Just got approved for car loan - want to rebuild credit and refinance

[jg1983]

Here is my situation. I have had no credit score for a few years. About a few weeks ago I found a 2009 car that I liked that only had 30k miles on it and it was selling right at bluebook value (and about $4k below NADA value). I had been denied for a few loans before that so I thought I had little chance of being approved but I applied through the dealership and they got me a loan for the car. The only problem is it has a 16% interest rate. I accepted and bought the car because the price before interest was good and I really needed a new car (with AWD for the winter). Today (about 3 weeks after I accepted the loan for the car) I checked my credit score and it has changed from no credit score to a score of 540. I know that is horrible but it is better than no score right? My goal is to hopefully build my credit score and refinance my car loan in 6 months to a year.

I have a few negative things on my credit but nothing too major. I have a few collection agencies reporting debts that total around $500. I also have a judgement from a credit card almost 7 years ago for a $300 credit card. It is my understanding that after 7 years the judgement should disappear from my credit correct?

Here is my thoughts on how to make my credit better. Feel free to add things or correct things. First I will start by opening an account at a credit union that refinances cars. I will then attempt to settle what I owe with the collection agencies and get that removed from my credit report. I was also thinking about getting a credit card with a low limit and using it to pay for gas or something and pay it off on time to hopefully help my credit. (suggestions would be appreciated). I noticed that just being approved for a car loan and (possibly) the down payment I made took me from having no credit score to having a credit score. My first car payment isn't even due yet and it seems like my credit is improving already. Hopefully making all my car payments on time for 6 months to a year will help me improve my credit and be able to refinance for a better interest rate. I was also thiking about saving up a few thousand dollars and offering to pay that right away when I refinance to see if that might help. I do want to pay the loan off ahead of time no matter if I refinance or not but I want to do it in a way that will help my credit. I hope to get a house loan eventually down the road here too. Any advice anyone could offer me would be greatly appreciated.

[crrredit]

Congrats on getting things started with your car loan. Establishing a relationship with a credit union is a great idea. Getting a credit card is also a good idea. In fact, getting three cards will help you optimize your score and increase your chances of getting better terms on a loan refi. Paying off your collection accounts is also good. Try to see if you can get them to agree to a pay for delete deal. While a paid account is better than an unpaid account, old collections can be difficult to get off your reports after they are paid. Just make sure if you offer to pay for deletion, you can make that payment. Also be aware of the accounts' SOL. That's the amount of time an creditor has to take you to court over your debt. Each state's laws are different in terms of length of time and also what can restart the clock. 

For your judgement, if it's not paid the creditor can usually renew the judgement, so the 7 years isn't quite so certain. You'll have to do some research about this topic. These boards are a great place to start. You can learn about all these things that pertain to your situation and a whole lot more. I was in your shoes this time last year. In fact, you're about 50 points ahead of where I was. Not just reading these boards but studying them helped me get a 0.9% new car loan, an apartment, 0% credit card deals that helped me get furniture, plus a greatly improved credit score. 

Welcome to the boards. You've come to the right place!

[bsal]

I would like to add that it wouldn't hurt to dispute that judgment. I had to judments on my reports showing on all 3 and I was thinking to myself no way in hell they are going to delete this, but it wasn't even a month and I got a letter in the mail from equifax saying it was deleted and the other two companies followed weeks later

[Anonymous]

Having credit cards is gonna help your score more than the autoloan will most likely. You'll probably need to get secured cards at this point. Check out capital one.

[jg1983]

So given my credit situation what is a reasonable amount of time to wait to attempt to refinance my car loan and where should my credit score be before I attempt to refinance? What can I do besides the things I listed to improve my credit score? My car payment is higher than I would like it to be and the sooner I can reduce it through refinancing the better. Does 6 months to a year sound like a reasonable time frame or is that too optimistic?

[Anonymous]

i did mine with a CU. my CU has a different stand. In 6 months they re evaluated me. My score went up. They didn't refinance my loan but dropped the intrest rate on the loan and my CC with them. And it was about the 6 month mark.
But I listened to these guys n gals here on my myfico. I got 3 revolvers, my truck loan was my installment loan that I needed. In 6 months I seen almost a 200 increase in score with those things and removing some bad stuff on my CR. so 6 months is totally do able but it takes work.
I've yelled, screamed, cussed everyone out, i was happy, sad, pissed, happy again, I swear I people thought I was a nut job! But now it's prett much over but a few things. Mostly just letting time pass and things age off.
If you put in a good amount of effort you can do it.

[Anonymous]

I wanna know how long it's gonna take me to be able to finance an auto period if my credit history is starting in september

[Anonymous]

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@Anonymous wrote:
I wanna know how long it's gonna take me to be able to finance an auto period if my credit history is starting in september

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What? With your score you can't get an auto loan? OP listen to others and try to get 3 revolving credit (best of its credit card) Start with capital one. You should be able to get the QS1 and platinum from them. I would just get those 2 and maybe some sort of store card or secured card. After that just use and pay on time 2-3 months you will see increase in your score. Wait till you get into the 650 so you can get into chase Amex and discover

[jg1983]

Can someone explain the strategy of getting credit cards to build your credit. I don't have much experience using credit cards. Is it better to only use them for small purchases and pay them off right away?

[Shogun]

CCs contribute considerably to your reports and scores.  Best thing to do is get a couple, then garden well.  Use and pay.