topic Re: Does Collection Affect Auto Loan Approval Odds? My Story in Auto Loans

Does Collection Affect Auto Loan Approval Odds? My Story

MOSHIE — Mon, 27 Mar 2023 06:46:26 GMT

Hello.

As some of you have probably read, I've made an existing thread where I outlined my plans of getting an auto loan around mid July - early August. https://ficoforums.myfico.com/t5/Auto-Loans/What-Should-I-Do-Planning-To-Purchase-In-August/td-p/6654038

Short version? Wanting to buy a car with the following points:

- EQ/TU/EX around 680+ at time of planned purchase (according to simulator)

- MB lease (100% payment history) - due August

- Lexus lease (2 30 day, 1 60 day) - due January

- Combined income $150k+

- DTI at time of purchase: 30% or so

- CC Util at time of purchase: 30%

- DP: up to $10k

- applying together with husband

The reason why I am making this thread is simply because that thread was filled with mostly a back and forth discussion with a very helpful member, which I deeply appreciated and the fact that there is one more update: a collection has just been added to my CR.

Will this collection put a big roadblock in me applying for a loan of $55k-$60k through Audi/BMW/MB financial? The reason I'm mentioning those 3 captive lenders is because I feel through captive lenders, the process is much easier and smoother and I've considered the Audis/BMW/MB and at this point are content with them at that price point. Now is the question of; which lender, given my situation, will be the most forgiving and lenient with the collection?

The collection amount is $3k. The collection is from PDM (professional debt mediation) from my old apartment. This collection is basically: landlord feels that I have damaged flooring in unit during the duration of my stay as a result of having pets. However, the apartment complex management fails to produce evidence that the flooring has been damaged because of 'odor'. They shifted the account over to PDM, which sends me a validation letter and to which I responded. I responded, after searching through google through various forums/boards on how to proceed and basically I just responded seeking sufficient evidence that the charge of $3k was sufficient. Mind you, last time I asked the complex to produce this evidence, they send me a quote invoice for the flooring, not the actual work order.

Ok so I responded to PDM for their validation letter and after that its been silent. They keep sending the same validation letter to my OLD address (uncle's address) after I responded and they've yet to address my response. Besides that they haven't sent anything to my current address, which they sent the FIRST validation letter to. This was November. Now 4 months later the collection is added to my CR.

Oddly enough, it added +10 points to my bureaus for some reason.

I've searched through the forums that collections don't really matter as long as its not auto-related collections and scores are good enough but I'm just paranoid at this point. I have available up to $10k for down payment and will even lease to help with approval.

Husband's file is thin and this'll be his first auto-loan personally.

I am frustrated. Please help.

Thank you so much!

Re: Does Collection Affect Auto Loan Approval Odds? My Story

Beefy1212 — Mon, 27 Mar 2023 18:40:01 GMT

Not sure who would have told you collections don't really matter, they are a major red flag particularly if recent and unpaid.

Although once on a report a collection doesn't care if paid or not, when sent to UR I am sure "paid" or even "settled for less" looks better than having an unpaid balance.

Re: Does Collection Affect Auto Loan Approval Odds? My Story

pizzadude — Mon, 27 Mar 2023 18:43:01 GMT

@MOSHIE wrote:
Hello.

As some of you have probably read, I've made an existing thread where I outlined my plans of getting an auto loan around mid July - early August. https://ficoforums.myfico.com/t5/Auto-Loans/What-Should-I-Do-Planning-To-Purchase-In-August/td-p/6654038

Short version? Wanting to buy a car with the following points:
- EQ/TU/EX around 680+ at time of planned purchase (according to simulator)
- MB lease (100% payment history) - due August
- Lexus lease (2 30 day, 1 60 day) - due January
- Combined income $150k+
- DTI at time of purchase: 30% or so
- CC Util at time of purchase: 30%
- DP: up to $10k
- applying together with husband

The reason why I am making this thread is simply because that thread was filled with mostly a back and forth discussion with a very helpful member, which I deeply appreciated and the fact that there is one more update: a collection has just been added to my CR.

Will this collection put a big roadblock in me applying for a loan of $55k-$60k through Audi/BMW/MB financial? The reason I'm mentioning those 3 captive lenders is because I feel through captive lenders, the process is much easier and smoother and I've considered the Audis/BMW/MB and at this point are content with them at that price point. Now is the question of; which lender, given my situation, will be the most forgiving and lenient with the collection?

The collection amount is $3k. The collection is from PDM (professional debt mediation) from my old apartment. This collection is basically: landlord feels that I have damaged flooring in unit during the duration of my stay as a result of having pets. However, the apartment complex management fails to produce evidence that the flooring has been damaged because of 'odor'. They shifted the account over to PDM, which sends me a validation letter and to which I responded. I responded, after searching through google through various forums/boards on how to proceed and basically I just responded seeking sufficient evidence that the charge of $3k was sufficient. Mind you, last time I asked the complex to produce this evidence, they send me a quote invoice for the flooring, not the actual work order.

Ok so I responded to PDM for their validation letter and after that its been silent. They keep sending the same validation letter to my OLD address (uncle's address) after I responded and they've yet to address my response. Besides that they haven't sent anything to my current address, which they sent the FIRST validation letter to. This was November. Now 4 months later the collection is added to my CR.

Oddly enough, it added +10 points to my bureaus for some reason.

I've searched through the forums that collections don't really matter as long as its not auto-related collections and scores are good enough but I'm just paranoid at this point. I have available up to $10k for down payment and will even lease to help with approval.

Husband's file is thin and this'll be his first auto-loan personally.

I am frustrated. Please help.

Thank you so much!

The short answer is that collection accounts won't help your FICO scores and almost always will drop your scores when they appear on your reports. How much of a drop will depend on what other derogatory information is already showing on your reports. If you experienced a 10 point gain then it was due to something else changing on your reports, not as a result of a collection.

I don't think auto lenders will ask you to resolve a collection as a condition of approval, at least I haven't seen this reported in the past. Your approval will be based on your income, down payment, prior auto loan history, and some version of FICO scores. Not all lenders use FICO auto enhanced scores for auto loans.

Re: Does Collection Affect Auto Loan Approval Odds? My Story

MOSHIE — Mon, 27 Mar 2023 20:15:05 GMT

@pizzadude wrote:
@MOSHIE wrote:
Hello.

As some of you have probably read, I've made an existing thread where I outlined my plans of getting an auto loan around mid July - early August. https://ficoforums.myfico.com/t5/Auto-Loans/What-Should-I-Do-Planning-To-Purchase-In-August/td-p/6654038

Short version? Wanting to buy a car with the following points:
- EQ/TU/EX around 680+ at time of planned purchase (according to simulator)
- MB lease (100% payment history) - due August
- Lexus lease (2 30 day, 1 60 day) - due January
- Combined income $150k+
- DTI at time of purchase: 30% or so
- CC Util at time of purchase: 30%
- DP: up to $10k
- applying together with husband

The reason why I am making this thread is simply because that thread was filled with mostly a back and forth discussion with a very helpful member, which I deeply appreciated and the fact that there is one more update: a collection has just been added to my CR.

Will this collection put a big roadblock in me applying for a loan of $55k-$60k through Audi/BMW/MB financial? The reason I'm mentioning those 3 captive lenders is because I feel through captive lenders, the process is much easier and smoother and I've considered the Audis/BMW/MB and at this point are content with them at that price point. Now is the question of; which lender, given my situation, will be the most forgiving and lenient with the collection?

The collection amount is $3k. The collection is from PDM (professional debt mediation) from my old apartment. This collection is basically: landlord feels that I have damaged flooring in unit during the duration of my stay as a result of having pets. However, the apartment complex management fails to produce evidence that the flooring has been damaged because of 'odor'. They shifted the account over to PDM, which sends me a validation letter and to which I responded. I responded, after searching through google through various forums/boards on how to proceed and basically I just responded seeking sufficient evidence that the charge of $3k was sufficient. Mind you, last time I asked the complex to produce this evidence, they send me a quote invoice for the flooring, not the actual work order.

Ok so I responded to PDM for their validation letter and after that its been silent. They keep sending the same validation letter to my OLD address (uncle's address) after I responded and they've yet to address my response. Besides that they haven't sent anything to my current address, which they sent the FIRST validation letter to. This was November. Now 4 months later the collection is added to my CR.

Oddly enough, it added +10 points to my bureaus for some reason.

I've searched through the forums that collections don't really matter as long as its not auto-related collections and scores are good enough but I'm just paranoid at this point. I have available up to $10k for down payment and will even lease to help with approval.

Husband's file is thin and this'll be his first auto-loan personally.

I am frustrated. Please help.

Thank you so much!
The short answer is that collection accounts won't help your FICO scores and almost always will drop your scores when they appear on your reports. How much of a drop will depend on what other derogatory information is already showing on your reports. If you experienced a 10 point gain then it was due to something else changing on your reports, not as a result of a collection.

I don't think auto lenders will ask you to resolve a collection as a condition of approval, at least I haven't seen this reported in the past. Your approval will be based on your income, down payment, prior auto loan history, and some version of FICO scores. Not all lenders use FICO auto enhanced scores for auto loans.

Besides this collection, the only blemish I have is the lates on the Lexus account but everything else, including my MB account is 100% payment history.

Thank you for your reply! Prior to this, I also have comparable credit of IFS ($60k) & TD Bank ($50k) in the past and both have 100% history as well.

Re: Does Collection Affect Auto Loan Approval Odds? My Story

MOSHIE — Mon, 27 Mar 2023 20:16:22 GMT

@Beefy1212 wrote:
Not sure who would have told you collections don't really matter, they are a major red flag particularly if recent and unpaid.

Although once on a report a collection doesn't care if paid or not, when sent to UR I am sure "paid" or even "settled for less" looks better than having an unpaid balance.

Will note that. I'll reach out to see if I can work something out with them. Thank you

Re: Does Collection Affect Auto Loan Approval Odds? My Story

fury1995 — Tue, 28 Mar 2023 01:17:46 GMT

@MOSHIE wrote:
@Beefy1212 wrote:
Not sure who would have told you collections don't really matter, they are a major red flag particularly if recent and unpaid.

Although once on a report a collection doesn't care if paid or not, when sent to UR I am sure "paid" or even "settled for less" looks better than having an unpaid balance.
Will note that. I'll reach out to see if I can work something out with them. Thank you

@MOSHIE

Two things:

Yes, the collection account isn't scrutinized so much for normal indirect lending. They always focus on the equity of the deal, score for tiering, and you (job/income and residence stability).

As far as the CA (collection agency), are they collecting FOR the landlord? I know you are saving your cash for your credit card debt and down payment so this has to be very frustrating! Whatever the case, if you don't plan on challenging the debt and plan on working something out, get agreements in writing.. always. You are allowed to request a deletion of the debt for payment if you go that route. If you want to persue option, post in the Rebuilding forum for further guidance: Rebuilding Your Credit

Re: Does Collection Affect Auto Loan Approval Odds? My Story

MOSHIE — Tue, 28 Mar 2023 02:17:49 GMT

@fury1995 wrote:
@MOSHIE wrote:
@Beefy1212 wrote:
Not sure who would have told you collections don't really matter, they are a major red flag particularly if recent and unpaid.

Although once on a report a collection doesn't care if paid or not, when sent to UR I am sure "paid" or even "settled for less" looks better than having an unpaid balance.
Will note that. I'll reach out to see if I can work something out with them. Thank you
@MOSHIE

Two things:

Yes, the collection account isn't scrutinized so much for normal indirect lending. They always focus on the equity of the deal, score for tiering, and you (job/income and residence stability).

As far as the CA (collection agency), are they collecting FOR the landlord? I know you are saving your cash for your credit card debt and down payment so this has to be very frustrating! Whatever the case, if you don't plan on challenging the debt and plan on working something out, get agreements in writing.. always. You are allowed to request a deletion of the debt for payment if you go that route. If you want to persue option, post in the Rebuilding forum for further guidance: Rebuilding Your Credit

Thank you again for your reply!

1. Sounds great! I revised my plan of paying down the CCs that I'll get every card down to 30% utilization to avoid balance chasing.

2. Yes they're collecting on behalf of OC (the apartment complex). Challenging this debt so far has gotten me nowhere and I guess for all intent and purposes of having a better credit, I can ask if they're willing to setup payment arrangments / PFD. I will only communicate via certified mail as this leaves a paper trail. Do you suppose I can reach out to the OC or should I just deal with the CA? Will "paid" off or "settled" be better in case PFD is not accepted?

Thank you.

Re: Does Collection Affect Auto Loan Approval Odds? My Story

TMDSCT — Tue, 28 Mar 2023 14:26:52 GMT

Um... Collections matter a great deal to your credit risk profile to any lender in any situation.

Re: Does Collection Affect Auto Loan Approval Odds? My Story

fury1995 — Tue, 28 Mar 2023 23:39:15 GMT

@TMDSCT wrote:
Um... Collections matter a great deal to your credit risk profile to any lender in any situation.

@TMDSCT Not completely true. Not in every situation for auto financing where there is collateral tied, especially dealer indirect lending.

I've submitted nearly 15,000 auto finance applications over the last 25+ years.. both highline and volume dealers. There aren't many major banks I haven't had interaction with have been mentioned here on myFico.

Paid/Unpaid Collections, derog history mortgage payments, bankruptcy all USED to have a bigger impact on auto loan applications. Not so much anymore.

Things have changed.

Re: Does Collection Affect Auto Loan Approval Odds? My Story

MOSHIE — Wed, 29 Mar 2023 00:47:44 GMT

@fury1995 wrote:
@TMDSCT wrote:
Um... Collections matter a great deal to your credit risk profile to any lender in any situation.
@TMDSCT Not completely true. Not in every situation for auto financing where there is collateral tied, especially dealer indirect lending.

I've submitted nearly 15,000 auto finance applications over the last 25+ years.. both highline and volume dealers. There aren't many major banks I haven't had interaction with have been mentioned here on myFico.

Paid/Unpaid Collections, derog history mortgage payments, bankruptcy all USED to have a bigger impact on auto loan applications. Not so much anymore.

Things have changed.

I'm glad you brought this up actually. Now let's play hypothetical. Let's say I decide to ignore this collection at time of applying to the mentioned banks above, what reaction will I get from Finance and/or the lender? Will it be one of those "factors" that causes them to raise rates, stipulate down-payments or flat out denial?

I'm asking this because, as you know, I'm saving my money towards paying down my CCs and for the (up to) $10k down payment.

Which of the three above are known to be more "lenient and forgiving" towards seeing collection like this vs the other?

If its worth anything, only my TU is not reporting this collection. For some reason. I'm planning on replying to the letter but undecided if I should go the "I want to make payment arrangement" or the "requesting PFD" route. Morally, I'm feeling terrible since that charge of $3k for collections wasn't on my doing (they're unable to furnish proof basically) but financially, I feel like this is a fight I have to lose for the greater good.

I'm even terrified to mention this to any finance managers in a "what if" scenario.

Re: Does Collection Affect Auto Loan Approval Odds? My Story

fury1995 — Wed, 29 Mar 2023 02:36:15 GMT

@MOSHIE wrote:
@fury1995 wrote:
@TMDSCT wrote:
Um... Collections matter a great deal to your credit risk profile to any lender in any situation.
@TMDSCT Not completely true. Not in every situation for auto financing where there is collateral tied, especially dealer indirect lending.

I've submitted nearly 15,000 auto finance applications over the last 25+ years.. both highline and volume dealers. There aren't many major banks I haven't had interaction with have been mentioned here on myFico.

Paid/Unpaid Collections, derog history mortgage payments, bankruptcy all USED to have a bigger impact on auto loan applications. Not so much anymore.

Things have changed.
I'm glad you brought this up actually. Now let's play hypothetical. Let's say I decide to ignore this collection at time of applying to the mentioned banks above, what reaction will I get from Finance and/or the lender? Will it be one of those "factors" that causes them to raise rates, stipulate down-payments or flat out denial?

I'm asking this because, as you know, I'm saving my money towards paying down my CCs and for the (up to) $10k down payment.

Which of the three above are known to be more "lenient and forgiving" towards seeing collection like this vs the other?

If its worth anything, only my TU is not reporting this collection. For some reason. I'm planning on replying to the letter but undecided if I should go the "I want to make payment arrangement" or the "requesting PFD" route. Morally, I'm feeling terrible since that charge of $3k for collections wasn't on my doing (they're unable to furnish proof basically) but financially, I feel like this is a fight I have to lose for the greater good.

I'm even terrified to mention this to any finance managers in a "what if" scenario.

First, you don't have to terrified to mention this to the finance manager. They do what do with the lenders.. to WIN an approval. That's their primary concern (like a defense attorney). Their job is to get you approved. You have the choice to accept what they get aproved.

The collection that's being reported... you absolutely should respond to the letter with your own. If you don't, they can seek further collection efforts including filing a lawsuit for judgement (betting you will ignore it resulting in default judgement). Require proof in writing that you owe that debt. Debt validation letters can be found by seeking assistance in the rebuilding forum. If you are certain you do not owe the debt and you are certain you did not have any such agreement in writing and they cannot validate the debt or do not respond to your letter within 30 days, you have legal grounds to force them to withdraw the collection.

It's good that Transunion is the only one reporting. If it's still there and only there, lenders may take an alternate credit bureau under certain circumstances. Very few indirect lenders use Transunion as their primary bureau. You can ask your finance manager that your client referred you to. He will likely tell you the same thing.. and will be able to tell you specifically which bureau Audi uses.

Re: Does Collection Affect Auto Loan Approval Odds? My Story

MOSHIE — Wed, 29 Mar 2023 04:01:52 GMT

@fury1995 wrote:
@MOSHIE wrote:
@fury1995 wrote:
@TMDSCT wrote:
Um... Collections matter a great deal to your credit risk profile to any lender in any situation.
@TMDSCT Not completely true. Not in every situation for auto financing where there is collateral tied, especially dealer indirect lending.

I've submitted nearly 15,000 auto finance applications over the last 25+ years.. both highline and volume dealers. There aren't many major banks I haven't had interaction with have been mentioned here on myFico.

Paid/Unpaid Collections, derog history mortgage payments, bankruptcy all USED to have a bigger impact on auto loan applications. Not so much anymore.

Things have changed.
I'm glad you brought this up actually. Now let's play hypothetical. Let's say I decide to ignore this collection at time of applying to the mentioned banks above, what reaction will I get from Finance and/or the lender? Will it be one of those "factors" that causes them to raise rates, stipulate down-payments or flat out denial?

I'm asking this because, as you know, I'm saving my money towards paying down my CCs and for the (up to) $10k down payment.

Which of the three above are known to be more "lenient and forgiving" towards seeing collection like this vs the other?

If its worth anything, only my TU is not reporting this collection. For some reason. I'm planning on replying to the letter but undecided if I should go the "I want to make payment arrangement" or the "requesting PFD" route. Morally, I'm feeling terrible since that charge of $3k for collections wasn't on my doing (they're unable to furnish proof basically) but financially, I feel like this is a fight I have to lose for the greater good.

I'm even terrified to mention this to any finance managers in a "what if" scenario.
First, you don't have to terrified to mention this to the finance manager. They do what do with the lenders.. to WIN an approval. That's their primary concern (like a defense attorney). Their job is to get you approved. You have the choice to accept what they get aproved.

The collection that's being reported... you absolutely should respond to the letter with your own. If you don't, they can seek further collection efforts including filing a lawsuit for judgement (betting you will ignore it resulting in default judgement). Require proof in writing that you owe that debt. Debt validation letters can be found by seeking assistance in the rebuilding forum. If you are certain you do not owe the debt and you are certain you did not have any such agreement in writing and they cannot validate the debt or do not respond to your letter within 30 days, you have legal grounds to force them to withdraw the collection.

It's good that Transunion is the only one reporting. If it's still there and only there, lenders may take an alternate credit bureau under certain circumstances. Very few indirect lenders use Transunion as their primary bureau. You can ask your finance manager that your client referred you to. He will likely tell you the same thing.. and will be able to tell you specifically which bureau Audi uses.

1. Would you say that at this point, I have power to negotiate? Is the 10k DP really worth that much?

2. That's exactly what happened. They sent validation letter which states the debt etc etc, I replied within the 30 day time limit and since then there have been no activity until few days ago where they reported the account to CR. If I remember correctly they're not allowed (legally) at least to collect until they address the dispute that I returned to them on November 27. Now, I have no idea what to do. I could reply to their letter demanding that they cease collection because they haven't addressed my dispute. Part of me also knows that to collect judgment, they would bear burden of proof, which is what my dispute was asking. Since they don't have that, I guess they just went on to reporting to CR.

This is why I was asking a "what if" scenario if I left this unpaid by the time I applied for the car. I can ask them to PFD for the greater good of the credit but it stings to me personally, more than paying down the CCs. At least with the CCs, I definitely did charge my expenses on there.

Re: Does Collection Affect Auto Loan Approval Odds? My Story

fury1995 — Wed, 29 Mar 2023 14:52:09 GMT

@MOSHIE wrote:
2. That's exactly what happened. They sent validation letter which states the debt etc etc, I replied within the 30 day time limit and since then there have been no activity until few days ago where they reported the account to CR. If I remember correctly they're not allowed (legally) at least to collect until they address the dispute that I returned to them on November 27. Now, I have no idea what to do. I could reply to their letter demanding that they cease collection because they haven't addressed my dispute. Part of me also knows that to collect judgment, they would bear burden of proof, which is what my dispute was asking. Since they don't have that, I guess they just went on to reporting to CR.

This is why I was asking a "what if" scenario if I left this unpaid by the time I applied for the car. I can ask them to PFD for the greater good of the credit but it stings to me personally, more than paying down the CCs. At least with the CCs, I definitely did charge my expenses on there.

If I don't owe the debt, I wouldn't pay for it. But that's me.

You should move this over to the rebuilding forum.

When you post, include this informration:

Date the collection letter was sent to you

Date you reponded to the collection agency

Whether you responded with a certified letter

What is the date the collector states you owed the debt from? << (this is for SOL, statute of limitations)

What type of contract is the collector referencing? <, (the lease?)

What State was the contract agreement signed. (also, for SOL)

What State the collector is doing business in.

Whether they are respresenting another party (landlord, management company) or are they claiming to own the debt?