

    In the meantime though I haven't been using credit and now have no history.

    I was told on a 14,000 car I would have to put down 5500.00 and accept 21% interest!!

    Is this really what I'm up against?
    This was a reputable toyota dealership and a salesman my family knows personally. I hope there are other options for me.
  • rroyce10rroyce10 Posts: 9,359
    ... **A little history: Supported myself through law school and relied heavily (and stupidly) on credit cards. I also had several late payments - up to 90-120 days on a couple occasions. Once I graduated and got a year long judicial clerkship (AKA lots of prestige and low low salary), I realized the severity of my money predicament and entered a dept repayment program through Consumer Credit Counseling Services.
    This was two years ago. I repaid all my credit card debt within a year. I also purchased a home a year ago. I do have two credit cards again with a small balance but pay significantly more than the minimum and will have it paid off by the end of the year. In the last two years, no late payments etc. Also have been in a well paying job for the last year and a half as a prosecutor** ...
    ========================

    You may also want to try: www.FreeCreditReport.com -- and perhaps take a look at Bankrate.com ..

    Even though "My Fico" states they give a window of 14 and 30 days, that sometimes doesn't make it true .. not that they are a bad guys or anything, it's just that the "real deal" credit reporting system is about 10 years behind the times, and getting worse ...

    In your case, you need to be actually looking at all 3 of your credit reports -and- be able to understand all 3 ...

    I have a feeling, if you have paid off all of your debts and they are paid in full the credit bureau's are not up to date - it's *common* .... Equifax doesn't always report like Trans Union and sometimes Experian will report some, none or maybe one loan you had in 2000 and maybe not the rest, or maybe the other way around ~ this isn't an equal opportunity deal .l.o.l....

    I look at 200/300 credit reports a month and you would be amazed at what I see ... the Sears card that someone had in 1987, the Burdines charge that went sour for 3 months in 1992 ~ but was paid off, the mortgage that almost went into foreclosure in 94, the funny part was, the folks never owned the property, but it all accumulates and it goes on and on and on, most folks won't even bother until it becomes a big deal ...

    I think your paying extra interest rates because of not being able to look closely, not being informed, so study it and trying to change it .. remember, just because they are credit bureau's doesn't make them "accurate" .. I would say that 35%+ of the buyers today are rolling around with inaccurate information thats still effecting their bureau's ... take the time and get the proper info, it's take patience, time and energy and it can be a pain in the butt .. but hey, 5.9% sounds a lot better than $15.9% ..

    Do you think the mortgage companies are all over the radio and TV's because they are nice guys.? Heck no.! .. they are too busy making an extra 1/4 - 1/2 or a whole point or two on someone who "thinks" they may have less than perfect credit .............. ;)



    Good luck.!



    Terry.
  • rroyce10rroyce10 Posts: 9,359
    ...... Unfortunately .. Identity theft is going to be the #1 crime in the nation in the next few years ....

    That said, it's still new to most folks (even dealers) and they think it's some kind of ride at Disney World .. sadly, you know the difference .... you need to get all of your information and legal papers and drop by the local lender and Credit Union and get a loan .. properly done, you shouldn't have a problem .. you being a realtor, you should know a bunch of lenders, at least some good connections ....



    Terry.
  • steine13steine13 Posts: 2,426
    "... the Sears card that someone had in 1987, the Burdines charge that went sour for 3 months in 1992 ~ but was paid off,"

    No kidding. A few years back, I got a HELOC and the nice lady at the CU let me look over my credit report. There was a Chase account on there that I hadn't used in 10 years .. at least it properly showed "0" balance... When I called Chase to close the account, they said it was so far back THEY didn't have any records.

    In the end, they sent me a formal letter declaring that the account was closed, and it didn't show un my credit report next time.

    I've heard rumors that there is a new law that entitles anyone to one free report from each bureaus per year... it's a huge program, so it's phased in state by state.

    I plan on getting a report every 4 months, starting in April... that information can make or break a man in the right (or wrong) circumstances. It's a big deal.

    -Mathias
  • rroyce10rroyce10 Posts: 9,359
    ..... Try: www.FreeCreditReport.com ....

    You can look at "all" 3 reports at the same time on a glance ..

    "I think" it's $35ish(?) a year and they will report any movements 24/7 365 on any of the bureau's, which is a nice feature .. they will notify you immediately via email if your close to a credit limit on any of your Credit cards, or something "hinky" is moving around - and you can watch your Beacon (oop's, your FICO) scores on a daily, weekly or a monthly basis ....

    Terry.
  • steine13steine13 Posts: 2,426
    Thanks, Terry,
    I'll check it out. $35 a year ain't "free", but it's cheap.
    -Mathias
  • rroyce10rroyce10 Posts: 9,359
    .... how about CheapCreditReports.com .....

    squeaky ain't we ..l.o.l....

    Terry.
  • kyfdxkyfdx Posts: 31,079
    Starting this year, all three credit reporting agencies have to give you a free report, once per year...

    This is being phased in, by state of residence.. So, it isn't valid yet for every state... Sorry.. I don't have a link for it..

    My point it.. soon, it will be completely free.. You won't have to pay anything for it.. Courtesy of federal government regulation..

    regards,
    kyfdx

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  • rroyce10rroyce10 Posts: 9,359
    ..... Thats old news ....

    The point is, getting day to day information and understanding what your looking at ...

    See, most people look at their Credit Reports "only" when the stuff hits the fan and that might be every 5 or 10 years maybe, by then it's waaay to late ..... whether you spend -0- or someone spends $35 is a moot point ...

    Mortgage lenders just made Billions with a "B", off of the cheap rates by charging extra points and closing costs in the last few years because the JC Penny's card still shows up or the furniture store in 98 showed a charge-off, but paid report ..... it was only $5 bucks before, do you think "free" is going to change things ..l.o.l...

    Terry.
  • kyfdxkyfdx Posts: 31,079
    Well... since the info is for people on this board, discussing this problem, then for them, yes, I think it will change things....

    For the vast majority of flotsam and jetsam that you have to deal with on a daily basis.... No, probably not..

    I just wanted to point out that you don't have to pay $5, $15, or even $35 anymore to get that info...

    I check my score every other year or so... before I had to pay.. Now, I don't..

    As Martha would say.. that is a very good thing...

    regards,
    kyfdx

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  • rroyce10rroyce10 Posts: 9,359
    ..... I assume your talking about Martha Washington ...... ?

    Terry.
  • steine13steine13 Posts: 2,426
    One detail: I've "heard" that the free reports that people are now entitled to do not include the credit score.

    The argument being that the information is out there, and you need access to it. But the score is the product of the corporation, and you have no rights to it.

    -Mathias
  • driftracerdriftracer Posts: 2,692
    important, but to me, what's more important is accuracy.

    My name is James E (Edwin) Lewis - no Jr, Sr, II, III, nothing. In 1987, in Texas, I opened a Gordon's Jewelers account. Charged a few things, paid them off in a few months.

    Started getting harrassing phone calls about my account. Didn't know why, there was no current balance.

    As you may know, SSANs are assigned by region and state. My SSAN started with the same 5 numbers as a guy named James A (Alan) Lewis, Jr, who had a Gordon's account that went 180 days delinquent. He also lived in Abilene (where I was stationed, I'm from South Texas, no there) and had several other bad debts.

    Over 2-3 years, I was getting nastygrams for Gordon's, Beall's, Dillards, Texaco, even some of the local supermarkets because of his bad checks.

    I got smart after a bit and demanded at each phone call that they confirm my SSAN and compare it to his. I was actually given his SSAN on several occasions, so when someone would call about a bad check, I'd make sure they had his number!

    In all, I helped local PD and merchants process several civial cases against the guy, especially since I was a cop, and Air Force member, and what credit I was good until this other dude started duplicating accounts on my bureau.

    It isn't like he ever opened an account in my name, but Gordon's especially ended up transferring his account number, blanaces, and delinquents onto my TRW bureau because someone didn't notive our last 4 numbers were different, and I was James E. and he was James A.

    Too late to make a long story short, but to me, the most important element of anyone's credit bureak report is accuracy. It took until 1994 - 4 years after I'd left the area, to finally convince Gordon's that I wasn't him.

    Review your reports, don't wait, correct any mistakes.

    Second issue - I'm looking at another new car, and although I traded my PT Cruiser in early November and my Chrysler Financial account was paid off on 11/10/04, the account STILL shows open on my bureaus.....
  • Kirstie_HKirstie_H Posts: 10,913
    Jim, we had the same issue recently with Chrysler Financial. My husband traded in one Chrysler for another, and 6 months afterward, the old vehicle account still showed as open on his credit report. They are really quite disorganized. We've been trying to set up autopay for the leased vehicle since September '04. They still haven't managed to process it correctly.

    When we wrote to them to get the old account closed and have it reported to the bureaus, they were pretty quick to act.

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  • rroyce10rroyce10 Posts: 9,359
    ...... I go through this everyday ... right now I'm trying to keep a deal afloat on a $40k vehicle that the customer took delivery of on Friday ..

    Experian is showing the balance of $180,000 on a home that was sold in 00 .. in the meantime, he's been in the new home for 5 years and hasn't missed a beat on anything and his debt ratio "shows" 67% and his Fico scores are hovering around the low low 600's, he should be 700+, but the other home is dragging the whole deal down ...... the problem is, you can't find anyone that can actually read a credit report and they go by the scores --- can we spell "nuts" ..................... ;)

    Terry.
  • danf1danf1 Posts: 935
    I've seen this a lot with Chrysler and GMAC. It is referred to as a hanging balance. I believe they do this because as Terry said, nobody can "read" a credit bureau. That way when you want to finance your next car, many people will not get approved because their DTI is out of whack because of open auto loans. Then that person goes back to a GM or Chrysler dealer because they financed them last time with no issues and leaves with their new car swearing against the last dealership who couldn't finance them. That is where a good F&I person is needed. Not just someone to look at a score, but to actually look at the credit.
  • Kirstie_HKirstie_H Posts: 10,913
    Absolutely! We were lucky and had a finance manager who was wide awake and basically said, "you don't really own 3 financed vehicles, do you?" We showed him the paperwork from the sold used vehicle, he made a few calls, and bingo! While the credit score didn't change instantly, they DID take the error into account and we got the financing we wanted, no problem.

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  • driftracerdriftracer Posts: 2,692
    you're getting rated on a beacon score that's 20 to 100 points lower than it should be....what's that cost us?

    I know the answer, it was a rhetorical question - it might be a point or two of rate, or a lower advance amount...for something that's not our fault at all.
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