Credit Scores and Vehicle Financing

audia8q

If you have a sizeable downpayment buy a used car for cash....getting yourself into debt with a new job in a new town may not be a great idea. I understand the concern about reliability of a used car but there are lots of choices that will do fine and not kill your wallet. just remember everyone drives a used car

prosa

It's usually better to seek credit through a dealership than on your own. A good F&I guy may be able to get you financed through certain lenders - but not if you've already applied to them and been rejected.

catch23

allfiredup - Thanks for the tip!

audia8q - Good point. But my new situation is pretty stable (yeah, I'm sure that's what everyone says before the downsizing). Also, the nature of my job is such that I need to represent a little... Silly, I know, but at least I'm smart enough not to try to get a luxury car.

prosa - Very interesting. My thought had been that I should secure financing first so I only get taken advantage of by the bank, not the banks *and* the dealer. It had not occurred to me that the F&I guy might actually be helpful! Thanks.

pancash

:confuse: I plan to buy a car for upto $20,000. I also plan to buy a house in the next year or two. Currently, I have no debt and my credit score is around 650. I can afford to make a down payment of upto $3,000.
How would the auto loan affect my credit score in a year or two?
Should I buy the car first or wait till I buy a house?
:confuse:

manamal

My gut feeling is house first...then after settlement, car. That is because owing on the car will hurt your changes of obtaining a mortgate, but owning the house (with mortgage) might actually help on car financing.

bdr127

Are you young or not have much credit history? If that's the case, then when it comes to buying a house, that could also hurt you....

You said you don't have any debt, so one auto loan with a low monthly payment won't hurt you very much in two years, as long as you make all your payments on time. In fact, having a good history on an auto loan would actually look good to most lenders.

pancash

Thanks for your advice. I do have a few years of credit history. As a student, I had maxed out one of my credit cards but recently (6 months back) managed to pay off all the debt.
Some friends have told me that If I am actually paying interest on loans, it makes me more attractive for lenders rather than if I pay off my credit cards every month. Is this true?

bdr127

Some friends have told me that If I am actually paying interest on loans, it makes me more attractive for lenders rather than if I pay off my credit cards every month. Is this true?

That is absolutely false. When another lender looks at your credit, they see your monthly payment history -- on time vs 30-60-90+ days late. They can also see your current balance, high balance, and credit limit. Keeping a balance and paying the interest doesn't show on your credit report and certainly doesn't help for future credit.

black_tulip

Some friends have told me that If I am actually paying interest on loans, it makes me more attractive for lenders rather than if I pay off my credit cards every month.

What your friends mean is that your current creditors love it when you carry a balance. That is the way they make bulk of their money.

getright40

Excuse me for corrupting the thread, but here's my situation: I have a current loan that turned out to not be a great idea. It's with TFC and I've had it since 2001. My interest rate is thru the roof and I've had some problems keeping up with the payment due to illness, unemployment and they have been less than helpful. I'd like to just give it back and try to find a used car because I am exhausted with the harassment. My score is low right now (between 480-500)and I am not looking for something spectacular, just priced between 12,000-14,500

Can anyone suggest a dealer that works with situations such as mine?

allfiredup

While not actually "hurting" your score, you score will be positively affected by carrying balances on your cards and making payments rather than completely paying them off each month. Perhaps if you charge them up and pay off EVERY month that might be different, but the point is to prove that you can make a payment each month. FICO scores DO analyze this information. As mentioned earlier, though, you should try to minimize interest charges as much as you can.

Also, something that a lot of people don't realize when rebuilding or trying to obtain new credit, keep credit card balances under 50% of the limit whenever possible. Balances over 50% will cost you some points on your FICO score because you are utilizing a high amount of your available credit.

Hope this helps some.

steine13

Do not have the car repo'd if you can at all avoid it.
Do not "voluntarily surrender" it either, it comes to the same thing.

Not only will your credit be shot for years to come, you will also have no car AND you will still owe the difference of the loan balance and what the thing went through auction for.

There is a common misconception that once the car is gone, the obligations are gone with it, but that is not true.

-Mathias

getright40

I've tried working some arrangements, but they are being extremely difficult. They claim they are going to give me an extension and then a serious of things take place or they lie to me about what they agreed to. Tried getting it refinanced thru my credit union to get from under this particular finance company, but was denied even with my score at it's highest of 540.

prosa

Do not have the car repo'd if you can at all avoid it.
Do not "voluntarily surrender" it either, it comes to the same thing.
Not only will your credit be shot for years to come, you will also have no car AND you will still owe the difference of the loan balance and what the thing went through auction for.

One thing you can be sure of is that the price the repossessed vehicle fetches at auction will be much less than what you still owe on it

I came across a sob story on a credit-related forum that illustrates how getting stuck with a vehicle loan or lease can be very bad indeed. This young woman had leased an Escalade as a favor for her boyfriend, who had bad credit. He promised her that he really loved her and of course would pay the $900/month lease payments. You can guess what happened next. The boyfriend split up with her and took off with the Escalade. She had to report it stolen (it was in her name) in order to get it back, but now is saddled with almost three years' of payments remaining.

getright40

I am going to continue trying, but not sure how long I can keep them off of me or get them to work with me.

blueiedgod

Excuse me for corrupting the thread, but here's my situation: I have a current loan that turned out to not be a great idea. It's with TFC and I've had it since 2001. My interest rate is thru the roof and I've had some problems keeping up with the payment due to illness, unemployment and they have been less than helpful. I'd like to just give it back and try to find a used car because I am exhausted with the harassment. My score is low right now (between 480-500)and I am not looking for something spectacular, just priced between 12,000-14,500

Can anyone suggest a dealer that works with situations such as mine?

You already have a used car. You said you had it since 2001, or at least the loan on it since 2001. So the car is a minimum 4 years old. That is the used car you are trying to buy. Why bother and getting into soemthing you know anything about, when you already have it, with pretty clear history. Pay it off, if you can, and you won't have to deal with harassment. If you can't pay it off completley, pay an extra $50-$200, depending on your financial situation, with every payment. This way you will build up a little buffer for when the times a tough again.

bdr127

When you say "they won't work with you", what exactly does that mean? They won't let you make late payments?

So you want to get rid of the car you're in now since you can't make the payments and the bank is all over you.... but you want to buy another car? Maybe I'm missing something, but if you can't make the payments on one car, how will you make the payments on the new one?

Regardless, if your current car is repo-ed (whether it is forcefully taken back or you just turn it in), then your credit will take such a hit that you probably won't be able to finance another car anyways....

getright40

I can afford it, but at some point I did have some financial issues come up such as being laid off, family illness, etc. Those things caused me to get behind on the car note. What happens is this: they call and say that they will work with me to catch it up and say I need to make a payment to get started. After which point, they will give me an extension. I do what is asked and then they say we are going to fax you a form, which never comes. Then I continue to call about so called form and get told by reps that there isn't anything in the system, so then they say we'll email it to you. This will continue until another note is due and then they will say extension request is denied when form was never completed. They tell me the form has to be done to even consider extension. At one point, I gave them two payments and they BS'd me so long that another payment was due not even a week later and they then said they wouldn't give extension until I made another payment which I didn't have. This type of thing continues constantly and then I get someone who says one thing and does another. When I make documentation of arrangements, they will lie and say they didn't say it. Things have finally straightened out that I can deal with the car, but if they keep doing things like this, I can't get it caught up. I have other financial responsibilities that I also have to maintain.

Kirstie_H

I'm sorry that this is happening to you. Most creditors make it reasonably easy to deal with them if they've got a consumer who is willing to pay and recognizes that he/she actually owes the money. It's the consumers who try to dodge the payments who are a problem.

I know it's hard, but I would suggest you just keep trying to communicate with them until you're eventually caught up. Creditors generally would MUCH rather have your money than your car.

steine13

Take one or two hours out of your day every day until you've got this worked out. Get every name, write down every phone call with date/time and what was said.
Be polite, be persistent.
Don't call them liars.. they're not liars, sounds like they're inept or disorganized.

Do not "pay ahead", as blueeiedgod suggested; if there's gonna be a "buffer", make it sit in your savings account. Paying ahead on an installment loan doesn't make any bills not come due... it only shortens the loan. And if you're in a short-term bind, you'll want a little extra cash sitting around.

Who are these guys? You said TFC, is that Toyota? Whoever they are, work with them, not against them.

Good luck,
-Mathias

getright40

They are Triad Financial. I understand what your saying, but how can you work "with" someone who isn't really willing to work with you when your making an attempt to get things right. It's just that I've been going at it for such a length of time, that I've become completely frustrated with the situation.

indychick73

I signed paperwork on a car today. It's a used car and I will be picking it up from the dealer next week after it is cleaned.

The salesman had trouble obtaining financing for me as I have really bad credit. Eventually, though, he said he found someone willing to finance me. I signed all the paperwork today, but I'm holding my down pmt. until I take possession.

I've heard horror stories of people who take possession of their car only to get a call three weeks down the road that their financing fell through.

How can I make sure with absolute certainty that this is a done deal before handing over my trade and my down pmt.
I don't want to get that call that my financing fell through.

Thanks!

allfiredup

I've been in a similar situation to yours, except mine was just being young and irresponsible. I bought a car I couldn't afford ($420 payments while making barely $20k a year). I finally let it get reposessed in 2000 and, luckily, my parents loaned me enough to buy a cheap used car. It took me over five years to rebuild my credit enough to buy a car again with anything close to a decent interest rate. Even when I was shopping two months ago, a lot of dealers were quoting me 19% interest, but I finally got 11.99%.

Don't let the car get repo'd, or you may be stuck without a car. You will probably end up with an interest rate as bad or possibly even worse than you have now.

How much longer do you owe on this car and what kind is it? Is it in decent mechanical condition? Have you spoken to your current lender about them possibly refinancing it?

allfiredup

Since you have a few days until you pick the car up, I'd find out from the salesman who is financing the car. Then I'd call them to verify that the loan is in fact approved. Tell him that the deal depends on it. I did the same exact thing when I bought my new car because the interest rate was so much better than anyone else was offering me. I was skeptical until I talked to the finance company.

Are you trading anything in on it? Obviously you don't want to trade in a car, them sell it and then take back your new one, too. I have heard horror stories of financing falling thru as well. People driving a car for as long as a month and then are forced to give it back.

Good luck!

kk2482

Mathias is completely right, and I have learned each of the things Mathias mentioned.

Document everything you do w/ them- date, time, person spoken to, + anything else you can think of. **In addition - while sitting @ your appt w/ their company - write down all you request of them at that sitting and have them/their mgr(if they won't) sign the paper to state the wording on it is true. *You should sign the paper at the same time, for witness reasons* A bystandard doesn't mind saying - yes he/she did sign it. This saved me a $750 penalty in a situation similar to yours.

Work with them - is right! Face them w/a level head and strong perseverance! When they tell you again that they will have to process your request - tell them you need to know the dept it'll be processed in and a ph# to contact that dept (contact them in a few days+every day after). This is what put me on the map and my financing company never procrastinated afterwards. I did this every time.

Don't pay ahead - put it in your savings as a buffer ... YES!! Do this even if you don't have credit problems. Too many people have the same situations arise with unemployment/car trouble/illness. Car notes are the same as a 30yr house note - paying ahead does help lower your note but not the size of your payment, and it doesn't have any effect on your FICO! :surprise:

I hope you are guided in the right direction and the people you speak to from here on make sure your taken care of. If you keep putting forth extra effort I'm sure it will pay off in the end!

getright40

The loan was 72 months from August 01, but records show I owe about $14-something so I guess that's about another year and half. It's a Camry and I tell you that I am so traumatized from dealing with this bad deal, that the next one I will review things more carefully.

allfiredup

Don't pay ahead - put it in your savings as a buffer ... YES!! Do this even if you don't have credit problems. Too many people have the same situations arise with unemployment/car trouble/illness. Car notes are the same as a 30yr house note - paying ahead does help lower your note but not the size of your payment, and it doesn't have any effect on your FICO!

FANTASTIC advice! The only benefit of paying extra on a loan is that you'll pay a less interest over the life of the loan. If you're down to less than two years left on the payment, you've already paid the vast majority of the interest, so it won't make as big of a deal. Put the cash in to savings until you have at least three months worth of payments then don't touch it. Everyone needs that kind of buffer in case of tragedy. I've found out the hard way.

qbrozen

when it comes to buying a car/house, in your case, its not so much the credit score you need to worry about as the debt-to-income ratio. The higher the car payment, the less of a mortgage payment you can afford. I forget the numbers offhand, but mortgage lenders will not allow you to have total payments (mortgage+car+credit) that exceed a particular percentage of your gross income.

ah, here you go. a nice article to read:
http://www.bankrate.com/brm/green/mtg/basics1-2a.asp

glsc12

I have a credit score of 545. I am in desperate need of a new car but the car information is overwhelming me. I really want a van but my monies may not allow and i don't really want another small car. I make about 2500 a month before taxes. I don't have any other outstanding bills but my credit history is really in shambles because of medical bills. I am really confused on my resources because i do not want to be flim-flammed into emotional buying.

bobst

I think the best way to avoid being flim-flammed is to think of only one thing at a time.

Step 1: How much can you afford to pay for a car?

Step 2: Once you know how much you can pay, then see what cars you are able to buy. It probably is better to buy a fairly new small car then an older large vehicle, which may cost you a LOT in repairs.

volvodan1

What payment are you looking for?

glsc12

No larger than 350. and no more than 23-25,000, after financing. I do not want another small car, my chidren(3) are too cramped and it is ust too many complaints on a simple ride to or from school.

audia8q

Assuming you can qualify thru a sub-prime bank and assuming it's on a car that qualifies for 60 month financing.....350mo @ 15% translates into apx. $14,600 amount financed.

This should give you some idea where $350 month with poor credit will be...

volvodan1

Dollar for dollar a 03,04,05 Chevy Malibu (Classic) for $9 or $10K would be the best bet, IMO. Mid size, decent gas fairly reliable, that would be the smart choice.

asafonov

I think a used Impala is a better choice (if ever slightly more expensive) - bigger, great fuel economy, decent driving dynamics. A larger back seat for your have kids...

Another choice, if ca. 15k purchase price works, would be a 2004-2005 Mazda MPV - quite a few of these former rentals are advertised by dealers at $14-15-16k asking (I recently saw a $12k 2004 which sold very quickly, but it was pretty beat up and was white with beige interior, not great with kids.)

[Deleted User]

I just pulled all three of my free reports and ordered credit scores with them. I was somewhat surprised to see that all three were about 100 points apart. Is it that each company computes them differently or maybe all creditors don't report to all three? How do the dealerships decide which one to use?

rroyce10

...... Aaaah, one of the many wonderful attributes of the FICO system ..l.o.l....

Dealers don't have anything to do with it, it's a lender thing and they pick and choose which report they use for their lending decisions - some use one, some use two .. and once in awhile you'll find a lender that use all three, but thats rare ....

The problem nowadays is that FICO is "not" a true reflection of somebodys ability to buy .... things have changed alot in the last 7/8 years with technology (good and bad) ... you can have a 20 year old working at Sears part time with a Home Depot credit card and having a 800 score .. in the meantime, his Mom and Dad have been hard at it for the last 25 years, they have a good income, house mostly paid off, they just have a few little credit cards, a 2 year old Subaru in the driveway and they get challenged with a 680 score - go figure ...

The crazy part is, most lenders sitting behind the desk can't read a credit report anymore .... if your score doesn't meet a "X number criteria" then your going to get a higher rate and maybe even a turndown .. in the meantime, the guy standing next to you has a much higher score and he's 15 minutes away from bankruptcy, been on the job for 9 months, makes less income then you and he just got a $450,000 mortgage with 1% down ..l.o.l...

The Fico system is being challenged more and more by those that know they have good credit, and they also know they're being side-stepped by those with a "X number criteria" .. because it's getting way out of control and some class action suits have been started - and I can't blame em' .....

It will be interesting in the next 3 to 5 years when a bunch of these mortgages and car loans come back on a hook because the lending institutions lent money on a number instead of a history -- and I'll bet there will be a TON.



Terry.

allfiredup

Most companies pull just one of the three, so you want to make sure they're ALL accurate. I'd compare the three of them and dispute any inaccurate information. Also, if a good credit reference isn't reporting, I'd contact them to discuss it. Of course, if a less than perfect credit line isn't showing up, you don't want to mention that to them.

It is quite possible that a creditor could pull one of the three and deny you credit because that has a significantly lower score than the others. I have spent the last 18 months getting all mine to reflect the most accurate, positive information.

I hate the credit bureaus!

ticoar

I will not be financing a new car, can anyone tell me if a credit check is mandatory from a dealer if you are paying cash? I would assume it is just a dealership policy if they want to check you out before they do the deal. I am in the process of buying a house and do not want anymore inquiries on my credit report. Thanks.

bdr127

They might want to do a criminal background check, just so they don't sell a car to someone with a history of money laundering, etc.... If the funds are certified from a local bank, they shouldn't have to run a credit check, though.

steine13

They are not allowed to run a credit check without your consent... it would have to be a pretty shady outfit to pull that.

If you're paying by check and you are not a previous customer, they will want to know who they're dealing with. A cashier's check drawn on a local bank should satisfy them.

Or a personal check, and you get the car after it clears. Not a big deal.

-Mathias

steine13

Anybody who wants to run a "criminal background check" on me before selling me anything is very welcome to keep it.

You gotta be kidding me...

-Mathias

bdr127

Anybody who wants to run a "criminal background check" on me before selling me anything is very welcome to keep it.

You gotta be kidding me...

Considering buying cars is one of the easiest ways to launder money, I don't blame dealers for wanting to run a criminal background check when dealing with large "cash" purchases.

IRS: Currency Reporting - Money Laundering

Under this federal law, simply "looking the other way" or ignorance to the law is not an allowable legal defense. If the issue does come up, the dealer may have to prove they did something to look into a "cash" deal to cover their butt.

With all the fraud and identity theft, it's hard to blame a retailer (especially a retailer of expensive vehicles) doing a quick check to make sure they're selling the car to someone legit.

Mathias: It's the 21st century... Welcome to this Brave New World.

danf1

I doubt that any dealer will run a criminal background check. We are required to check the OFAC list to see if your name appears on it though.

rroyce10

.... Anything over $9,999 "in cash" has to be listed and reported, just like a bank .... if it's a certified, cashiers type check of any kind then it makes no difference because there is a immediate paper trail ...

Mathias is right, there is no need to run a NCIC .. if things look a little suspect a credit report will do fine.

Terry.

ticoar

Thanks for all the input everyone. I should have clarified when I said "cash" I did not mean walking in with a briefcase full of money and putting it on the table, I just meant that their would be no financing involved. A cashiers check from the bank would be the method of payment. I remember several years ago I paid with a bank check and the dealership still ran a credit check on me.

bobst

Ticoar, since you are asking the dealer to accept a piece of paper in exchange for one of their wonderful cars, I think it is reasonable for you to let them do a background and credit check on you.

When we paid for a new car with a personal check last March, I gave them my SSN and let them do whatever checks they wanted to do. That was almost a year ago, and George W hasn't thrown us in jail so far. Hey, gotta run - I see a couple guys in black coats coming to the front door.

danf1

Are you positive those aren't white coats coming to get you? Somebody here may have turned you in when they read the key story.

ticoar

There is a big diffrence between a personal check and a bank certified check. If paying with a personal check, of course they are going to want backup info. I don't mind if they want to verify my identity, verify the bank account and the funds in that account...thats not the issue, and I don't know where George W came into all this. BTW, as a past victim of identity theft, you should not be so willing to throw your SS# around. I am going to be buying multiple homes in the next year or so and want as few inquiries as possible on my credit report to keep that score as high as possible, thus the reason to pay in full with no financing. That was the reason for my initial question of do all dealers do a credit check if you are not financing the car. I'm not sure how this turned into some kind of conspiracy, men in black coats thing.

kamimarie

Would it be a good idea to use my credit card to pay for a car. Everyone who I speak to says it's a bad idea, but let me draw a little picture. It's a 1999 Mercury Grand Marquis. I have never owned a car and don't have any credit. The credit card that I do have is my dad's. I'm an authorized user. He says it's okay, but moms is trippin, my friends are telling me not to do it because of the purchase interest. I understand about interest rates on credit cards and everything like that, but what's the big deal. You pay for the car then and there and you're out the door never dealing with the dealership again (unless u have a warranty and something goes wrong). What are the major cons of purchasing a car with a credit card? :confuse: