Advice requested for raising our chances at a car loan- bad credit (improving)

[kayann02]

My score: 570 Partner's: 520 

Hi. I'm 21, partner is 23. I had really good credit (score of 780) thanks to my dad. Because of that, I made very stupid decisions starting at 18. Maxed out 2 cards at over the $2500 limit. I had two installments closed as soon as I paid it off from poor payment history (a year or two ago). My one card is still open and next week will be $1,000 under the limit. 

However, my Chase card was charged off at a balance of $3,220. It's now in a collections agency. My partner has a balance of $2,520 through Chase- in a payment plan but will be paid in full by Dec 8th, if not mid December. His charged off Cap One card charged off in internal recovery will be paid in full tomorrow. In total, $5,185 of debt gone. 

We currently have a 2018 Accord EX financed through Ally. It has a balance of around $10,700. Flawless payment history there. We're looking to get a 2022 Civic Touring. Would finance around $21-22k. We can afford the payments even at a high APR easily (income of near $3,700) but even once that is all paid off, I'm afraid the banks will see the charge offs and immediately deny us anyways.

Finance advisor at the dealer said the main issue with us being approved is my partner's credit. So if we pay off his debt, and get my score in the 600s, he said our chances would be much higher.

In your experience, what are our chances once we pay what I said? Or how long should we expect to wait until we have a decent shot? 

My dad's current credit history still shows on my reports regularly. So it shows I have a high amount of available credit and things. My payment history is 97%. Partner's is 87%. That's of today.

Thanks for any advice! 

[FireMedic1]

Fix whats broken first so higher scores can move in. Higher scores. Lower interest rate. CO's with balances are the killers. Got to get them settled. Then look for another vehicle.

[kayann02]

Very late reply, but here's an update.

Got my credit card- the one open and in good standing- well below the credit limit. Collections company actually sent me a settlement offer in the mail for $1771 out of $3220. The settlement payment will be sent sometime next week. 

Edit- I did call the number listed on my account to make sure it was a legitimate letter and it was. I got a PDF sent through email as confirmation which I will print out after work today.

We worked out a payment plan with my husband's creditor, and his account status is now listed as current which boosted his score. We're paying it down though not just paying the payment plan amount.

My question is, do auto lenders view a settled collection as negative compared to paid off? Well, both are bad, but is one worse? As in, would they not approve me? Or will the zeroed out balance be beneficial enough? I've heard settling a credit card hurts your credit score, but it's already in collections...not sure if there's any difference between settled in full and paid in full once it's at that point.

Thanks! 

[RSX]

Any reason you need to replace a 5yr old Honda Accord?  I had a Civic for 9 yrs, followed by an Acura for 14yrs

given what has happened in the past with your credit, i would suggest driving the Accord for as long as possible, especially since it isnt paid off yet - drive it until it is paid off - then drive it until the repairs start hitting the $2k sort of range

once the payments are done, save that monthly amount for as long as possible to use as a down payment for another car - 2yr old used is best financially

just my opinion

[FireMedic1]

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@kayann02 wrote:

Very late reply, but here's an update.

Got my credit card- the one open and in good standing- well below the credit limit. Collections company actually sent me a settlement offer in the mail for $1771 out of $3220. The settlement payment will be sent sometime next week. 

Edit- I did call the number listed on my account to make sure it was a legitimate letter and it was. I got a PDF sent through email as confirmation which I will print out after work today.

We worked out a payment plan with my husband's creditor, and his account status is now listed as current which boosted his score. We're paying it down though not just paying the payment plan amount.

My question is, do auto lenders view a settled collection as negative compared to paid off? Well, both are bad, but is one worse? As in, would they not approve me? Or will the zeroed out balance be beneficial enough? I've heard settling a credit card hurts your credit score, but it's already in collections...not sure if there's any difference between settled in full and paid in full once it's at that point.

Thanks! 

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Either way its still a collections on your reports. Paid looks a whole lot better than owed. Doesnt change a score though.

[kayann02]

Well, I don't have to. But it's nearing 100k miles, the shocks are wearing out, and I've done a number on the car. Bought it 2 1/2 years ago and put 84k miles on it. I drove pretty much anywhere- even roads that really aren't meant for a car with such low ground clearance- resulting in the car getting stuck multiple times and needing to be towed out. 

That stuff was in the second half of the first year I had the car, where I was so used to going down roads in my old SUV I didn't think about it.

Anyway. Then I had a newspaper delivery job for several months taking me through the middle of nowhere with horrid gravel/dirt roads littered with giant potholes. Pay was decent, but I ended up leaving after: it ripped the plastic part underneath the front of my car nearly all the way off, and I got 2 flats in one week from all the wear and tear on my tires.

Now I'm having slight suspension problems because of all those rough roads I constantly drove on, not to mention poor judgment a couple years ago-ish of driving on roads that weren't plowed well enough to turn around without getting stuck. Plus, my warranty is void at 100k miles, which I really do not want. My husband and I easily drive 15-20k miles a year for work and we can afford a new car so we wanna get a new car.

I'd been looking at the 2022 Civic. There's plenty with less than 15k miles on them (to my surprise), probably from being on a lease. There's some 23s that are priced similar but not many. We'll see what's out there by next year.

My plan with the car loan I have now was to pay extra on it so I'll owe maybe 8k in a few months, and also have a 5500-6500 cash down payment. That plus the trade in would be 9500-10,500 down. With the price of the car I want generally staying around 27-28k, I'd think my estimated finance amount would be somewhere around 18-20k depending on fees and taxes and stuff. 

[dunn2500]

suspension parts are alot cheaper than a note on a newish car......Hondas are super reliable

ive had toyota trucks i promise were abused far worse than your honda and they kept going and going, transmissons and engines are the killers.....shocks are cheap as well as contol arms, alignments and small parts to fix the steering geometetry and handling......with your scores and todays times your gonna get hammered on rates I would bet ( been there not too long ago)

spending $1500 on suspension sounds alot better than 20k note with 17% financing, imo

[RSX]

hi

i am not trying to TELL you what to do - i am simply suggesting a better path

as the last poster noted, suspension replacement is considerably cheaper than acquiring a new car - and once it has been repaired, it will drive like a new car as well

Plus, my warranty is void at 100k miles, which I really do not want. My husband and I easily drive 15-20k miles a year for work and we can afford a new car so we wanna get a new car.

i replaced the suspension on my Acura after 12years - then drove it for another 2 without issue - up to 135K miles

i contend that you cannot afford a new car, based on recent chargeoffs and the fact that you will be rolling negative equity into the new car

i have made mistakes with cars myself, so i am speaking from experience - i bought a brand new car when i was 19 - could i afford the payments = yes - should i have bought a used car and more money for other things = YES

my opinion - replace the suspension - aggressively pay it down - then drive it for as long as possible, while putting the monthly payment you used to have, in a HYSA  - then when it does require a 2K+ repair, reavaluate the purchase of a used car - i would go 2-3 yrs old minimum

having drove one car for 3yrs with a payment- followed by 6years without a payment - followed by 3yrs of payments - then 11 years without a payment - i cannot overstate how AWESOME it is to not have a car payment

all the best to you, whichever way you go forward

[Thomas_Thumb]

^ Agreed. Kept my 1993 Toyota Camry V6 for 13 years and my 2006 Honda Accord V6 hybrid for 15 years.  The Accord had 194k miles on it and was running well but showing some rust.

Having no car payments was helpful in qualifying for a larger mortgage.

[kayann02]

Just checked this thread out again. There's more wrong than I thought. After driving in the winter a few times I realized the traction was god awful- usually it handles amazing in snow and ice. My traction control comes on nearly constantly in bad weather now. Oh and the tires aren't worn and are good quality tires.

Yesterday I went to make a right turn (slowly) and i couldn't even turn 25% of the way. Went diagonally into the other side of the road. Thank god there wasn't really anyone out because no matter how I tried I couldn't correct the car. Earlier I turned left and almost hit a curb because it wouldn't turn all the way. I'd had issues with repeatedly having to correct my car to stay straight even on bare ground but thought it was just the roads. 

Alignment was terrible, felt a horrible vibrating from the right front end. It wasn't a flat tire and the tires weren't off the rims. My dad drove it and said the traction control and alignment are severely messed up. Tie rod is likely bad too. I'm cutting my losses; the tie rod is covered under warranty and I'm trading it in Feb 9th. (I can take my dad's car to work in the meantime).

Hopefully I don't have to get an alignment too. My thing is, I don't wanna put money in to make repairs on a relatively new car that I want planning on having for over a month from now anyway. 

My FICO auto score will be in at least the 640s (TransUnion & Experian; my dealer uses TransUnion). I know they use the auto scores but I'm monitoring all just in case. Regular FICO will be 620/630 (TU/EX). I settled my collection account for $1,775 out of the $3,220 a couple months ago when I got an offer to do so. That will be reported this month as a zero balance on what was 129% reported usage.

I'll have a $3.5k down payment along with around $2.5k from my trade. Found a new job-yay- and my gross income is much higher. If the APR is horrible, I'll refinance in a year or so.

Thanks everyone for your advice- but I'm not dealing with all these issues on a 2018 car. It shouldn't even have them when it isn't even past 100k miles.