Auto loan refi or not.

[Anonymous]

I currently have a good auto loan.  2.5 years no late payments.  It's a 72 month loan at 5.9%.  My scores were 80-100 points lower then they are now when I took this loan.  The CU that it's through does NOT report to ex.  It's my lowest score because of this.  I'm thinking about a refi to a bank that reports to all 3 majors and possibly hopefully a lower APR.  How will this effect my FICO scores?  A closed loan paid in full with no lates should look great, but a new loan will drop my scores.  For what it's worth, I'm planing on buying land in the next year and building a home in the next two years, and I want to do what's best for these long term goals.

[Anonymous]

Yes, having the old loan "paid off" by the new lender and then a new loan reporting could have temporary negative effects on your score, in that it is possible that a cycle reports between the payoff and the beginning of reporting on the new loan, making it look like you have no installment accounts (this is what hurts a score, if your only installment account is closed/paid off and you don't have another one to replace it, your "mix" points fall because of that).

The overall benefit of (a) potentially lowering your interest rate/costs and (2) hopefully getting the account to report across all three boards is going to outweigh any temporary dip.  Once your new loan reports and you make several on-time payments on it, your score would rebound anyway.  You will get "high balance" alerts on the new loan until you pay off a piece of it, but again the overall benefits in terms of eliminating money spent on interest when you don't need to, and of having a stronger profile on the third report, will overcome the few points you might lose on high balance.   This is one of those "marathon, not sprint" situations that comes up with financial/credit decisions.

[Anonymous]

So in the long run it's just a better move it seems like.  Sounds good to me. Any thoughts about penfed vs DCU?

[Anonymous]

I don't do business with either, but they each have a huge fan base around this forum...  

I do my credit union business with a brick-and-mortar one based here in my state, because I like being able to walk in if i feel it necessary lol

Don't discount other options besides credit unions, if you can find good rates.  I do the credit union thing, have for years, but the last two car loans I signed - one refi, now a purchase - have not been with credit unions, they were both with traditional banks (Independent and Chase), because the terms just came out better that way in my case.

[SouthJamaica]

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@Anonymous wrote:

I currently have a good auto loan.  2.5 years no late payments.  It's a 72 month loan at 5.9%.  My scores were 80-100 points lower then they are now when I took this loan.  The CU that it's through does NOT report to ex.  It's my lowest score because of this.  I'm thinking about a refi to a bank that reports to all 3 majors and possibly hopefully a lower APR.  How will this effect my FICO scores?  A closed loan paid in full with no lates should look great, but a new loan will drop my scores.  For what it's worth, I'm planing on buying land in the next year and building a home in the next two years, and I want to do what's best for these long term goals.

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1. It makes economic sense to me, because you may well be able to get a lower rate.

2. From a scoring perspective, it's a catch - 22, because the advantage you get from it reporting to all 3 bureaus, is countered by the point loss you suffer when you replace a partly-paid-down loan with a new 100% loan.  If you can pay the refinanced loan down to 9% of its original amount at least a few months before you do the mortgage thing, then sure, go for it.

[SouthJamaica]

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@Anonymous wrote:

I currently have a good auto loan.  2.5 years no late payments.  It's a 72 month loan at 5.9%.  My scores were 80-100 points lower then they are now when I took this loan.  The CU that it's through does NOT report to ex.  It's my lowest score because of this.  I'm thinking about a refi to a bank that reports to all 3 majors and possibly hopefully a lower APR.  How will this effect my FICO scores?  A closed loan paid in full with no lates should look great,

it might look great and feel great but to FICO it actually knocks you down; paid down to 5% --> great; paid down to 0% --> scores drop

but a new loan will drop my scores.  

that too

For what it's worth, I'm planing on buying land in the next year and building a home in the next two years, and I want to do what's best for these long term goals.

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[Anonymous]

I have 42 months left on the current loan. I'm going to take a 36 month refi, so I do plan to pay it off quicker. Either way in two years when I go for the mortgage I wouldn't be under 9% UTI. It would be roughly 35% owed on the original Loan vs 29% on the new refi owed. Pretty much a wash there.

[Appleman]

PenFed - 1 EQ HP and you can apply for an auto refi and CC (and other items if your credit profile supports the additional credit)

DCU -  another good option, but need to apply for membership and auto loan, each a HP

If it saves you money, go for it. 

[RonM21]

I'd go with Penfed, but you probably can't go too wrong with either.

[Anonymous]

I just wanted to update this.

I apped with penfed.  Instant denial due to collection accounts.  I called them and they gave me an email address to send a letter.  They reviewed it and re-declined.  I was honestly shocked.  It's a great loan coming from 2.5 years no late payments and I was asking for 25,000 for a truck worth 41,000.  $16,000 in built in equity sounds like great security to me.

I opened up a DFU account and apped with them.  Went to pending for a bit then changed to APPROVED with a secure email asking me to call them.  I called in and they just needed a paystub and the payoff info.

I closed the loan today.  25,000 for 36 months at 3.5% from a 72 month at 5.9%.  I cut six months of payments out for $40 more a month, and I'm happy with that.  The rate was higher then I thought it would be but in the end I'm building a relationship with a great CU and saving money.  Win win if you ask me.  3 HPs later ...