Quick Help! Denied Car Loan/ Credit Score716,due2high rev. credit risk, I want to make sure I fix

[Anonymous]

I was denied  for a car loan (roughly 16000, going to put 5000 down so essentially $11000-12000 loan). credit score is 716 according to my bank-M and T

I just want to fix the credit issue, but don't want to make things worse in the process. I do have some outstanding debt, but the loan officer said ultimately that wasn't why. They said I had too much "potential debt" compared to my income. I am prepared to close out some cards that I don't use, but not sure if I am going about it the right way...And I can't find answers through on-line search. I checked out the debt utilization ratio, it's at 60% right now and if I close out cards it will be at 75%, everything says that I should have it under 30% but again, wasn't the issue right now. (but don't want to make it worse)

I also read that I should keep any cards that show my long standing history. I have had one late payment on one card from like 10 years ago, and have had to go through a loan modification on my mortgage about a year and a half ago that they force you to have late payments, but that is clear on the report and again, wasn't a reason given for the denial.

So over 18 years of credit, all my closed cards and current say I am in good standing. Also I don't have any maxed out credit, never had a collection against me... The 2 largish loans used to have a really high credit limit, but those have been reduced as I have been paying...

I also haven't been going crazy with any purchasing. The 2 high debt cards are when I was struggling with the mortgage, and has since been rectified.

I don't know if that's enough info, but looking to buy a car this week and need to resolve as soon as possible. I just can't find  rules of thumb on the whole revolving credit with potential debt. So how many cards should I have open, how much revolving credit? etc. Should I close the cards that have the high debt? (I plan on negotiating those and then closing which will effect my score, but wanted to wait until after the auto loan, now I don't know)

Hopefully someone out there will have some quick answers...soon. I appreciate any knowledge, even if it's a referral.

[jrands]

---

@Anonymous wrote:

I was denied  for a car loan (roughly 16000, going to put 5000 down so essentially $11000-12000 loan). credit score is 716 according to my bank-M and T

I just want to fix the credit issue, but don't want to make things worse in the process. I do have some outstanding debt, but the loan officer said ultimately that wasn't why. They said I had too much "potential debt" compared to my income. I am prepared to close out some cards that I don't use, but not sure if I am going about it the right way...And I can't find answers through on-line search. I checked out the debt utilization ratio, it's at 60% right now and if I close out cards it will be at 75%, everything says that I should have it under 30% but again, wasn't the issue right now. (but don't want to make it worse)

I also read that I should keep any cards that show my long standing history. I have had one late payment on one card from like 10 years ago, and have had to go through a loan modification on my mortgage about a year and a half ago that they force you to have late payments, but that is clear on the report and again, wasn't a reason given for the denial.

So over 18 years of credit, all my closed cards and current say I am in good standing. Also I don't have any maxed out credit, never had a collection against me... The 2 largish loans used to have a really high credit limit, but those have been reduced as I have been paying...

I also haven't been going crazy with any purchasing. The 2 high debt cards are when I was struggling with the mortgage, and has since been rectified.

I don't know if that's enough info, but looking to buy a car this week and need to resolve as soon as possible. I just can't find  rules of thumb on the whole revolving credit with potential debt. So how many cards should I have open, how much revolving credit? etc. Should I close the cards that have the high debt? (I plan on negotiating those and then closing which will effect my score, but wanted to wait until after the auto loan, now I don't know)

Hopefully someone out there will have some quick answers...soon. I appreciate any knowledge, even if it's a referral.

---

Unfortunately I don't have the answers you seek, but I can describe my situation that may provide some direction for you. My TU Fico is about 686. It was in the 730's not too long ago, but some inquiries and credit utilzation I believe are the main culprits in the lowering of my score. My credit utilization is at 90% for a $25,000 credit limit so yeah, not so good for me. Also my debt to income ratio is over 1 (a lot of school debt!), also not very good.

I have been thinking about getting a new car with a lower monthly payment than my current car in order to use the savings to pay down my revolving debt. However, with my situation, it didn't appear likely that I would get anything approved, or if I did, it would be in the teens or 20's. But, just last week, I joined Baxter Credit Union and was pre-approved for up to $25,000 with the terms being 4.75% for a 49-72 month term and 4.25% for a term <48 months. The APR will change a little based on the ultimate LTV (loan-to-value) ratio (havent' decided on car), but it was a relief to get the pre-approval. I haven't yet applied for a loan yet with any other lenders such as Cap One.

I have had my current car for about two years now. My prior car was a 24-month lease. My car before that was a hand me down that I drove for a good 13 years. For my lease, I was approved for the special lease rate. At the time when I was looking for my current car as my leased car was coming to the end of it's term, I applied for a car loan through Cap One, Chase, and BofA and was denied by all. I never had a late payment on my lease nor did I have any 30+ late payments on my CC. However, i was able to get financing through VW (VCI) under their Tier B rate. At that time, they had a 1.9% financing special and I ended up getting 3.65%.

I suppose my point is that although one avenue may not work for you, that you should go ahead and try a different avenue if you're able. Remember, generally if you have your auto-loan inquiries within a 30-day period, it'll only show up as one inquiry on your credit report.

[marty56]

Do not close  CCs.  That will hurt your FICO score.   The best way to improve your FICO score with high CC debt is to pay down the balances.  That will also lower your DTI, while not a factor in FICO scoring, is a factor when trying for a autoloan.   Also do not try to settle your CCs for less than is owed.  That will certainly lower your FICO score.

[Anonymous]

Thank you jrands! for your quick response. I was combing web sites and there just weren't any clear answers. Fortunately, I have many wonderful friends in my life, 99% of them Not bank people...lol. I even have a friend who is financial advisor, that I've known my whole life. But you really need someone that knows the banking/loan industry for these questions, not necessarily finances...

So racking my brain, I was able to think of and talk to a friend (it so rare to get a hold of people too on a nice sat eve...so he's awesome) that has worked for M and T, Citibank, HSBC in the loan department, that was able to give me some advice....which pretty much was yours for now.

Essentially he explained how they were looking at my income to debt ratio, the revolving credit issue, and the credit utilization, along with thegood credit history.  He was definitely not able to provide a quick and easy answer. Essentially he said there was a damned if you-do damned if you don't. So his suggestion was to go to a local Credit  union walk in and tell them my story. Also to ask what would help, closing out credit cards, paying the ones with a balance off, partially or wholley, then closing or not (which I am able to do...) because those options could  have negative and positive affects depending on what the institution looks at...along with my credit history.

I also haven't pursued the co-sign option, which I've never had, unless you include sharing loans with my exspouse..so anyway...

That's my plan monday morning; to go into a couple credit unions....maybe back to my bank to ask what would it take, which cards, but the loan officer underimpressed me with how much she was working for me to get the loan. Last option for loans would be to go through the dealership.

You super helped me with reassurance, the 30 day thing and how it will effect my credit rating..

I do have a sense of urgency as there is a  rebate option that expires at the end of the month.

There are other reasons...but I am minimizing that so I can get a good deal on a car and not be rushed. I am frustrated because I was reassured that I would have no problem getting a loan based on my credit rating...so mental note, always get the preapproval before you go to buy a car...so you can work out the kinks...

Thanks again, and if anyone has any insight...I'm still open. i'll keep people posted.

[Anonymous]

Marty56...Well that's helpful...but what about the part with being too much of a risk and declined for having high potential debt?

I am also going to ask the loan people in person what I can do to have them loan me money...I just was hoping (and thought I was golden) for the lowest interest rate and am still grieving that loss of possibility...

[Booner72]

+11111 on not closing your cards!  You were probably denied because you are carrying 60% utilization, and the salesperson probably doesn't understand the difference.  NEVER close a credit card unless it is costing you money every month or year in fees you don't want to pay, or if you can't stop yourself from using them.  I'd use the down payment money to pay down those balances and then try again.  You have a good score and there is no reason you should be denied if you have the income to cover the payment, and your other payments, and the job history.

ETA:  That late payment from "like 10 years ago" should not be reporting.  The credit reporting time period for negative items is seven years.  It is up to the Credit Reporting Agency to be on top of those things, so call them up on Monday and have them get that late payment off your report(s).

[Anonymous]

Thanks Booner72! Because the open revolving credit was what was said as to why I was denied and the suggestion to close the unused accounts was made,  I was feeling like I needed to do something! I am so appreciative of the responses to not close out cards were made. 

I am leaning towards throwing money into the debt, I have money set aside to do do so...and soon paying them off all together.I also am on a revolving account (Home Equity loan) with an ex(husband) that he we have an agreement where he pays that, and I pay the mortgage, so I know that is counting against me. So I have requested a notarized letter from him stating he has taken sole responsibility for the payments.

But immediate plan is  I am going to make sure I know what the bank/credit unions need me to do to loan the money.-tomorrow morning first thing

I am worried now that someone will say.."close out this account, this account etc and we'll approve you" I'll be  back on here if that happens...and then my credit score is crap, even if i get the loan. But now I know to pursue other options and not do that. I am trusting what I am reading as responses here...

I am putting some back up plans in place. I keep having a questioning thought too as to why my bank didn't say, "do you have someone to co-sign" (Not that I want to do that...I am not sure if I even would ever do that.) I have had 3 car loans with them, all paid off and none ever late you think that would be good history too and mean something.

Also with the negative reporting, I will check into the one card and how long ago, it may have been under 7 yrs..but it was a while ago...but maybe not as long as I originally said, but very good to know for future...because I didn't know how long they kept a record like that.

Again, thank you..thank you.

[boomhower]

FInd a different lender.  There are to many out there that could care less how much credit you have available to close out cards for this lender.  The 60% utilization is what's hurting you. 

[Anonymous]

TY boomhower, you give me hope!  My sign in changes everytime, as I can't resign in after I have rebooted my comp. I haven't formally signed up with myfico..I have made sure my pw/user id is right...but when I do the "forgot my pw " thing it asks for my SS# which I didn't use it to register...so not sure what is up with myfico...but I will try to respond to people when I have the update, so it may help someone else. So appreciative!

[Chris123nTx]

Like everyone else has said, do not close the credit cards that are in good standing unless and until you pay off the rest of them first. younwill hurt yourself regardless of what they told you. I would pay the cards down as soon as you can though, if for no other reason than to stop paying the interest on them. Then you can decide what credit cards make sense for you to keep or to close, you also said you dont want to go through the deaker, but they may have programs, lenders with great rates that you will not know about. Get to a credit union first, go armed with all of your information and see what they can do. There is no way that score alone will keep you from a loan. More of an income vs. Debt thing and then you need to be honest with yourself about how much you can comfortably handle. Way back in the day, i used to laugh at banks that told me i could "afford" a 350k house. Maybe by some of thier calculators, but not in my real.world. good luck with it.