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New Member
coaching_goddess
Posts: 7
Registered: ‎06-04-2007
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Car Loan with FICO Score of 555 - what are my options?

I've just pulled my reports (waiting on Experian & TransUnion) - have Equifax with a FICO Score of 555 (it was 539 in Oct/Nov 2006).  Car that I've had almost 5 years (which has 9 more payments left) is again making those funny, yet familiar sounds which often lead to hundreds of $'s in repair costs. 
 
Am wondering what recommendations/thoughts people have about this.  I've had some late payments and have paid off some old tax liens, and am still working on paying down other types of debt.
 
In the past (almost 2 years) I've gone to Debtors Anonymous (DA) and have paid off over $2,000 in debt (of various types, some of which is personal and would not show up on a credit report), so I feel like I'm making progress there. 
 
I have a job/income that would allow me to purchase a decent used or new car (I still owe $2,400 on my vehicle and it's valued at around $1,200).  I'm concerned about the shopping around process because I'm wary of getting to many reports run and the impact that will have on my report.  At the same time, I'm not willing to go in the the car buying process without a pre-approval in hand.  I've been doing a ton of research about car buying of late and I'm committed to being a good consumer and getting a good deal (regardless of the time/effort I need to put into the process - I know it'll be worth it). 
 
I bought my current car at a dealership and left everything up to them (which I'm sure they loved) and ended up with an almost 21% interest rate (my credit wasn't great then either).  Anyway, I'm looking for any thoughts/ideas/feedback/suggestions for ways that I can be a smart consumer in the interest rate shopping (ideas for lenders that will loan me the 12-14k I'll need without kickin my butt with the interest).
 
Anyway... thanks!
 
Marsha
Regular Contributor
javi84
Posts: 171
Registered: ‎05-18-2007
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Re: Car Loan with FICO Score of 555 - what are my options?

Join a credit union that has a decent auto department. They can probably pre-qualify you (mine does) and tell you how much money they can loan you (From their website: "Request a pre-approved loan first, so you'll know how much you are qualified to borrow!"). And they have fleet pricing which they say is lower than what dealerships offer to customers .
For age and want, save while you may; no morning sun lasts a whole day.
--Benjamin Franklin
New Member
coaching_goddess
Posts: 7
Registered: ‎06-04-2007
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Re: Car Loan with FICO Score of 555 - what are my options?

Thanks.  I actually belong to Navy Federal Credit Union.  I spoke with them yesterday (yes, they have customer service folks on the weekend which I love) and they said based on what I told them (without submittting an application) that the computer would likely turn me down.  I was told that even if I get a turn down, I can still request a loan person review the application.
 
Do you know of any specific Credit Unions that might be good to talk to?
Moderator Emeritus
masdeocho
Posts: 2,050
Registered: ‎04-17-2007
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Re: Car Loan with FICO Score of 555 - what are my options?

I don't have a lot of suggestions (well, none really) but wanted to congratulate you on paying off so much debt!! Way to go!!  :smileyvery-happy:
 
I would advise hanging onto the car until it's paid off, if at all possible.  You're upside down (owe more than it's worth) and if you get rid of it, you'll still be paying for it. Paying it off will also help your score, provided you're making payments on time.  Other suggestion: get multiple mechanics to have a look. I found out my "reputable" dealer was saying I needed very expensive but nonexistent repair work. :smileymad:
-----------------
Bartender, bring another round of FICOtinis please!

9.4.2011: TU 805. EQ 815.
New Member
coaching_goddess
Posts: 7
Registered: ‎06-04-2007
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Re: Car Loan with FICO Score of 555 - what are my options?

Thanks for your kind words.  Yes, I feel like I've made a lot of progress and this makes me happy.  I will definitely get some quotes for repair and see where that takes me.  The car has had more than it's share of repair work in the last 5 years (some under the extended warranty and some not) and I'm just wary of spending more $ on it that could be used to pay off the car sooner or for a down payment. 
 
Oh, and yes, unfortunately it's an upside down situation, but there's not a whole lot I can do about that...
 
One last thing is that I have been making my payments on time (with the exception of a difficult time about a year+ ago where I had several late payments).  Otherwise, since then I've gotten myself on track and pay just a little more per month than the required payment.
Moderator Emeritus
Tuscani
Posts: 6,182
Registered: ‎03-29-2007
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Re: Car Loan with FICO Score of 555 - what are my options?

You could try www.roadloans.com. They ara sub-prime lender so don't expect a good rate.
Valued Member
Jack_Sparrow
Posts: 44
Registered: ‎05-31-2007
0

Re: Car Loan with FICO Score of 555 - what are my options?

While it's not the most attractive option. I would get the car fixed and keep it. Not even a credit union will save you with that score (maybe a couple percent...). 21% interest is ridiculous and while it's possible and probable you can get a better rate, it would still be way too high IMO. I had to pay $2000 in interest on $10,000 on 6.49% for 48 months, so I can just imagine the money you'd be losing.
 
Use your money to finish paying off the loan, fix the car, pay off other debts. In another 6 months to a year if you do all this, there is no reason why your score can't be somewhere in the 600s. Then it would be a better time to apply for a loan.
Established Member
willhbauto
Posts: 20
Registered: ‎05-17-2007

Re: Car Loan with FICO Score of 555 - what are my options?

I actually do finance at a large dealer, since you're under 620 you'll go to  sub-prime or "secondary" bank, so the rates will be high, DO NOT continue going to well-known banks and credit unions and having them pull your credit, the inquiries will kill your score even more, some banks will shop it around and ring up tons of inquiries. The well-known banks are all prime lenders, Bof A, chase, wells fargo, almost all credit unions, you'll have to allow the dealership to find you a secondary bank, careful because most dealerships are allowed to make 2 points of rate on top of the banks "buy rate" so work the finance manager by telling him you found lower rates elsewhere or something of that nature.
 
The key when getting approved for a car loan is Loan-to-Value, ultimately you'll have to buy used since they can be marked down further, do all your shopping on the internet, the dealers discount the cars more online for competitions sake. What the banks will finance you on, is something 35,000 miles or less that is 2003 or newer, since the vehicle is the colateral the bank wants something that, if you you default on the payments and they have to reposess they can auction and get some of their money back. The biggest key is that your loaned mount is significantly less than its retail book value. Also, they'll probably give you $14,000 max to spend. The banks make you crawl before you walk, so they won't approve you for alot.
 
Example:
 
2005 Chevy Impala
27,000 miles
retail book value $15,700
 
purchase price $13,700
+inequity carry over from trade-in $1300
=amount financed before TTL: $15,000
Loan-to-Value: 95.5%
 
obviously money down makes the loaned amount less and the loan-to-value ratio lower, so try to put as much money down as you can, the odds of getting approved are much much higher around 80-85%, just like buying a house. and remember Loan-to-value doesnt have to include TTL, you will have to pay TTL but the banks look at L-to-V before TTL just so you can do you math at the dealer while looking at cars.
 
So stop going to prime lenders and getting your credit pulled, the dealer probably has a secondary finance department that can get you approved with the right Loan-to-Value ratio with your credit, and yeah, I know it sucks to have to trust the dealer because they're going to make money on you but hey they can only make 2 points of interest rate so if its an inexpensive vehicle it might only be a few hundred bucks but thats the cost of using their services and atleast you'll get a newer car potentially with some warranty still left on it. Just dont buy any extended warranties or service contracts, those are where they really make money. Definitly get gap insurance incase something happens but don't pay more than $500 for it, the dealers cost is usually only about $350 for it.
 
READ THE PURCHASE/BUYERS ORDER CAREFULLY BEFORE SIGNING IT AND THE CONTRACT TOO, make sure all the blanks are filled in and read all the lines, they can sneak expensive non-factory warranties in the financing and tell you its included with the payments on your new car, but they have to disclose it to you on the purchase/buyers order to have the banks fund it, alot of bad credit people are so excited they just start signing away and don't read what they're paying for. Expect interest rates in the teen's for your score, so on a $14000 loan expect to be paying in the high 300's for 60 months (you wont qualify for 72, so don't bother)
 
If you do all this correctly you'll get a good deal, and the dealer may still make a small profit but they should because they have a business to run and they run alot of paperwork to sell cars, but you wont be getting ripped off for thousands. Pay on time for a year or two and you'll be able to trade it in for a new car and prime interest rates, it'll cost a little more now but its worth it, a well paid car loan will do wonders for your credit.
Moderator Emeritus
masdeocho
Posts: 2,050
Registered: ‎04-17-2007
0

Re: Car Loan with FICO Score of 555 - what are my options?

willhbauto - thanks for giving us the inside scoop!
-----------------
Bartender, bring another round of FICOtinis please!

9.4.2011: TU 805. EQ 815.
New Member
coaching_goddess
Posts: 7
Registered: ‎06-04-2007
0

Car Loan with FICO Score of 555 - what are my options?

Willhbauto,
 
Thanks.  This was very helpful.  And, such a useful perspective!

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