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Good score but low income. Should I bother?

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Zann
New Member

Good score but low income. Should I bother?

I went through a bad patch in 2006-2007 which led to multiple car reposessions, house forclosure, and bailing on my many other debts such as credit cards, loans, even the utility bills.

 

Needless to say I fell off the grid and never was served with papers or any harrassing phone calls (only phone number they had was the one that was turned off). Now that that statute of limitations for my state have passed and the 7 year mark has come and gone I have decided to quit living off cash and get back to normal. I opened an account at my local credit union and was suprised to see my credit report is blank of the tons of things I defaulted on. Only things still there are two minor collections that are due to fall off this year. My score with Equifax (per the credit union's credit pull) was 651 with zero activity for 7+ years.

 

I started a 'fake loan' or whatever you call them where they froze $500 I put in savings and then gave me $500 and I use that to pay back the loan over six months. They also opened a $1000 visa that I plan to use for gasoline purchases just to show activity and good payments. After doing both of these back in March my score jumped to just shy of 700 already.

 

To get to the point, before my credit world fell apart I was making good money for my area around 60k a year. I finally regaining employment and finding something I enjoy doing but it pays next to nothing. I pull in around $17-19k a year before taxes. Browsing this site I've looked at the various approvals based on various scores but I've yet to see anyone in my income bracket. I live with a room mate and the car I've been driving doesn't have much longer for this world.

 

What sort of money would they approve if any? The local credit union rep told me she would approve me for a loan with 10% down but she was referring to a second chance finance program and I didn't even want to know how bad the interest rate was going to be and she didn't mention exactly 'how much' the loan would be for. I'm wanting to purchase a $20K new Scion Tc or something along those lines for a long term reliable car. I've looked at their $2000 down $200 a month lease for this model car but I believe my income wouldn't allow that to happen.

Message 1 of 12
11 REPLIES 11
Remember0
Valued Contributor

Re: Good score but low income. Should I bother?

So yeah, you should bother. What's your rent payment? And the "fake loan" as you call it (usually called a share secured loan) payment?

 

For our sake, let's say you put 1.5k/month down for income. You could put lower, but then approval becomes much harder. Also are you sure you aren't forgetting something like interest or investment income? Child support, alimony, etc...?

 

With a 700 FICO score, I think you'll definitely find someone to finance you. I would have in the past recommended DCU, but seems like they are doing only 15k approvals for low income (or low FICO, no idea which yet). I'm fairly confident you'd probably get 15k with DCU for 1.74% for 65 months with that 700 score. But I can't guarantee because of income.

 

This said, I know that a dealer will be able to get you financed. If DCU doesn't approve for what you're looking for, just be smart about APR at the dealer. A 700+ FICO should be able to get <5% (really <4% on new). Dealer might say oh you're a first time auto loan, etc... just say something like I'll use my local CU approval. The 2014 tC seems to have a 1.9% for 60 month promo, so I really think you would qualify for that from the dealer. You can use DCU's 1.74% rate (even if they say only 15k) as negotiating leverage with the dealer...just don't tell them about the 15k part.

 

Also I'd recommend maybe trying CapOne or RoadLoans first before even DCU. RoadLoans will approve you, but I don't know what the APR will be. Not sure if CapOne wants to see 1.5k or 2.0k/month in income...can anyone chime in?

 

Since it looks like you're somewhat new to buying cars, here's my thread on how to buy + finance a car (you can skip the lease part):

 

http://ficoforums.myfico.com/t5/Auto-Loans/Guide-to-Financing-Leasing-and-Refinancing-a-Car/td-p/289...

Message 2 of 12
Remember0
Valued Contributor

Re: Good score but low income. Should I bother?

Also found this:

 

http://www.scionofberkeley.com/default.asp?url=financing&suburl=buying

 

They clearly state that for Gen One they need a min gross income of only $1,500. I imagine the same thing applies to regular loans. Why would you require a 1.5k/mo gross for someone with no credit history, but make someone with a 700+ FICO need more income? Like I said, pretty sure you can snag the 1.9% at a dealer with Toyota, but maybe the dealer screws you a bit...I don't see you going above 4% to be honest.

Message 3 of 12
Zann
New Member

Re: Good score but low income. Should I bother?

I did try roadloans and was declined but I tried that before opening the new accounts at my  credit union. Not sure if it were those two old collections preventing it or the lack of ANY recent credit over the last seven years. Now that I 'woke' up my credit maybe things will be different. I also was debating trying the car loan now or waiting for that 6 month loan to work it's course and to have 6 months of good payments and low balance on the credit card. I assume the fico score would climb even higher or is that initial spike the best I'm going to get out of them?

 

My portion of the rent is $275 then half the utilities. The saving secured loan thing is $83 a month for 6 months. They bank earns $3.50 interest total which is worth it to rebuild a little credit lol.

Message 4 of 12
Remember0
Valued Contributor

Re: Good score but low income. Should I bother?

I entirely agree on the $3.50 interest. Heck, I currently have a secured loan of 2.5k out with USAA and they'll make $40 over the life of the loan. Well worth it to me to build up installment history (I already have plenty of revolving history and no baddies).

 

The 6 months will help raise FICO a bit, but it won't increase anything like the initial jump. And to be honest, when that loan closes, your FICO may DECREASE because you again would have few accounts open. My opinion? Try again at Roadloans and Capital One, before going to the dealer. Roadloans especially given the income, and make sure you put 1.5k or 1.6k! Since the dealer will run a bunch of inqs anyways, may not hurt to also try BofA while you're at it, but I don't know BofA's minimum income...it may be 2k/month. 3 inqs won't kill. Don't do DCU though...there's an issue with them that I'm realizing in the last hour or so regarding low $ and high APR approvals.

 

Also if you're going to wait for a few months for the car loan, apply for 1-2 cards I'd say in 1 month. Try to pick issuers that pull different buureaus. I'd do something like Barclays (TU) and Bank of America (usually EX)? If you're doing the auto loan now, after you buy your car, add another 1-2 cards.

Message 5 of 12
Zann
New Member

Re: Good score but low income. Should I bother?

Thank you for all your advice! I may wait and see what happens in May as we have a employee who turned in their notice and the owner has hinted at me gaining more hours (I work four 8 hour days now which could go to actual full time 40 hours) which the extra hours alone would be a car payment but it would show more income on a check stub (which would jump to right at 2k a month gross).

 

I'll browse around at some easy credit cards I can aquire.

Message 6 of 12
Remember0
Valued Contributor

Re: Good score but low income. Should I bother?

No problems! If you get two paystubs (ideally three, but two will do in a pich) that show 2k/month gross you'll have absolutely NO issues getting financed everywhere at amazing rates (<3-4% for 60 months on new cars).

 

Add barclays to that list. They have some okay rewards cards (no annual fee, at least 1% rewards) and they are a pretty easy lender to get approved with. Just don't apply for their top tier Arrival card imo. But any of the other branded ones you should be in without a problem. Plus they pull TU which relatively few others do. another one is Discover though they tend to be easy if you're a student and app for a student card, a little harder otherwise. Discover's not a guarantee though.

Message 7 of 12
Creditaddict
Legendary Contributor

Re: Good score but low income. Should I bother?

If you want the Scion, go to Scion for the financing... it's part of toyota but geared towards lower incomes, first time buyers, younger buyers with less credit, all over the board of basically new, little credit, little income... they will make it work and probably not at a bad rate if not the lease if that's what you really want but id prefer to buy when talking under a $20k car.

and don't shoot down your CU before you actual know the whole deal... they probalby don't get to crazy with interest rates even in what they call 2nd chance... it's not roadloans and you shouldn't apply to them again.

 

but I would pick up another credit card or 2, your score will jump some more with a few solid new accounts.

 

check pre-approvals for capitalone.com, chase.com, discovercard.com for right now I would not apply for any of these 3 if not pre-qual for something.

maybe go for a 76 gas card or chevron gas card, walmart or something if nothing above and those could help.

Message 8 of 12
Zann
New Member

Re: Good score but low income. Should I bother?

I did apply at Barclays last night but alas the instant approval failed and the auto response was they needed to evaluate things and a reply would come via mail within ten days. I'm not giving my hopes up on an approval. After the roadloan failure and now this, I think I just want to quit while I'm ahead. The inquiries are stacking up.

 

Once I get a few true full time paychecks under my belt in hopefully June I will visit the dealership. In regards to my union's second chance finance program, looks like they go as high as 18% interest according to the website. She did say my world with them would open up after this 6 month loan ends. She said to come see her then and if the credit card is paid on time and has a low balance as well as the secured loan paid off, they would take care of their own in her words.

Message 9 of 12
Creditaddict
Legendary Contributor

Re: Good score but low income. Should I bother?


@Zann wrote:

I did apply at Barclays last night but alas the instant approval failed and the auto response was they needed to evaluate things and a reply would come via mail within ten days. I'm not giving my hopes up on an approval. After the roadloan failure and now this, I think I just want to quit while I'm ahead. The inquiries are stacking up.

 

Once I get a few true full time paychecks under my belt in hopefully June I will visit the dealership. In regards to my union's second chance finance program, looks like they go as high as 18% interest according to the website. She did say my world with them would open up after this 6 month loan ends. She said to come see her then and if the credit card is paid on time and has a low balance as well as the secured loan paid off, they would take care of their own in her words.


Barclays: 866-408-4064 (Credit Analyst)

 

Call now and have your application reviewed!

Message 10 of 12
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