Too many revolving accounts for an auto loan?

[Anonymous]

First off, thanks for all the help, guys. This forum has been a huge assistance in getting my credit on track as I try to get a new car in the coming months.

I printed my credit report pulled last week and it took it to the local credit union. One of the loan professionals said if I can get my credit score up 10 points, I'll be approved for a new auto loan with 3.49 percent interest. That's not going to be a problem since my credit utilization is at 87 percent right now and I plan on having it down to between 30-40 percent by the time I apply in October. So this was amazing news.

But when I inquired about a possible amount for the loan, they told me two things -- it'd probably only be about double the total amount of my current car loan, so about $16-20,000 total. Even though I took that one out four years ago and am still paying 24 percent interest. My credit scores were in the low 500s at that point and my income was half of what it is today.

The other thing was that I have way too many revolving accounts. She said the loan officer would see this as a negative when determining how much money the credit union would loan me. I have nine credit and store cards currently. I had already planned on cancelling two -- about $1,100 total between a clothing store card and Care Credit. I opened both within the last six months and haven't used either since the initial purchases. So cancelling them isn't going to harm my FICO at the moment. But she told me I should have no more than four or five, at the most.

So do I need to cancel a few more cards, which would then raise my credit utilization? Or was she giving me the wrong advice? My current DtI is only 14 percent right now, so I'm handling everything and I'll have them all paid down relatively well by October. Seemed like a weird demand.

[Creditaddict]

Credit Unions can  be a little more sensitive about the "ability" to max out credit vs. how you are actually handling your credit.

I have a local credit union that is like pulling teeth for credit because of how much credit I have but Cars are usually considered differently since it's secured.

I would not start closing ANY credit cards especially while you have balances on other cards... That's what lowers your credit score because your reducing available credit to dilute overall utilization.

[trant3]

Revolving accounts should not play a major role when extending an auto loan to you, primary they are looking at score, prior auto loans, and payment history. Closing cards will lower your score for sure.

[MarineVietVet]

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@trant3 wrote:

Revolving accounts should not play a major role when extending an auto loan to you, primary they are looking at score, prior auto loans, and payment history. Closing cards will lower your score for sure.

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Not in every case.

Here is an excellent thread about Closing Credit Cards.

[toi34]

Go someplace else! 

There are plenty of people that have more than 4-5 cards and get auto financing...

[Anonymous]

Robbing Peter to pay Paul is not a proper way to pay off anything, but, if your auto loan is sky high, a higher type interest peronal loan that is under your auto loan would pay off your existing loan, and if you get a little more, could be a 1-2 punch to a few of your interest credit cards. Also, your car would be paid off so you could raise up your deductible or not even carry collision for a bit and save some money. I did this to pay off my kawasaki bike (2800 left) that was 12.99 percent, took out a loan that ended up being the same interest rate, but got enough to pay off a 3500 CC balance that was hitting me with interest. Credit score jumped 40 points because the CC balance showed zero immediately, and the personal installment loan didnt report 2 months. when it did, my score didnt drop more than 10. You gotta be robot diligent and pay pay pay, i know how life gets in the way, but it works on paper...