Advice on whether to buy now or wait

[havlow]

I've been debating a new or low mileage certified used Honda, Toyota or Nissan as my current car runs, but will probably need about 1500 or more in repairs in the next year to keep it running.  

Yesterday I receive on of those Capital One pre-approval loans for up to 30,000 in the mail.  I'm upside down on an old Ford Focus but I owe less than 4k and I'm basically paying mostly principal at this time because I'm less than a year away from paying it off.  Additionally I have about 78% Credit Utilization on my cards and owe another 6400 on a signature loan I got about 2 years ago.

My Fico scores are in the high 500's to mid 600's (They've fluctuated a bit over the last quarter so I'm just giving an average) and I make about 65000 a year.

Overall my total debt is around 16,500 (Car Loan + Credit Card Debt + Sig Loan) and I've been able to cut this down about 2k a month due to the fact that I work a night shift that actually pays me about another 500 extra month than I normally make.

I have the following questions:

- Should I pay down the CC Util and wait for a better rate?

- Can anyone suspect what rate I would currently get?  My original car loan was at 18% back in 2004 but my AAoA, Salary and spread of different types of accounts have increased since then.  I also had some chargeoffs back in 2000 on 3 credit cards and a lawsuit from 2001 (long story just like everyone else) but overall I've been on time with my payments.

- I bank with BoA and I have a small account with a CU in TX that I haven't used in years.  Should I try them first?

Any help would be appreciated.

Thanks,

J

[havlow]

Also...I just calculated my DTI which is about 32%

[Zahnrosen]

You need to pull your credit report today and see what your fico scores are. Use the Score Watch product here, I highly recommend it. Post back with your Fico score once you get it and we can give you some solid advice then.

[Anonymous]

If I were able to pay 2k/month toward CCs, I think I'd wait at least 6 months. That will be 12k toward your 16.5k in debt. Paying off those CCs should have a positive and immediate impact on your scores and put you in a much better position to buy a new car. If you can wait 9 months you'd be completely out of debt, and at the end of the year I'm thinking car dealers will be tripping over themselves to make deals and get more sales on their books. I also think I'd run far, far away from that Capital One pre-approval. I've heard horror stories about them, and no I can't think of any specific examples off the top of my head, but if you search on this site (or google) you might find more info. Since you have an account at a CU, I'd definitely try there first (or another CU like PenFed after your scores are up a bit).

[Anonymous]

I agree with desflink.  I would work on paying down my current debt (starting with the highest interest rate debt first).  If you are upside down on your current auto loan then you would be forced to assume that difference in debt if you sold or traded in that car (negative equity).  That would just effectively increase the cost of any car purchase you make.  I know its hard to do, but I always think about the total cost of a big purchase like a car and not just the monthly payment required.  If you realize that the $10000 car will cost you $15000 over a 60 or 72 month loan at double digit interest then it doesn't seem like such a good idea even if you can make the monthly payment.  I say wait until you get your debt down.  With improved FICO scores and a little money down you can save a lot of money.

[havlow]

Hey everyone...I pulled my Experian and Transunion scores this morning:

EX - 633

TU - 619

One is above the 620 and one is below the 620...not sure if that would really change the parameters that much.  I know that paying down the CC debt over the next 3-4 months will definitely help a lot.  I'm really surprised that my scores were this high though.  I had a few charges off back in 2000 that fell off.  I did see a tax lien against me for 6600 bucks that was filed in 2004 but I never had one.  I'm curious how I can find out how to get that resolved.

[WannaHouse]

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@havlow wrote:

Hey everyone...I pulled my Experian and Transunion scores this morning:

EX - 633

TU - 619

One is above the 620 and one is below the 620...not sure if that would really change the parameters that much.  I know that paying down the CC debt over the next 3-4 months will definitely help a lot.  I'm really surprised that my scores were this high though.  I had a few charges off back in 2000 that fell off.  I did see a tax lien against me for 6600 bucks that was filed in 2004 but I never had one.  I'm curious how I can find out how to get that resolved.

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Call the IRS and set up payments.

[havlow]

Kathy...sorry I may not have been clear.  The Tax Lien is incorrectly listed on my CR.

A little background on the reason why it's there.  In 2004 the state sent me a letter saying that a Lien was being filed against me unless I could prove that I had paid taxes in 1999.  Essentially they said that I never filed my taxes, had no proof I paid them and therefore wanted their money plus interest.  So I called them up at that time, told them I had W-2's that proved otherwise.  They told me to file the taxes again and that should resolve the problem.  I did, sent everything CMRRR to them and got a nice letter saying I was no longer in any danger, that they would remove the lien.

Well as it turns out, they sent me a letter, but it had the correct account information.  Apparently they used the account to release my information from the courthouse.  Essentially someone else had the Tax Lien removed instead of mine.  So I had a later stating the issue was resolved, however, they removed the wrong account from the courthouse.  I find this out when the woman on the phone stated that they had a different account number listed nexto my name.  She did a cross reference check and found that indeed there had been a mix up and they would go to the court house that day and resolve that issue.  They will be sending me a letter and copies of everything they have done at the courthouse as well.

[Zahnrosen]

Something from 2004 won't matter too much. I just bought a car and I've got a lien from 2008. If you can get it removed, do it but I wouldn't sweat it too much. Getting your debts lowered will really help you much more improve your credit scores.