Purchased my first car, now I want to trade it in 3 months can I?

[KenG1]

Good morning,

I'm 24 years old, make 70K a year, and my score is a 644. I purchased a car two weeks ago, and it hasn't hit my credit yet. I'm expecting my score to go up significantly within the next 4 months due to ontime payments. I purchased a used Lexus for 21K, and my goal is to be able to trade in the car for a 2014 Lexus IS-350 or an BMW 435 by september. I know there wil be negative equaity but I know a good way to asorb the negative equity is to lease a vehicle. How long do I have to wait until my score is effected positvely to the point where i'm able to trade my vehicle in with no problems? I'm looking for the shortest time possible. 

Thank you,

[Remember0]

I mean you'd probably get approved now, but generally for top tier rates your FICO has be 650+, 680+, or 720+ depending on the exact finance company. A previous poster reported that Toyota Financial Services top tier was 650+, but not sure if that carries over for Lexus or if leasing has the same tiers. BMW and TFS tend to be pretty lenient with approval though.

I'm not sure why you think your score would jump in 6 months. Your auto enhanced might if you had no auto / installment history previously, but your regular FICO probably won't jump all that much. What baddies do you have now? I think you'd need to start taking care of the baddies to really see a jump in credit score.

[KenG1]

@remember0 thank you for the response. I don't have anything on my credit but two student loans that are in deferment. So this is my first auto loan that is on my report. I needed a strong tradeline on my account. Hence why I purchased the used car but really want a 2015 lease. So my question was how long do I have to wait until my score is postiviely impacted to where a credtior will assume I'm responsible to make the payments back?

[StartingOver10]

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@KenG1 wrote:

@Remember0 thank you for the response. I don't have anything on my credit but two student loans that are in deferment. So this is my first auto loan that is on my report. I needed a strong tradeline on my account. Hence why I purchased the used car but really want a 2015 lease. So my question was how long do I have to wait until my score is postiviely impacted to where a credtior will assume I'm responsible to make the payments back?

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Look at it from the lenders' point of view for a moment. You have no revolving credit and you have a short history in which 2 out of three accounts you don't make monthly payments.

The lender will want to see more than 3 months of payments. Having a larger tradeline (the auto loan) doesn't make it a strong tradeline. You will need to make a min of 6 months worth of payments to see any impact and probably closer to a year.

Installment loans don't impact your FICO score nearly as much as revolvers (cc's) do. They are only a small part of the scoring formula. Right now all you have are installment loans.

You would be better off to get a credit card or two and keep the utilization at zero for one card and less than 9% of the credit line for the other to see actual positive increases in your FICO score.

[Remember0]

Agreed with StartingOver. I'd get 2 credit cards (even if they have to be secured cards)...that should help boost your score if you have no revolving history.

[KenG1]

Thank you - Does the credit limit of the secured card matter? Could I for example get one secured card for 1000 and another for 500, and just use only about 5%?

[Remember0]

Nope, doesn't matter. Your plan is fine.

To optimize FICO though keep one of the cards at 0 balance. Note that this doesn't mean you shouldn't use both cards; rather you need to use both cards. But just pay one card off in full before it's statement cuts every month so that the statement shows a 0 balance. The other card can report a statement balance of less than 10% of it's credit limit for optimal FICO.