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timotiger
Posts: 52
Registered: ‎09-20-2012
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Seeking advice on auto refi after BK

I recently had a Chapter 13 BK dismissed, not discharged, in May 2011 (16 months  ago.) I've cleaned up all collection issues and have applied for and received two unsecured credit cards. I have an auto loan that is reporting derogatory as a result of not making payments during the bankruptcy. The trustee wasn't making payments because all of the money was going towards my mortgage loan. I caught up and am currently 6 payments ahead of the original schedule and have less than a 50% loan to value. I owe $6300 and have 20 payments to go. My auto loan is with Capital One Auto and I have 64000 miles on my car.  Here's my question. Does it make sense to refinance my auto loan in order to get an installment account showing open and in good standing? The reason I ask is that I've run the simulators on Trans Union and Experian and it shows that it would drive my scores down. I've asked Capital One for a goodwill adjustment but they declined. I've been turned down by my credit union, Capital One Auto (they don't refi their own loans, and Lending Tree. I don't care about the rate as much as having a new installment in good standing. Any thoughts? Thanks for reading!

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llecs
Posts: 32,880
Registered: ‎08-04-2007
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Re: Seeking advice on auto refi after BK


timotiger wrote:

I recently had a Chapter 13 BK dismissed, not discharged, in May 2011 (16 months  ago.) I've cleaned up all collection issues and have applied for and received two unsecured credit cards. I have an auto loan that is reporting derogatory as a result of not making payments during the bankruptcy. The trustee wasn't making payments because all of the money was going towards my mortgage loan. I caught up and am currently 6 payments ahead of the original schedule and have less than a 50% loan to value. I owe $6300 and have 20 payments to go. My auto loan is with Capital One Auto and I have 64000 miles on my car.  Here's my question. Does it make sense to refinance my auto loan in order to get an installment account showing open and in good standing? The reason I ask is that I've run the simulators on Trans Union and Experian and it shows that it would drive my scores down. I've asked Capital One for a goodwill adjustment but they declined. I've been turned down by my credit union, Capital One Auto (they don't refi their own loans, and Lending Tree. I don't care about the rate as much as having a new installment in good standing. Any thoughts? Thanks for reading!


 

Welcome!

 

No!!! Scoring aside for a second, even if you got refinanced and got a new rate, your rate would be astronomically high. Likely even higher than what you are paying now. Even if it did help your score, let's say 50 points, it certainly isn't worth spending an extra $1k+ in interest and refi fees to raise your score (IMO anyway).

 

Per your score, know that the scores and simulators from TransUnion and Experian aren't FICO-related. In fact, lenders don't even use those scores. And the scores lenders typically use are auto-enhanced FICO scores and those can't be purchased anywhere. Per FICO scoring, refinancing an auto would drop your scores a little bit (est. under 20 pts), with most of the points returning inside 6-12 months as the account ages. You wouldn't see a net gain when the dust settles.

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timotiger
Posts: 52
Registered: ‎09-20-2012
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Re: Seeking advice on auto refi after BK

llecs, thank you. I was trying to apply using Ally Bank and I kept running into problems trying to initiate a refi. I figured it was a sign and threw in the towel. Can I ask a follow up question? I have the ability to pay the final $6300 off quickly. Does it make sense to zero out the account that is reporting derogatorily, or to keep the installment account open and continue to make the monthly payment to let the credit season?  Thanks again for your answer.

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llecs
Posts: 32,880
Registered: ‎08-04-2007
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Re: Seeking advice on auto refi after BK

If I had that, and if I had the means to PIF, then I'd pay it off. I'd pay it off to save on the interest. On a FICO scoring standpoint, it doesn't matter when you pay it off, the baddie aspect of the TL (the lates) would still be there and still age at the same pace. FICO (and lenders) really don't care if you pay on time; they care if you don't pay on time. It primarily scores off the worst past deliquency and the time between that deliquency and now.

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timotiger
Posts: 52
Registered: ‎09-20-2012
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Re: Seeking advice on auto refi after BK

Just sharing information for whomever it may help. I recently refi'd my car and was able to lower my rate from 8.15% to 5.25% with American Eagle. This CU only pulls Experian which was my best score.  My loan to value on the car was about 30-40% which really helped. I didn't really care about the rate as much as having an installment account in good standing and closing the negative acccount. I took a 24 month term because there is so much emphasis on your last 24 months on scoring. I got my first credit alert since the change and my Equifax FICO on this site jumped from 608 to 642 based on the refi. I'm pretty happy because that is my midscore and I'm now eligible to apply for a home loan.


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