06-27-2014 09:21 PM - edited 06-27-2014 09:57 PM
I've spent the last two years rebuilding my credit and am so nervous about doing anything like filling out credit apps that could cause it to drop so I was wondering if anybody would be able to offer some advice given the following circumstances:
I had a score of 700 after rebuilding (started at 560), and over the course of two years have been able to get credit cards and a great rate for the mortgage and all was great until I missed a mortgage payment 6 months ago and it dropped my score by 80 points (it's gradually working its way back up). I currently sit at fico 650 and am in need of a loan for a used car for my spouse (her credit is in a bigger hole than mine). I did take a small auto loan less than a year ago, have paid nearly half of that off leaving a balance of $2500 - I'm currently 7 months ahead on this loan. I have a walmart ($800 cl), amazon ($1600 cl), capital one ($800 cl), and a line of credit with my bank ($2500 cl) - none of which have ever been late nor do they have a utilization greater than half of their limits - The only missed payment I've had in two years has been that mortgage payment.
My questions are these:
Thank you in advance, and I appreciate any guidance or advice.
06-27-2014 11:41 PM - edited 06-27-2014 11:42 PM
1) Depends. If you have a good reason (ie wife needs a second car), most finance companies won't mind. Also if you're not super subprime, you should be okay. Also depends on your DTI. How much car do you want to buy? How much is your gross income? Rent/mortgage? And aggregate minimum monthly payments on all personal loans and credit cards?
2) Yes. What bureau is it from? A 650 EQ FICO gets you ~3-4% from DCU and at a dealer should generally yield < 5%.
3) Paying off the credit cards would be FAR more beneficial if the goal is to get the lowest rate. Paying off the other car loan might actually cause your score to go down (counter intuitive, I know). If your FICO gets to 675 EQ, you'd qualify for 1.24% from DCU (with direct deposit) and 680+ qualifies for top tier at a dealer typically which is often like 0% or 1% if it's a new car.
Do me a favor and list all your cards' balance / limit in that format as well as how much money you have set aside to pay things down...I'll try to see what would optimize your FICO and leave you a bit left over. Preferably you'd save a little for a down payment (often helps to grease the wheel and get you approved/a lower APR at the dealer). If one card's interest rate is very high, then obviously, pay that off first regardless.
4) Personally I do not know about Nationwide. Perhaps someone with personal experience can chime in here. But I know DCU has decent rates and your FICO definitely qualifies for a good rate with them (especially if your util comes down). Also on the subject of bank subs of insurnace firms, State Farm Bank also has a decent program that Explicit, another poster here, often recommends.
06-28-2014 01:51 PM
Thanks for the information and reply, I've provided the additional information you requested below:
1) The reason for the loan is a car for my wife (but if it works out, I'd like to get a truck and she can drive the car I have now - the one with the small auto loan). We've been looking at the 2006-2009 Ford F150's ranging between 15k & 19k. I gross 42k pr/year, my mortgage is $630 pr/month (includes escrow for taxes, homeowners, etc), and my minimum payments on all credit cards & line of credit total $150 pr/month.
2) The fico score I'm using comes as a benefit from my walmart credit card - It allows me monthly access to my actual fico, and according to the details, it comes from Transunion.
3) Please excuse my ignorance, but could you tell me what "DCU" stands for? I'm assuming this is some form of a credit union?
4)Thanks for the info regarding Explicit, I'll check into it.
Capital One - 353/800, Walmart - 397/800, Amazon - 721/1600, Kohls - 125/300, LOI - 1100/2500
I have $3k available to pay things down with
My first auto loan has a remaining balance of $2500, has a monthly payment of $163, and isn't due again until Feb 2015. (We bought a 2007 Ford Edge last year for 16K but had a decent down payment and trade-in so I only financed 5k.
Thanks again for your assistance, I'm am so appreciative for any guidance/suggestions you can provide.
06-29-2014 02:24 AM - edited 06-29-2014 02:25 AM
1) So as far as your DTI on the new auto loan is considered, we're looking at (630+150+163+250 (implied payment on new loan))/(42000/12)=34%. So I'd say you are definitely good on the income side. 35% is like the ideal DTI for a car loan and you're under that.
2) You guessed right. DCU is Digital Credit Union, a CU out of MA that accepts members from all 50 states. But don't apply to DCU more than 2 weeks before you know you'll buy because their approvals, like most online approvals, are only good for 30 days or so. Also when you apply, don't forget to add taxes and title cost to the car price on the application form. So if the car's price itself is 17k, in my state sales tax is 6% and registration is $400. 17000*1.06+$400=18420. You want to enter 18500 as the car price when applying online for loans in my example. And obviously if you haven't yet negotiated the price of the car you want before applying, you want to estimate high enough that you'll have enough financing to buy any of the cars you're looking at.
3) Because of the low payment on that auto loan, I'd leave it if I were you. If you pay off the auto loan in full a) you won't have that much of a down payment and b) your FICO might actually drop.
To maximize FICO in the meantime and try to leave you with as much as possible for the down payment, here's what I'd do: Pay off Capital One ($353), pay off Walmart ($397), pay off Kohls ($125). And then pay $100 to either Amazon or LOI (pay whichever has the highest interest rate). Obviously you need to keep sending at least minimum payments every month to Amazon and LOI else late payments will report.
If you do that, it'll cost you 353+397+125+100=$975, leaving you with a little more than 2k for the down payment (keep it, it'll be helpful to have a down payment if needed).
Also on the FICO side, you'll have 3 cards reporting a 0 balance (if I were you, I'd make sure these cards keep reporting a 0 balance until after you buy the car) and your util will be under 30% (28.6% to be exact). I would expect you, once the 0 balances report in not more than ~30 days after pay off, to gain perhaps 10-20 FICO points hopefully and that'll leave you in a good spot in my opinion.
Honestly, I don't think you'll have any issues with a hopefully 660+ (even your current 650 would work) FICO and a 2k down payment on a 15-19k car.
07-01-2014 06:36 AM
Thank you so much for your help and guidance. I called DCU and they were very helpful, but I think we might try to wait a few extra months as the lady I spoke to said that the late payment from December would we weighed heavily upon because it hasn't been long enough. Honestly, she seemed a bit negative about the loan being approved because of it.
07-01-2014 10:40 PM - edited 07-01-2014 10:51 PM
Meh, it's more than 6 months old at this point and if I read correctly, it's only a 30 day late?
Unless you want to and can wait, I still think an application to like Cap One is worthwhile especially if you can get your balances down as described above and wait for it to report before applying for the loan. I mean getting some cards to 0 as described above and lowering your util will itself probably get your FICO to a 670+. I bet any dealer worth his salt would definitely be able to get you <5% at that point.
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