Credit Scores and Vehicle Financing

Mr_Shiftright

$300 a month translates into about a $5,000 down on a $20,000 car.

verdugo

$300 a month translates into about a $5,000 down on a $20,000 car.

Depends for how long is the loan. :shades:

Mr_Shiftright

You know, about the usual 60 months. I think that taking out 72 month loans is a bit foolish as these often exceed a car's warranty.

Nothing quite as painful as paying for repairs on a car while paying it off.

[Deleted User]

I logged into my credit union this morning and noticed they are making our credit score available to us for free. I'm wondering with the info stated below, what the number really represents...

As an exclusive benefit of membership, Alliant is making your credit score available to you free of charge to help you monitor and improve your creditworthiness.

Your most recent available individual credit scores are listed below for the primary account holder.
Credit Score features
Experian Advanced Risk Score 2.0
Range: 150 to 950
Not a FICO score
Updated quarterly
Not a hard pull
Will not impact your credit rating

Please note: credit scores are fluid numbers that change as elements in your credit report change and there are many different credit scores used in the financial services industry.

joel0622

You know, about the usual 60 months. I think that taking out 72 month loans is a bit foolish as these often exceed a car's warranty.

Nothing quite as painful as paying for repairs on a car while paying it off.

I tell people that every single day when I am selling them a Ford VSC.

joel0622

Never heard of it dad23. Probably another company trying to cash in on the consumer credit score fear sweepinfg the country.

It is actually allot simpler then the credit companies lead on. If you pay your bills and are not in debt up to your [non-permissible content removed] you can finance something. If you don't pay your bills you can't.

I know that sounds pretty simple on my part but in the big picture thats it. It was allot simpler before all this beacon crap came along IMO.

kyfdx

If you pay your bills and are not in debt up to your [non-permissible content removed] you can finance something. If you don't pay your bills you can't.


A lot of people with good credit obsess over what every little action does to their score... but, your statement truly sums it up..

Pay your bills, and you'll never have to worry about credit....

cadillacmike

Yeah, it could go back into the 7000's!!!

BTW, MSN in their money section has a credit score estimator. I knew what my score was and fiddled with it. It turns out that late payments are the single biggest thing that will trash your score in a hurry. A 100 point drop is likely for 1 missed payment. Now I'm not talking 3 days late, which will get you a nice late charge from the card company (and could cascade into worse problems), but 30 days past due. We had a very high debt load but had zero late payments for over 10 years and her actual score was like 785 and mine was 768 (figures hers was better!) which we found out from a letter from one bank.

Putting my info in came up in the MSN estimator right where i expected (it gives you a range and our actual scores were in the middle of that range). It doesn't even have the upper limits for out total aggregate available credit limit though! We could buy a nice house with our "available credit" :P

Hi Kirstie, i'm trying to fnd a few free minutes to stay in touch while stuck out here on my year long paid vacation to afghanistan. :sick:

penone

I'm looking to get a car by end of month and am wondering what to expect. It would be my first car financed under my own name (prior to this I either paid cash for a car or had it under my mother's name) and my first financed car.

I'm 37, make $ 72K/year (verifiable with pay stubs), live with my girlfriend and our rent is $880.00 per month (my share being $ 440.00). Up until December of 08 I paid everything in cash and did not have any credit cards. Realizing that if I ever wanted to get a house or a new car I would need to establish some sort of credit I went ahead and got 2 secured cards - each with a $ 300.00 limit and both have been paid in full the past 6 months. I just finished rehabing an outstanding student loan I had but the loan nor its default is on any of my 3 credit reports (they are over 15 years old). The remaining amount on the loan ($ 2800) is now being handled by the DOE and they tell me that it should show up on my report in the next 45-60 days as a positive trade line but am not holding my breath on that. My monthly minimum payments on that will be $ 50.00 per month which I can easily afford. Other than the 2 small credit cards there is nothing else on my reports. My Experian score is 722, my Equifax is 754 and my Transunion is 697.

I am looking to get a car now as taking mass transit is getting a bit old (I haven't owned a car in over 5 years. I live in NYC where mass transit is pretty good). My question is what can I expect in regards to financing? I can put down $2500 on a car and am interested in getting a 2006 Lexus IS250 (based on autotrader.com searches the average price is $ 23K) or if possible a 2009 model. Based on my salary, my very limited credit history and my small debt to income ratio what are my chances of getting a car loan? I can easily pay a few hundred dollars a month on a car payment and still have money left over. Would I even qualify to be able to get a lease?

These 4 hour round trip commutes to work is starting to get to me (been doing it for the past 18 months) and would like to be able to drive again.

Any thoughts is greatly appreciated.

Thanks!
-P

volvomax

You should qualify for a car loan on the used car easily enough. Esp if you are going thru a captive like Toyota Credit. New car is gonna be harder and you probably won't qualify for a lease(lease co's like to see prior car credit)

penone

Thanks volvomax for the reply. After doing a bit more research today I see that getting a lease at this time is definitely not an option with no installment credit whatsoever. But I do hope to be able to get a loan for a used lexus. I've read in other posts and in different articles that it's best to go to a dealer with a loan already in your hand. Is that the consensus?

-P

volvomax

I've read in other posts and in different articles that it's best to go to a dealer with a loan already in your hand. Is that the consensus?

Can't hurt. Sometimes the dealer can do better,sometimes they can't.

joel0622

I can easily pay a few hundred dollars a month on a car payment

To me a few hundred means $300. I think you are looking at way to much ride. Even on 72 months you are all over $400 a month.

penone

By a few hundred I mean about $ 500 or $ 600. I take home about $3900 a month. After rent, student loan, food, cell phone, cable and electric, etc. I'm left with approx. $ 2500 a month give or take. I do tend to eat out a lot - do a bit of traveling and like to buy nice clothes but am willing to sacrifice that to get a nice car. I figure paying $ 600 on a 5 year loan (totaling $36K) I'd be able to afford something nice.

My issue is that - although I know I can afford it how do I convince a bank/finance company that I can with such a small credit history? I hope by being able to show the dealer how much I make and what my rent is they can see that I can afford a high monthly payment of $ 500 or $ 600.

-P

lokki

I faced a somewhat similar problem of establishing credit after being outside the states for about 10 years back in the late 70 to mid 80's. I actually ended up putting up a CD as security on my car loan. I had plenty of cash but no credit.
I got a good enough rate of return on the CD, and a good rate on the loan. You might discuss that kind of arrangement with a bank or credit union.

Nex idea:
How much do you intend to put as a downpayment on the loan? If you have a $20K car, and you put down $15K you shouldn't have any trouble getting a loan for the balance - plenty there for them to repossess- and your monthly payments will be minimal.... nice situation for establishing credit.

joel0622

I think you will be fine. We get people handled all the time in your situation. You are only at about 9% PTI if the payment is $600, and you have a good down payment. FYI it is easier to get financed on a new car then it is a used one.

penone

Thanks Joel for the reply. I do have to say thought that I was surprised when you mentioned it would be easier to get financed for a new car than a used car. I would have thought it would be the other way around.

-P

joel0622

Always rememember this. The captive finance company is there to support the manufacture in selling cars. All the manufacture cares about is if a dealer is selling new cars, used does nothing for them. So in an effort to support the manufacture the captive buys more aggressive on new. You might even qualify for a first time buyers program on a new car.

Look at cars in this order from a finance standpoint

1. New
2. CPO
3. Used
4. Private Party.

Mr_Shiftright

do you have a garage? If you are in the 5 boroughs and the car is staying outside on the street, I sure wouldn't buy anything too nice. (former NYC war veteran).

penone

Thanks for the explanation Joel. Makes perfect sense!

Mr. Shiftright - I'm born and raised in NYC (37+ years) but have to say that I would never ever let where I live determine what I own. Because I live in NYC I can't buy anything nice???? That's absurd! I do plan on getting a spot but mainly because parking is horrendous in my neighborhood and I don't feel like driving round and round looking for a spot.

-P.

Mr_Shiftright

Well okay, you know your area best of course but I'm pleased at any rate you are getting off street parking. I think that's a very good idea for you and your car! Might even help your insurance, who knows?

corvette

Have you priced insurance? I'm thinking after not having a car (or a car insurance policy) for five years, it may be higher.

penone

Haven't priced it yet but I'm sure the insurance is going to be pretty outrageous. The fact that I haven't driver in so long and also the fact that I live in NYC makes the premiums pretty high. Am going to take a 6 hour defensive driving course to give me a 10% deduction plus adding in rental insurance for further reduction plus the garage/parking space plus whatever else I can throw in there to help bring the cost down.

-P.

Mr_Shiftright

certain kinds of alarm systems sometimes allow further discounting.

lyndacarter

I received approval for a Cap One Blank Check car loan for up to 18k. My equifax is 645. I suspect my experian is probably around 10 points lower, and trans u about 20 points higher based on what they were when I checked them a few months ago.

The finance rates are:

2009 - 12.7
2008 - 14.7
06-07 - 15.45
02-05 - 16.7

The car I want is around 12-14k, and 04 or an 05, so I'm stuck in the 16.7 finance rate for a 60 month loan. I'll probably pay it off in 30 months, but I wanted the longer term "just in case".

Does that seem high? Can I do better elsewhere? I know my credit is not great, but I have no new bad credit in the last four years. My only blemish is a little medical collection from years ago and a four year old 5000 collection in dispute. I have no late payments or judgements. I have six credit cards with under 40% utilization, with total debt on the cards about 2500. My income is 6k per month.

I bought a car 2.5 years ago and paid it off six months ago and that's on my credit report.

Would I do better going through my credit union, bank, dealer, or another source? I just don't know if the 16.7 finance rate is common for my credit score or has more to do with the fact I'm buying 5 year old car, or that I'm asking for a 60 month loan.

Thanks for any help, I don't know much about car financing.

dtownfb

Until the finance experts get here (they do have day jobs)....... You mention a bunch of credit cards and other debt but no mention of mortgage or rent. do you own or rent? What other commitments do you have? What car are you looking at and is it from a dealer?

Looking at Capital One auto financing website, their used car rates start at 5.99% for 5 year car loans. So 16.7% is pretty high and I would never finance $12k-$14k at that rate for 5 years. My guess is your credit score and/or "debt to income" ratio is hurting you in this case.

I would suggest waiting to purchase a car and focusing on knocking out that credit card debt first. If your total credit card debt is only $2500, it may be possible to eliminate those in 2 months with what you are making. You will see your credit score go up simply because you will be showing more available credit. At the same time, get that collection resolved. That is killing your credit score.

If the total car loan (car plus tax, tag, fees) is $14,000, your monthly payments would be $346. Since you plan to pay it off early, you probably have some extra cash available each month. Apply what you have budgeted for the car payment and the extra cash and focus that money on your credit cards. 6 credit cards with a total debt of $2500 is about $425 per card. I'm sure a couple are higher and others lower. Start with the lowest card(s); pay it off and move to the next one. heck you may be able to pay off 2-4 cards in one month depending on the balance. Don't forget that is extra money you have next month because you don't have to send money to the CC companies.

If I were that close to being free of credit card debt, i would make that my priority. And put the car purchase on the back burner for a few months. Tons of used cars out there. No sense in you overpaying on the interest rate when this can be resolved in few months. Also try your local bank or credit union. They see your regular deposits and withdrawals. Also most offer "interest rate discounts" with direct payment from your account. i was just approved for a used car loan 3 weeks ago, 4.99% with auto pay (4 years).

This is just a layman's opinion. Take from it what you like.

volvomax

Given what your score is, 16.7 isn't bad at all. Especially for an older car.
In your case, I would focus on getting as new a car as possible, even if it isn't what you really want and clean up your bureau. Deal w/ the medical collection and the $5000 collection. Those are killing you.

boomchek

Agreed on both points.

Too many times people will let their credit slide to the dumps because of a dispute. Even if maybe sometime in the future you'll win the case, you'll save $5000, but you'll pay way more than that in higher interest costs over time because of the low score that the $5000 collection created.

I'd go for something as new as possible as cheap as possible, until you get your score to over 700. Then go all out and buy yourself a treat of a car at a low interest rate you deserve.

What car are you looking at by the way?

grandtotal

Start with the lowest card(s); pay it off and move to the next one.

Better advice is to start with the card(s) charging the highest interest rate.

lyndacarter

Thanks all, paying off the cards will be easy but my only concern with doing that is that a lot of people are having their cards cancelled once they're paid off, especially if they have "fair" or "poor" credit, so I was concerned with having them closed out. I know my cc from the credit union won't cancel me, but what about discover, cap 1, and hsbc? I don't need the cards, but I like having them and would hate for them to be cancelled. That was the only reason I was keeping a balance on them, but I do pay them off every couple of months and just use them for gas, groceries, eating out, cable bill, power bill, phone bill, etc, so that represents most of the balance on them.

I rent right now, $1500/mo. I'll try paying them off and see if my score jumps. I also have a current student loan with $7800 balance.

dtownfb

Not necessarily. mathematically, you are absolutely correct. and for a disciplined person, you are right. But sometimes the human psych needs a "victory" and paying off the lowest cards gives you a sense of accomplishment. Also you receive once less bill the next month and free up money.

Can't you tell I listen to Dave Ramsey. :P

kyfdx

Yeah.. for people that don't have any trouble with credit, it's just a math exercise.. For those that can't seem to control it, those little tricks seem to work...

If someone can change their lifestyle and spending habits that have caused tens of thousands of dollars in problems... then, paying an extra few hundred in interest over the next couple of years will be a minor problem..

I sometimes wonder why I don't have more money, when I think of the dozens of decisions I make every day, just to save a dollar, or a quarter, or even a nickel! Then, the credit card bill comes in... I had a lot more control over things, when I was single..

oldfarmer50

"...I don't need the cards..."

Then why keep them. I've had one credit card for over 40 years and I never needed another. Last time I checked my credit score was 791.

Try Googling "Dave Ramsey". Guy has a pretty good plan to get out of debt. EDIT: I see someone already beat me to that one.

BTW, if you do get rid of a few cards, keep the oldest one. That will have the best impact on credit.

Also lyndacarter I just have to say, I loved you in 'Wonder Woman'.

dtownfb

Your situation is like mine and probably millions of others. I finally sat down and did a budget 2 months ago because i knew I needed to replace my car soon. We included EVERYTHING. I was stunned at how much money I was supposed to have extra each month. It's those daily decision we make like getting a cup of coffee out, going out for lunch instead of packing, impulse buying at the grocery store, etc.

i think the OP should be fine if she cleans up those collections.

dtownfb

it seems like you have the credit card situation under control or soon to be under control. And that is a huge accomplishment. But don't expect a huge jump from paying the credit cards off.

but as others have suggested, you have to address those collections. That is keeping your credit score down and causing you not to qualify for the lower interest rate. i would make this a priority.

Like oldfarmer said, why keep them if you don't need them. Keep your oldest or maybe the one with the lowest interest rate or the one that actually treats you like a human (most likely your credit union).

verdugo

Also lyndacarter I just have to say, I loved you in 'Wonder Woman'.

LOL Too funny oldfarmer.

cadillacmike

dammm you beat me to it!

Pay the highest rate off first. It's costing you the most.

I would not use capitol one for ANY type of loan, they are among the worst. Let's see a few years back (and some things have changed) I bought a 5 year old car with oveer 30,000 in CC debt, but hadn't had a late payment forever and have / had no collections, etc and score was arounf 770. 4.7% from essentially my "credit union" i.e.USAA's bank. Took anoter loan out six months later, 4.5% same bank.
Check w/ your credit union.

The CC banks, they can't close EVERY "fragile account" then they'd have no income. Chase did close one on my wife - but we hadn't used it in 4 or 5 years. We had no reason to, I had then sucked into a zero percent until it 's paid off transfer on one of my accounts - and they keep sending me "offers" no thanks that will negate the 0% benefit! :surprise:

tidester

dammm you beat me to it!

Yes, but you have no idea how many before you refrained from making such a silly comment. :P

tidester, host
SUVs and Smart Shopper

cadillacmike

We have over 8 cards and my wife's score is right up there with yours at 788. (mine is lower at 770 because i "own" the two with the highest balance). It's not the number of cards, it how you use them. I haven't paid more than 4% APR in CC balances since November. With more than one card you can work them for interest free loans. and use your money for other things like the 10% US gov't guaranteed rate on some money i deposited when i got sent here to afghan. If i used that to pay off two cards, i would have saved 4% (or zero%) but lost 10% - thanks but no thanks.

dtownfb

i want to be like Mike!

I think it depends on how far you are in debt. If you are way over your head, get those little victories by paying off the smallest debt can keep you going. Again mathematically, you all are absolutely correct. But sometimes it's more than crunching numbers.

Stay safe.

oldfarmer50

"...It's not the number of cards, it how you use them..."

True, but I believe the credit raters also look at your available credit vs. your income as part of the calculation. If you have 8 credit cards with $5K of available credit they may ding you just because you "might" run up $40K in debt.

Better to get rid of the ones you don't need...less temptation.

tazzi

I have a question regarding credit scores and car loan criteria. I checked my 3 credit scores and they range from 745 to 770 but I really don't have any major loan history. I have one active credit card with a modest balance. I closed the other two cards I had a few years ago - I just wanted one to deal with.

So, I'm thinking my scores are good but will the lack of other major items on my credit report be a bad thing? Or should I qualify for the low interest loans? :confuse:

volvomax

It depends, have you had a car loan before?
If not, the big banks may not accept you,regardless of your score.
The captives probably would.

cadillacmike

dtownfb - No you don't. I'm eating dust in afghan - worked all day on sat have a taskmaster for a superior who somehow thinks I can solve all the other sections' shortcomings. :sick: But, partly as a result of not being able to spend any money out here (except on Canons from ebay) I have low or no interest on ccs and can get them all zeroed out by year end.

Too bad the dealers won't take more than 3-4000 deposit via a cc (because of the bank fees), I could buy a NorthStar STS AND an XLR-V just with my available credit. :P

dtownfb

I hope we can you get you back in the States, quickly and safely, so you can spend some of that money..

Stay safe and complete the mission..

oldfarmer50

"...have you had a car loan before..."

Back in Jan. 2008 I financed a car and even though I had no mortgage history and my last car loan was in 1986 I had banks, CUs and captives falling all over themselves to loan me the entire cost (including tax).

My, how times have changed. :confuse:

tazzi

I did have a 3 year car loan in the early 90's. So, it's not on my credit report any longer. My last car I paid cash for in 2002.

I'll be putting 30% down (at least) on the new car.

volvomax

It probably is still on your bureau.
30% down is very good too.

Kirstie_H

A national newspaper is looking to speak to consumers who financed through GMAC and got approved or tried to finance through GMAC and didn’t get approved. Please send your daytime phone number and the vehicle you own to ctalati@edmunds.com by Thursday, July 30, 2009.

Thanks,
Chintan
Corporate Communications
Edmunds.com

tifighter

I am thinking about buying a car for my wife as a surprise for xmas. I currently have my own lease but and would want to finance the second car. Do you think my tier 1 score will be enough to get financing on the second car by myself, even though I already have an active lease on my current file? I'd rather do all the paperwork myself so I can keep it under wraps til xmas, and not apply jointly if possible. Thoughts?