Auto Loan with my score & circumstance?

seruby · ‎08-11-2014

I'm not sure if this should go under here or under Rebuilding Credit, since it ties with both, but more concerned with an auto loan.

I am looking to purchase a new car later this year, and want to know what my chances are.

My credit scores aren't the best, ranging from 571-625, depending on the site, mostly due to the combination of being irresponsible with cards then being out of work. It's been improving lately, as I got a Cap One secured card last May (started with a $200 CL, which they upped to $300 in August, and last month upped again to $750!), and this past March, got a Merrick Bank double your line card with a $700 CL. Aside from the first few months with CO, I've paid all the statement balances in full each month, and tried keeping the next statement balance low, though sometimes I buy a high price item so a high balance reports. At the end of this month, I plan to have 1 of the cards completely paid, and the other back reporting a low balance, then going back to keeping the balance low. I want to wait until November because in October my Merrick card CL will increase to $1400, so my utilization will look much better when it reports in November.

I've been working consistently for the past 2 years and recently got a good raise in my position. I figure, I could have roughly 10-11k saved up by the end of November without stretching myself thin otherwise, which is a huge downpayment considering the car would cost about 26-27000. However, there are some collections still on my credit report from 2011-2012, some of which have been sold and are no longer with the OC. I handled one in 2012-2013 with the OC, but setttled for less than was due. The others haven't bothered me aside from responding to DV requests, and 1 is from my old apartment. My question is: should I pay them, or should I let sleeping dogs lie since collections factor into your score less as time passes and any activity could potentially restart the clock? If I do that, will it impact my chance at getting a car loan?

I'm hoping putting so much down, plus the recent positive history, will offset the negative of having them on my report.

SunriseEarth · ‎08-11-2014

@seruby wrote:
I'm not sure if this should go under here or under Rebuilding Credit, since it ties with both, but more concerned with an auto loan.

I am looking to purchase a new car later this year, and want to know what my chances are.

My credit scores aren't the best, ranging from 571-625, depending on the site, mostly due to the combination of being irresponsible with cards then being out of work. It's been improving lately, as I got a Cap One secured card last May (started with a $200 CL, which they upped to $300 in August, and last month upped again to $750!), and this past March, got a Merrick Bank double your line card with a $700 CL. Aside from the first few months with CO, I've paid all the statement balances in full each month, and tried keeping the next statement balance low, though sometimes I buy a high price item so a high balance reports. At the end of this month, I plan to have 1 of the cards completely paid, and the other back reporting a low balance, then going back to keeping the balance low. I want to wait until November because in October my Merrick card CL will increase to $1400, so my utilization will look much better when it reports in November.

I've been working consistently for the past 2 years and recently got a good raise in my position. I figure, I could have roughly 10-11k saved up by the end of November without stretching myself thin otherwise, which is a huge downpayment considering the car would cost about 26-27000. However, there are some collections still on my credit report from 2011-2012, some of which have been sold and are no longer with the OC. I handled one in 2012-2013 with the OC, but setttled for less than was due. The others haven't bothered me aside from responding to DV requests, and 1 is from my old apartment. My question is: should I pay them, or should I let sleeping dogs lie since collections factor into your score less as time passes and any activity could potentially restart the clock? If I do that, will it impact my chance at getting a car loan?

I'm hoping putting so much down, plus the recent positive history, will offset the negative of having them on my report.

I'm not sure I understand the logic of what I've highlighted in red. If you make a big purchase, you can pay it off/down before your statement closes. UTIL is one of the most important factors in FICO scoring. For ideal scoring, you want reported balances to overall and individually be <10% of your total CL. You also want less than half of your accounts to have a balance (many on here suggest letting only one card post a balance). Yes, the auto-increase on Merrick will improve your UTIL, but so would paying down the balance.

As for the collections, are any of them COs? With the current FICO models, paid and unpaid collections are scored the same (however, a paid CO will, at least, show a $0 balance and those do affect your UTIL). In some cases, paying could make the collection look more "recent" and ding your score. Yes, they should be paid (especially if you're seeking employment or a mortgage), but it can lower your scores. However you also don't want those to turn into judgments, if the CAs decide to pursue that avenue.

seruby · ‎08-11-2014

I saw nothing in red, but I'm guessing you are referring to when I said "sometimes I buy a high cost item, so a high balance reports" when mentioning paying off balances. I'm aware I can pay off purchases before the statement closes, but sometimes the purchase is too close to the statement date, or I know I could have it paid off by the next month so I don't worry about making it. I only have the 2 cards, and as I said, they'll both be paid off before the statement date this month, so only the Capital One card would have a balance.

As far as the collections, 2 of them are COs, 1 of them is past rent..

SunriseEarth · ‎08-11-2014

@seruby wrote:
I saw nothing in red, but I'm guessing you are referring to when I said "sometimes I buy a high cost item, so a high balance reports" when mentioning paying off balances. I'm aware I can pay off purchases before the statement closes, but sometimes the purchase is too close to the statement date, or I know I could have it paid off by the next month so I don't worry about making it. I only have the 2 cards, and as I said, they'll both be paid off before the statement date this month, so only the Capital One card would have a balance.

As far as the collections, 2 of them are COs, 1 of them is past rent..

Sorry about the disappearing font color...there was some sort of formatting issue when posting, so it took away that color. But yes, I did mean that remark. Anyway, it can be hard to juggle through cards (I know I switch out my "usual" cards near the end of the statement close dates), but it's really important to pay attention to that right before you're ready to have your credit pulled.

If the COs are reporting anything higher than a zero balance, I think settling those would help the most. As for the housing collection just be mindful of SOL, as you don't want them trying to sue to collect. I would attempt PFD offers on the housing collection but since it may not be out of SOL, I'd only doing this if you are able to PIF.

seruby · ‎08-11-2014

My plan is once the cards are paid off, only use the capital one card for purchases and bills. I'll use the Merrick Bank one for gas since I can pay that right away, but it'll show activity on the card so they won't close it. So it'll make juggling a non-issue.

The COs are all reporting $0 and sold. The housing collection is with FCO, who I've read are very unwilling to work with anyone. They haven't bothered me about collecting on it though. I'm not sure if I want to write the actual management company either - I moved out very shortly after they took over because I did not like them - and I know if I give them any inkling I can pay, they'll just file a lawsuit without even trying to work it out outside of court.