06-10-2010 12:28 AM
I applied with another credit union near where I live, but the application was rejected again. They were pretty forthcoming though, as they explained that they generally do not finance anyone below 640 credit score, co-signer or not. I need to try with the other credit union again, since they initially couldn't verify my employment.
I also found out that I cannot be financed by Bank of America because I'm not a permanent resident. (I know that I should probably avoid banks, but I've been a customer with them for close to 10 years so I figured that it'd help.) This came of as a surprise, both for myself and for the nice employee who was trying to help me. It's rather silly considering that their online application offers three options (citizen, permanent resident and lawful resident) and doesn't prevent you from submitting if you check the third option.
I have another question. What about car dealers? I realize that it's better to have financing sorted out prior to visiting the dealer, as they make a profit out of financing by increasing the loan rate. However, I also hear that dealers can often obtain an approval in situations (like mine) where an individual is having difficulties securing a loan. Is that true? Of course I wouldn't accept an insane rate, but if I can get financed in the low double digits, it wouldn't be so bad. Plus I could refinance later.
I'm running out of options. I'm getting very antsy because I started looking for a loan a week and a half ago, so the 14 days period during which inquiries are lumped together is expiring soon. If I cannot get a loan now, when would it be reasonable to try again? Couple months? As soon as I have better credit? Will those inquiries have a very negative effect if I decide to apply again later?
This is so frustrating. I'd never have thought that it would be so difficult to get financed when you have pretty high income. I really dislike this credit system.
Thanks again for the help everyone.
06-10-2010 12:58 PM - edited 06-10-2010 01:09 PM
Guess what, I have another question.
I contacted the first credit union, and they confirmed that my credit history is really too thin -- especially with the unpaid collection tainting it. As a side note, the loan officer was extremely nice and helpful, which certainly made me want to join a credit union instead of dealing with a large impersonal bank.
Anyway, among other useful bits, she explained that I could use a secured auto loan instead i.e. open a savings account and deposit an amount corresponding to what I need to borrow. She said that it's not very popular since most people do not have enough savings, but that isn't a problem for me as I have plenty enough sitting in my bank's savings account. I had never heard about this kind of loan before, and it sounds perfect in my situation. Rate should be very low, and I'm not concerned about needing my savings soon; besides, I could refinance later as she confirmed that there's no penalty for paying early.
What is the catch? Is it simply the fact, again, that people generally do not have $20k sitting around -- and when they do, they'd rather purchase the car right away? On the other hand, what is the benefit? I cannot see any asides from the situation where someone is trying to build their credit history. Do you guys think that it would be a good idea? Also, in terms of credit history, does it help as much as regular loan or is it handled differently?
Thanks for any replies!
06-10-2010 03:34 PM
I did this once, long ago. It was very beneficial.
Like you said, you put the money in a shared account and they fund a loan based on the deposit amount. It reports as a regular unsecured loan usually, but you will want to make sure with the CU. This really helps to establish yourself with the CU and also helps your credit history.
In my situation, after 6 months I asked the CU for a credit card and was approved on the spot. No questions asked. I then later asked for a personal unsecured loan, and once again was approved on the spot.
06-10-2010 03:36 PM
Forgot to mention, usually people dont have 20k laying around and that is the reason why this is not hugely popular.
Also, dont forget that even though the loan is secured with that deposit, they expect you to make payments on it. At least, in my case they did.
06-10-2010 05:49 PM
Thanks for the reply, ngerasimatos.
I went to the credit union's local branch and they were very helpful once again. In fact I decided to open an account, and I will most likely migrate my BofA accounts as I'm not exactly happy with them. (Of course I'll have to keep using the credit card since it's my oldest account.) I'm starting to understand why people around here are praising credit unions.
I haven't applied for a shared secured loan yet as I'm still evaluating some options, but I'm getting convinced that it's the best solution in my case. It's not like savings are returning much in this economy anyway (I miss the 5% interest on my ING account...) so I don't mind locking 20k for a while. And hopefully my credit will be sufficient to refinance within 12-18 months, especially if I manage to take care of the collection. I think I'll visit car dealers this week-end, and if they cannot finance me with a good rate (which they probably won't), I'll come back with the shared secured loan.
What did you mean exactly when you said that it was very beneficial? Are you refering to the fact that you were able to obtain an unsecured loan later on? Did you notice a significant impact on your credit scores as well? It's my understanding that installment loans don't help much with credit scores, but of course they're looked at very favorably by lenders. Any other benefits?
06-11-2010 10:04 AM - edited 06-11-2010 10:06 AM
Don't make the mistake of letting a dealership pull your credit or purchasing over the weekend! Your financing options are limited as most banks/loan departments are closed on the weekends.
Have you tried a POF for the small collection on your history?
06-11-2010 12:05 PM
Right, now I remember about the week-end issue so I won't look for financing on Saturday/Sunday. Thanks for reminding me. I might ask today though, as I'm heading to a dealership this afternoon. If they cannot do anything for me, then I will resort to the shared secured loan since I don't want anymore inquiries starting Monday. (That's when my 14 days period is over.) I probably won't buy this week-end anyway because the car I'm looking at (2011 Hyundai Sonata) is difficult to find in specific trims/colors.
As for the collection, I haven't sent any formal PFD (I assume that's what you meant?) letter yet. Unfortunately the debt is assigned to an infamous collection agency called CMI which is notoriously very difficult to work with. I have sent polite emails to test the waters, then I will send DVs and follow-up with PFDs. This debt is past its SOL which might help, but I'm not exactly optimistic considering their reputation. I don't even agree with the debt, by the way, which makes it even more difficult to swallow...
Either way, most lenders have explained that my credit history is too thin, so I don't want to delay the purchase much further. In my mind, the key point is that I can always refinance later if my credit somehow becomes much better -- whether by removing negative items or otherwise. There's no question that I can afford the car, so I'm flexible about the purchasing process as long as there's a positive effect on my credit in the long term (and the sooner the better).
06-11-2010 12:06 PM
Now I'm wondering about shared secured loans... Why shouldn't someone use those for any purchase? Say I need a television, what prevents me from getting a personal loan instead of paying cash as usual? Is there such a thing as having too many *paid* loans? Of course I understand that *opened* loans increase my debt which isn't good in the short term, but once the loans are paid, doesn't it always have a positive outcome? Perhaps I should ask this question in the general forums though.
06-11-2010 12:08 PM
Usually there is a min loan amount.
As for why it was beneficial in my situation, it helped me build rapport with the CU. Like I said, in a very small amount of time they were giving me loans and credit cards without any issues.
06-11-2010 12:48 PM
Yes I meant PFD, my bad. Your score isn't that bad and as for the thin file a lot of lenders including credit unions will overlook if there's no negative marks on your file. For example a friend of mines daughter just turned 18 and graduated high school last week and just started a new job a few weeks ago. The used/pre owned dealership she went to got her approved at my credit union without a co-signer and her not being a member. I was very surprised because that's not the normal practice at my local credit union that I've been doing business with for 10+ years. The area you live in may also have a lot to do with your situation. If I were you I would submit the DV and make sure it's your debt then request a PFD if the debt is yours and I would proceed with becoming a member at your local credit union. Like another poster said, within no time of becoming a member they were issued a CC and a personal loan no questions asked. If you aren't in a hurry to purchase then take the time to build a relationship with the CU & clear the only mark on your credit history but keep in mind you're also going take a hit with the inquiries ( 14 day ) pulls. Good Luck, I hope you find a solution and get what you want.
IMPORTANT INFORMATION: All FICO® Score products made available on myFICO.com include a FICO® Score 8, along with additional FICO® Score versions based on Experian or Equifax data (additional FICO® Score versions based on TransUnion data are not currently available on myFICO.com). Your lender or insurer may use a different FICO® Score than the versions you receive from myFICO, or another type of credit score altogether. Learn more
FICO, myFICO, Score Watch, The score lenders use, and The Score That Matters are trademarks or registered trademarks of Fair Isaac Corporation. Equifax Credit Report is a trademark of Equifax, Inc. and its affiliated companies. Many factors affect your FICO Score and the interest rates you may receive. Fair Isaac is not a credit repair organization as defined under federal or state law, including the Credit Repair Organizations Act. Fair Isaac does not provide "credit repair" services or advice or assistance regarding "rebuilding" or "improving" your credit record, credit history or credit rating. FTC's website on credit.