691 FICO and still being Declined

tbenz6876 · ‎12-18-2011

I went to the Mercedes Benz dealer, and when they pulled my FICO they got a 691.

I have very little credit card debt, less than 3% total utilization across all three cards.

The dealer told me that Mercedes and all the other banks turned be down because of a Chapter 7 BK back in 2009, and that the finance companies are not going off the credit score anymore because it is so easy to repair your credit these days. I have been on the same job for 15 years and I make a little over 100k annually. I have also not had any baddies since the BK since the only reason I filed the BK was because of ID theft.

Has anyone else seen this?

deebray · ‎12-18-2011

That's not good that your bankruptcy is being held over your head after almost 3 yrs. Looks like you have bounced back with your scores quite nicely. From what I have read, you look like you can qualify, do not know the standards of a high end dealership, did you include any vehicles in your bankruptcy?

tbenz6876 · ‎12-18-2011

I have paid off two cars since the BK and they both are showing up on the credit report. My Credit Union approved me for 3.49% up to 66 months, but they wanted 20% down. We all know that putting that kind of money down on a vehicle is just not good because cars lose their value so fast.

I have even paid off an installment loan, I am current on another installment loan through my other credit union. Any suggestions now that you have more information.

Creditaddict · ‎12-18-2011

@tbenz6876 wrote:
I have paid off two cars since the BK and they both are showing up on the credit report. My Credit Union approved me for 3.49% up to 66 months, but they wanted 20% down. We all know that putting that kind of money down on a vehicle is just not good because cars lose their value so fast.

I have even paid off an installment loan, I am current on another installment loan through my other credit union. Any suggestions now that you have more information.

I'm confused by this statement above.... If im not mistken this statement would be true if you are leasing the new car. But if you finance, putting ANY money down is a plus so that you don't owe more on that new car then what it's worth. I personally always say put AT MIN. Taxes, Title, Fees ETC.

The only time I might not want to put money down is if it's 0% and you are not carrying any negative equity into the new car loan and you don't plan on getting rid of it within the first 24-36 months of a 60 month loan. Otherwise the more down the less the payment!

llecs · ‎12-18-2011

Ditto. Putting more as a down payment is a better deal. You'll always be upside down on any car purchase since they rapidly depreciate once you drive it off the lot. You have to cover that deficiency if you want to sell your car prior to paying it off. It also saves you money because the interest is avoided by forking over a decent down payment. Plus lower payments as mentioned. Or look at it this way: either way, you have to pay the full 100% by some point depending on your terms. Would it be better to fork down 20% interest-free or 20% plus interest, whatever the rate may be? Either way, that first 20% has to be paid via a down payment (or in part) or paid with added interest. No picking on the 20%; just using it as an example.

I'm an amateur compared to everyone on here, but of the two new purchases, one was a $5000 down payment and the other $7000. Both were about 25% down. My last purchase was in 2003 and I'll drive what I have until it falls apart, but I'll put more down next time if I can.

StartingOver10 · ‎12-19-2011

You don't specify when you had your BK in 2009, but I *assume* you are two years post discharge now.

Some lenders require 3 yrs post discharge to finance you. I don't know MBF's specific qualifications (2 yrs or 3 yrs or more) but it should be something you can find out. Just get in touch with MBF and ask what their qualifying criteria is for a given purchase. BTW, the salesman may not be the best person to ask as many don't know the lender underwriting criteria.

As pointed out in the above posts, the more likely reason was the down payment issue and not the BK issue. The higher the LTV, the higher the risk is to the lender. If you have had a serious derog before, then the risk actually increases (previous BK indicates a greater likelyhood of another BK). Many times you can overcome issues with compensating factors. The most obvious compensating factor is more money down. If you are looking to purchase a MB with no money down, then your risk factor to the bank increases substantially. Naturally, if you are only putting down a few thousand your LTV is above 100%....representing an extreme risk to the lender.

Your thought about not putting down 20% due to the depreciation is slightly off. Yes, there is significant immediate depreciation the moment you drive off the lot. So to avoid being so massively upside down, you put down more money to counteract the depreciation, not less. Once you meet the time qualifications and the down payment conditions, the lenders will loan to you for the MB.

tbenz6876 · ‎12-19-2011

Thanks for the information. The BK was discharged 12/20/2009. I gave it a year before I started trying to rebuild everything. I was going to put down 10%. Even when I have put down 20% or more I am still upside down when I trade in because of the 40k plus miles I put on the car each year driving back and forth to work. I will just save the other 10% that my credit union would like and do that.

Anonymous · ‎12-22-2011

@tbenz6876 wrote:
Thanks for the information. The BK was discharged 12/20/2009. I gave it a year before I started trying to rebuild everything. I was going to put down 10%. Even when I have put down 20% or more I am still upside down when I trade in because of the 40k plus miles I put on the car each year driving back and forth to work. I will just save the other 10% that my credit union would like and do that.

You always have the option of possibly downgrading to a cheaper model. Which could possibly put your savings you have now for down payment at 20%.

Example: You want to purchase 100K model.... 20% down would be 20K down

Look at something from Mercedes that cost 50K and that 10K you have saved for down payment is now a 20% down payment.

Just play with the numbers and you can possibly get into a car much sooner then later.

I know some of us have our preferences on what we want but if you are constantly trading in cars every few years the more the car cost the more you are losing on it year after year. Not really good sound financial decisions, but thats just my 3 cents........

GregB · ‎12-22-2011

@llecs wrote:
Ditto. Putting more as a down payment is a better deal. You'll always be upside down on any car purchase since they rapidly depreciate once you drive it off the lot. You have to cover that deficiency if you want to sell your car prior to paying it off. It also saves you money because the interest is avoided by forking over a decent down payment. Plus lower payments as mentioned. Or look at it this way: either way, you have to pay the full 100% by some point depending on your terms. Would it be better to fork down 20% interest-free or 20% plus interest, whatever the rate may be? Either way, that first 20% has to be paid via a down payment (or in part) or paid with added interest. No picking on the 20%; just using it as an example.

I'm an amateur compared to everyone on here, but of the two new purchases, one was a $5000 down payment and the other $7000. Both were about 25% down. My last purchase was in 2003 and I'll drive what I have until it falls apart, but I'll put more down next time if I can.

Extremely good advice. Hard to justify putting less than 25% down on a car unless they are offering near 0% with no option of cash discount instead. A person trying to justify putting less down because cars depreciate quickly is trying to justify the exact opposite of reality. Even putting 25% down on a 5 year loan will cause you to be slightly upside down for some period on most models.