Strategy for Refinancing loan

[Anonymous]

I am in the process of rebuilding my credit and due to an unexpected car accident had to take out a joint car loan with less than optimal credit. Right now I have a 16,800 loan at 9% with a 72 month term that I've paid since January. 

At the time I took out my loan, I was still in the process of repairing my credit, had a dozen collections accounts and a single open tradeline from my girlfriend (now wife's) Capital One card. My FAKO score was hovering in the high 500's low 600's and her's was mid 600's. Since then I have opened up my own Capital one card and have been establishing a history with them and got an installment loan from lendup (somewhat unwise..AAoA dropped). Between collectionshield360 and some phone calls asking for EE's I can now proudly say I have zero collection accounts or derogatory marks on my history as of now. 

I pulled my FICO 8 scores today EQ 644 TU 660 EX 651   Auto 8 EQ 611 TU 638 EX 609. I still had one collection account on TU and EX (called and got EE for both today) at the time of this pull. 

Currently what seems to be holding back my score the most is the high utilization on my one card 101% (300 limit). I pay it off every month, and actually paid it off early today after seeing how much of an influence it had with the score simulator. My wife's card that we have been sharing also has a somewhat high utilization, but doesn't seem to affect my score quite as much as my personal card. Just paying it off my card showed my FICO 8 jumping to the mid 700's. 

Under the reasons my Auto scores are low it lists:

• You've made heavy use of your available revolving credit.
• The remaining balance on your mortgage or non-mortgage installment loans is too high.
• You have few accounts that are in good standing.
• You have a consumer finance account on your credit report.

The first one I am assuming is just my CAP1 tradeline? or does it include the CAP1 account I am also authorized on?

My main problem is the timing of my pay and the credit payment dates. Essentially I have fallen a month behind and pay off most if not all of our 2,550 limit shared card when I get paid once a month, so It always shows a high utilization 60-80%. 

The second one is fairly straight forward - I just took out the car loan in December. 

The third one -- I am not sure how to approach this. I am assuming that the number of accounts I have is a factor, all the ones I have are in perfect standing. 

The fourth one -- I am assuming this is from the lendup installment loan, will this go away when I pay it off, or should I try to get the tradeline removed since I opted in to credit reporting with them?

So my general question is, what should my strategy be before I apply to refinance through my CU? It is a hard pull on Experian for me to do it, so I want to time it right and make sure I get the best rate when I pull the trigger. 

[Anonymous]

It appears you are hurting yourself by using these credit cards thinking they will build your credit but that 101% credit utilization has the same effect as a collection account, my wife accidently did that last summer and it cost her 60 points.  I realize you are saying the timing of your pay checks and credit card reporting are not in sync. My solution would be to not be so reliant on those cards.  If you simply used them until they reached their 20-30% level and paid them down you would be fine, use cash for the rest and never let any card get anywhere near the limit. Refinancing through credit unions is pretty much always preffered. Once you get your utilizations down accross the board and ensure that all of your negatives are resolved.  You will need to know the loan to value ratio, this is what hurts most folks because they end up taking a large depreciation hit driving off the lot and fail to put money down so they have too much negative equity to qualify so regardless of how much their scores have improved they are limited in their options to refiancnce.  

[Anonymous]

I know that my loan to value ratio has me underwater right now. 15,800 vs 13,500. Should I also focus on paying down the loan more quickly to fix this ratio before I try and refinance?

[Anonymous]

---

@Anonymous wrote:

I know that my loan to value ratio has me underwater right now. 15,800 vs 13,500. Should I also focus on paying down the loan more quickly to fix this ratio before I try and refinance?

---

Yes, some lenders will work with a little bit of negative equity on a refinance but your best to have no negative equity to get a good approval.

[dabrian]

Pay off the cards and put them in a sock drawer at least until the next statement cuts. You should see a nice increase in your scores once the zero balances are reported.

[Anonymous]

Did that yesterday and opened a new CC with my credit union with a 10k limit. I did this to increase my total credit so I don't run into the issue of hitting my CL before I PIF each month and increase the number of accounts on my report which was sitting at 2. I am not sure what the magic number is here, but it says 2 is too low. 

Spoke with the lending department at my credit union which told me 730 is the cut off point for getting the best rates (2.69% vs 9%) and advised me to keep my personal util low and wait 6 months for my auto loan tradeline to have more history before attempting to refinance. He said the account I am an AU on has little to no effect on my Auto score, so its not a priority to have it show a 0 or < 9% balance.