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Established Member
LMBray09
Posts: 19
Registered: ‎02-02-2013

New- Auto Loan and Debt

Hi, I'm new here and have been reading through the forums. Lots of helpful advice :smileyhappy:

 

I have a couple questions, mostly regarding a new auto loan, thats why I put my question here. I have USAA credit monitoring (which I just found out to be "FAKO's"..all new to me.) 

 

Question is...I have 3 debts left. One is my husbands truck loan for $13K, CC for $2780 ($2800 limit) and CC for $1545 ($2000 limit). I have $15,845 to put towards all three. My USAA credit monitoring says my most negative is the credit to debt ratio, which is understandable. My EX is 673, EQ 621, TU 609 as of 1/9/13 (through USAA).

 

I'm currently 17 weeks pregnant and already have a 20 mos daughter so I want to upgrade to an SUV (Ford Edge) anytime between now and May. 

 

I want to know what would be the best plan of action to get those debts down and up my score in time for me to apply for another auto loan. I'm pre-approved through USAA for 25K at 4.59% already but the car I want is $30k. I'm hoping I can up my score and try to get a $30k loan before baby comes. We can more than afford it but I think the problem was the debt ratio at the time. I applied beginning of January and at the time had 2 more credit cards ($250 and $225) but those have been paid off. 

 

Would paying off my husbands truck loan (4.79% at 72 months) early be best and then just use the rest towards the CC debt? We've only had his truck for almost a year (March 2013). I keep hearing about credit utilization and I'm just so lost. 

 

Sorry if this is confusing and in the wrong place. I just need advice on what to do.

 

Thanks!

Starting Score: FICO EQ 663 (02/04/13)
Current Score: FICO EQ 687
Goal Score: FICO EQ 700 (March 2013)
Moderator
Revelate
Posts: 6,738
Registered: ‎12-30-2011

Re: New- Auto Loan and Debt

Welcome to the forums!

 

Pay off the credit cards, don't sweat the auto loan at all.  Save the cash for financing the new vehicle (downpayment) or new-kid expenses.  Congrats btw!

 

Credit utilization is just on credit cards for the most part; there's lots of posts on it but generally for FICO prettiness in your case, simply pay off one of the two other CC's, and substantially pay down one of the others so when the statement cuts, you're somewhere in the 1-9% range.  Figure in your case on that $2800 CC, you want to have no more than call it $250 for a statement balance, and $0 on the 2000 CL card.

 

You're probably looking at a substantial bump right there in your FICO scores, and that still leaves you with 10K to cover the difference between the USAA auto loan and the truck price if required.  Paying off the current auto loan isn't going to be a big help for FICO, it may help you with Debt-To-Income calculation, but I'd hang on to the cash for a bit anyway in your situation as unforseen expenses could come up (knock on wood).

 


Starting Score: EQ 561, TU 567, EX 599* (12/30/11, EX lender pull 12/29/11)
Current Score: EQ 672, Wally TU 686, EX 702 (04/14)
Goal Score: 700 in all three (01/01/15)


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Established Member
LMBray09
Posts: 19
Registered: ‎02-02-2013

Re: New- Auto Loan and Debt

Will it affect my chances of getting my 30K auto loan if I still have a 13K auto loan out already? I can have my 1545 CC paid Monday and the 2780 CC paid down to 1000-1400 by mid feb. the 2780 CC has 14 months no interest left.

I just want what will help me get the 30K auto loan with good rates and my score to bump ASAP lol...am I dreaming?

I have a 4K down payment but was going to use that for tax and registration and towards my payments.
Starting Score: FICO EQ 663 (02/04/13)
Current Score: FICO EQ 687
Goal Score: FICO EQ 700 (March 2013)
Established Member
LMBray09
Posts: 19
Registered: ‎02-02-2013

Re: New- Auto Loan and Debt

Oh and if I needed to really bad, get the 2870 CC completely paid off by April 2013.
Starting Score: FICO EQ 663 (02/04/13)
Current Score: FICO EQ 687
Goal Score: FICO EQ 700 (March 2013)
Moderator
Revelate
Posts: 6,738
Registered: ‎12-30-2011

Re: New- Auto Loan and Debt

[ Edited ]

LMBray09 wrote:

 

Question is...I have 3 debts left. One is my husbands truck loan for $13K, CC for $2780 ($2800 limit) and CC for $1545 ($2000 limit). I have $15,845 to put towards all three. My USAA credit monitoring says my most negative is the credit to debt ratio, which is understandable. My EX is 673, EQ 621, TU 609 as of 1/9/13 (through USAA).

 


I think something got confused here :smileyhappy:

 

I thought you meant you had $15K+ in cash assets by your description, and in fact by saying you could pay off the current installment loan immediately.  That said, if you're looking for quick FICO score improvement, paying down your credit card debts is the way to do it as you're carrying a heavy utilization currently, and that's a pretty big penalty.  

 

Installment loan amounts have much, much smaller bearing on FICO scoring.  Where they do factor in is your montly payment will be factored into the DTI calculation the loan underwriting department will do.  Basically it's simply adding up your monthly debt obligations, and dividing by your monthly gross income.  Credit card payments do factor into this as well, but not nearly as much as rent/mortgage or other auto loan payments... usually because the minimum payment is much smaller than those.  Utilities / insurance, etc. are also included in the monthly calculation.

 

If I'm misreading your financial situation, then I profusely apologize.  It's worth doing the rough estimate on DTI yourself, but if you're able to pay off 4K in credit card debt in two months through earnings, I sort of doubt you have an issue on that front.  If the DTI does come up wonky (and I don't know what the ratios are for auto loan underwriting, probably can google that or someone will hopefully chime in here) then paying the current auto loan substantially down makes sense, but otherwise I'd still want to keep as much of your liquid and near liquid assets intact in your situation.  

 


Starting Score: EQ 561, TU 567, EX 599* (12/30/11, EX lender pull 12/29/11)
Current Score: EQ 672, Wally TU 686, EX 702 (04/14)
Goal Score: 700 in all three (01/01/15)


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Established Member
LMBray09
Posts: 19
Registered: ‎02-02-2013

Re: New- Auto Loan and Debt

Im sorry i just got all confused now too lol. I do have 15K+ in cash.

I guess my concern is seeing all my savings go lol. If I pay off the truck and both credit cards, I go from almost 21K+ in savings down to 5K+. Makes my heart break :smileyhappy: it's bitter sweet.

I also hate to see a 240 truck payment along with a 400-500 SUV payment.

I'm thinking I'm just going to go with your advice and pay off both credit cards immediately. Then when the time comes, see what I should do. Bite the bullet and just pay the truck loan if both payments are too much or just keep it and have both payments. Might even just half the truck price and any extra money coming in, have it go to the truck.

Thanks a lot!
Starting Score: FICO EQ 663 (02/04/13)
Current Score: FICO EQ 687
Goal Score: FICO EQ 700 (March 2013)
Valued Member
Jkusa
Posts: 38
Registered: ‎10-15-2012

Re: New- Auto Loan and Debt

I'm no guru but here's what I would do. Pay off the two CC's that leaves you 11520 from your 15k savings. Determine what 3 months total household expenses are and deduct that from the 11520 available. The difference it what I would consider in using as a downpayment for the new car. You dont have to use it all but that amount would be my ceiling.

src="http://ficoforums.myfico.com/fico/i/custom/FFC_Icon.gif">Starting Score: 652
Current Score: EQ 685 TU 683 EX 699 (their sites FAKO) all as of 03/02/13
Goal Score: 700


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Creditaddict
Posts: 16,863
Registered: ‎10-23-2007

Re: New- Auto Loan and Debt


LMBray09 wrote:

Hi, I'm new here and have been reading through the forums. Lots of helpful advice :smileyhappy:

 

I have a couple questions, mostly regarding a new auto loan, thats why I put my question here. I have USAA credit monitoring (which I just found out to be "FAKO's"..all new to me.) 

 

Question is...I have 3 debts left. One is my husbands truck loan for $13K, CC for $2780 ($2800 limit) and CC for $1545 ($2000 limit). I have $15,845 to put towards all three. My USAA credit monitoring says my most negative is the credit to debt ratio, which is understandable. My EX is 673, EQ 621, TU 609 as of 1/9/13 (through USAA).

 

I'm currently 17 weeks pregnant and already have a 20 mos daughter so I want to upgrade to an SUV (Ford Edge) anytime between now and May. 

 

I want to know what would be the best plan of action to get those debts down and up my score in time for me to apply for another auto loan. I'm pre-approved through USAA for 25K at 4.59% already but the car I want is $30k. I'm hoping I can up my score and try to get a $30k loan before baby comes. We can more than afford it but I think the problem was the debt ratio at the time. I applied beginning of January and at the time had 2 more credit cards ($250 and $225) but those have been paid off. 

 

Would paying off my husbands truck loan (4.79% at 72 months) early be best and then just use the rest towards the CC debt? We've only had his truck for almost a year (March 2013). I keep hearing about credit utilization and I'm just so lost. 

 

Sorry if this is confusing and in the wrong place. I just need advice on what to do.

 

Thanks!


Similar to what others have said I would do:

1. Pay both Credit Cards in full. (After thought... Are any of these credit cards with USAA? If not, you have 2 great loans through them, seems like you should look to them for a new credit card along side taking the loan they have offered you at $25k.

2. I would NOT touch that $13k loan with having the good finacncing on it like it is.  If you have been pre-approved for the $25k now and that is pretty much in line with best they can do I would head on down to the Dealership and let them run your credit and try to beat it!!! if they don't go with USAA, if they beat it by more than .50% or something, I would stick with USAA otherwise because of the relationship but I guess buying brand new ford might be good relationship too depending down road you want another ford... anyway!...

3. Either way, you have $25k loan and want $30k car, put the $7-9k down for the taxes and all that and off you go.

4. Sit on the rest of the cash you have for money towards 8 month emergency fund.

 

Congrats all around from there :smileyhappy:

 

Fico Scores: EQ 620, TU 675 & EX 703 (4-1-14)
Joint Cards: Navy NavCheck $15000, Discover iT $9000, Macy Amex $4000, Macy Store $3000, Macy Furniture $5800
AU: Virgin America $8500, CSP $27,000, Fidelity Amex $25,000, AA Biz $25,000, Barclay USAir Biz $6640
Mine: Navy NavCheck $3000, Kay Jewelry $2700, Pottery Barn $2800, FleetCard MC Biz $1800, HSN $1500, Vitacost MC $1500, Navy Cash $1500 and nRewards $1500, Bill Me Later $772, Cap1 Sony $750, Cap1 Spark $750, Best Buy MC $750, GE 76 Gas $650, Von Maur $600, Cap1 QuickSilver $500, Burbank CU $500, Kohls $300, Target1 $300, Target2 $300, Buckle $250, Express $250, Target3 $200
Established Member
LMBray09
Posts: 19
Registered: ‎02-02-2013

Re: New- Auto Loan and Debt

Thank you for your reply!

I went ahead and just paid both credit cards. Neither of them are through USAA though. So now I have zero credit debt and only have the truck loan.

I haven't decided if I'm going to pay the truck off yet but have decided I'm going to wait a bit. I guess I'm going to see how 2 car payments are before taking the plunge.

Thanks for all the advice!
Starting Score: FICO EQ 663 (02/04/13)
Current Score: FICO EQ 687
Goal Score: FICO EQ 700 (March 2013)
Community Leader
Valued Contributor
StartingOver10
Posts: 2,991
Registered: ‎03-06-2010

Re: New- Auto Loan and Debt

Yea! Wise decision. Now, before you go to purchase, wait until the payoff's not only post to your accounts but get reported to the CRA's. You should see a large increase in your scores. :smileyhappy:


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