Approval with large down payment

[Anonymous]

I'm hoping to get a new car in July when I pay off my Toyota. I'm looking at cars in the $35K range and my trade in value currently is $8.5K, so I'll probably have $7K for trade and $2k cash at time of purchase. My credit score now is in the 540 range but I expect to be up over 620 by the summer (some major aging occurs in March and over 12 months clean history, I have one 30 day past due last March but nothing late other than that since January 2008). What are my chances of getting approved for a loan with a rate under 10%. I'm working to improve my history and really will need a new car. When I bought my toyota I had a score of 510, 10k in negative equity and only $5k down, my rate was 11% but that was in 2005, I'm hoping to have a much lower payment this time around. 

[Anonymous]

I should add some additional information: My income is $150k, I rent and my current rent is $1700/month. My current car payment is $660/month and I've managed that amount just fine, I'm hoping for a payment below $450 going forward. I need a new car because I currently have a coupe and its way too small now, I bought it when I didn't need the space and just liked the look. I have one CC with $0 balance and I have no credit card debt, but big student loan debt. My late payments are related to my student loans which I finally got consolidated and under control this spring. I do have 2 collections < $100 and paid related to medical bills. I do have a number of 30 days past due on my current car loan back in 2008 when I was laid off for 6 months and struggled to pay my bills on time. I also have a deed in leiu in 2007 because my house never sold after 12 months on the market after I moved across the country for work, I tried to do a short sale, but it was a disaster. Any help would be greatly appreciated.  I'm looking at the Ford Edge or a Nissan Morano. 

[haulingthescoreup]

I have to say that I'm surprised that your score is this low. Your reported revolving util (CC balance/ CL) is 0%? And you only have 30's, collections, and a lien? That's not great, but I would have expected to see a score in the mid-600's, depending on how recent the lien andor collections are.

This is a FICO score, correct? Not a "credit score"?

Assuming that you got your score here, look on screen 2 of your score report. What are the negatives, listed in order, over on the left?

[Anonymous]

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@haulingthescoreup wrote:

I have to say that I'm surprised that your score is this low. Your reported revolving util (CC balance/ CL) is 0%? And you only have 30's, collections, and a lien? That's not great, but I would have expected to see a score in the mid-600's, depending on how recent the lien andor collections are.

This is a FICO score, correct? Not a "credit score"?

Assuming that you got your score here, look on screen 2 of your score report. What are the negatives, listed in order, over on the left?

---

Yes those are my credit scores and I did get them here. My TU is 534 and my EQ is 540. On both there is a BIG error that should be cleared up in the next month (one of my student loans shows 120 past due as of July, but the account never existed it was a clerical error made during my consolidation and I've already confirmed with the company that they will remove it). I have 3 accounts in a debt management program, they total about $1000 and they show a declining balance but still negative information from several years ago and are also showing up in my revolving balance, not sure why. So my credit utilization looks high even though its not but my active credit accounts have 0 balance. That $1000 balance will be paid off next month. According to the score simulator, if I do nothing but what I'm currently doing I can expect my score to be in the high 600s in 12 months, and over 700 in 24 months, assuming nothing ages off or gets removed for other reasons. My student loan balances are over $100k but all show paid on time. The deed in leiu is really the killer. I'm just trying to figure out if I'll have problems getting financing this summer. 

[haulingthescoreup]

I would guess that it's the incorrect 120-day late as of July, meaning that it's only 7 months old. Anything that recent tends to be the score killer.

The balances on the closed cards (or the cards in the DMP; I assume that they're closed by the way you describe it) do still affect your util, so that will also help when they're paid off. Congrats on doing that!

Are either of these (the 120 and revolving util) listed among your top two negative scores? That's that info on screen 2 of your FICO reports, over on the left. That one list of negatives on that screen is probably the most important part of your credit reports, and it helps to get really familiar with it, because those are the factors that drive your scores.

I would think that you will be in much better score shape once the incorrect 120 is gone, so any guesses now as to what will happen in July would be premature. A lender would be understandably worried about a late this severe and this recent, so if it doesn't come off, I think you would have some real problems.

I'd suggest that you come back and update next month when the 120 has been removed from both reports and let us know your new scores, and also copy/ paste the list of negatives from both reports. Those will be the same negative factors that the lender sees when your report is pulled, so it will be very useful to know what they are.

[Anonymous]

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@haulingthescoreup wrote:

I would guess that it's the incorrect 120-day late as of July, meaning that it's only 7 months old. Anything that recent tends to be the score killer.

The balances on the closed cards (or the cards in the DMP; I assume that they're closed by the way you describe it) do still affect your util, so that will also help when they're paid off. Congrats on doing that!

Are either of these (the 120 and revolving util) listed among your top two negative scores? That's that info on screen 2 of your FICO reports, over on the left. That one list of negatives on that screen is probably the most important part of your credit reports, and it helps to get really familiar with it, because those are the factors that drive your scores.

I would think that you will be in much better score shape once the incorrect 120 is gone, so any guesses now as to what will happen in July would be premature. A lender would be understandably worried about a late this severe and this recent, so if it doesn't come off, I think you would have some real problems.

I'd suggest that you come back and update next month when the 120 has been removed from both reports and let us know your new scores, and also copy/ paste the list of negatives from both reports. Those will be the same negative factors that the lender sees when your report is pulled, so it will be very useful to know what they are.

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Ok, so I checked page 2 of my reports from my fico and here are the negatives:

EQ Negatives:

1. You have a collection and a serious delinquency on your credit report.

• 10 accounts showing 60 days past due in their history--> keep in mind I have 14 years of credit history and many of these accounts are very old, 4+ years I don't have a single 60 days past due since 2007
• 3 Collection accounts--> All paid and over 2 years old

2. You recently missed a payment or had a derogatory indicator reported on your credit report.

• Your most recent late payment was 6 months ago-->This is the 120 past due I mentioned that is an error and should be removed shortly

3. You have multiple accounts showing missed payments or derogatory descriptions.

• 11 accounts--> same issue as #1, most are very old

4. You have balances on accounts that are past due.

• Total balance $1045, these are the accounts in the program that will be paid off next month. They are all closed accounts that I pay on time every month but will show past due until they are paid in full, I wish there was something I could do to reflect that these accounts are paid every month as agreed. 

TU Negatives:

1. You have a collection and a serious delinquency on your credit report.

• Exact same description as reported on EQ

2. You've made heavy use of your available revolving credit.

• Says CU is 163%, have no idea how that's possible because my current usage is <10%, I haven't been able to figure this out. I think that the $1045 that EQ shows past due shows up on TU as credit usage. 

3. You have multiple accounts showing missed payments or derogatory descriptions.

• Same description as EQ

4. You have balances on accounts that are past due.

• This is an error, says past due balance is $90004, which is the student loan error, in EQ it shows 120 past due but paid in full closed, on TU it shows as 120 past due, closed but unpaid balance $90004. This is some weird error because they originally booked my student loan incorrectly and when they were in the process of fixing it they reported it past due, but that's not even the true balance. I'm not really stressed about it because I know its being removed. 

Any thoughts on what I can do to deal with these so I can get the financing I need would be great. I've worked really hard over the past 4 years to fix my credit issues and just want to get this resolved. 

[llecs]

Send GW letters to the paid collections asking if they can remove it. Whether you owe $0 or $10,000, the score damage is equal. You'd want them off. You might see a fair gain with that. If the 120 day late(s) are newer than the collections, then the points returned will be less obviously, because the lates are newer.

The 163% refers to revolving utilization (e.g. CCs). Even if the CC is closed, the balance (if there is one) and the CL still factor into FICO scoring. Sounds like the balance is over the reported CL on one or more CCs. You also mentioned a $1,045 balance. I take it that this is via a DMP? Based on your income, I would PIF that balance ASAP. You'll see a decent score gain once PIF. BTW, under a DMP as mentioned, lates will be added monthly while under a payment plan even if you pay on time. The reasoning behind the lates is because you are paying less than the org. contract agreement.

The 60 day or worse lates are hurting. If part of that are the SLs, then let whatever it is you are doing shake out before worrying about it. If the lates are on other account (s), then consider a GW letter if they are open. If closed, I'd let the dust settle from the CLs and then re-evaluate. You wouldn't want to send a GW to a past baddie only to have them delete the entire TL and history, especially when the impact of those 60s are too bad.

Don't worry about the balance on the SLs in the meanwhile, the impact of installment utilization is very, very small. In fact, If I was a betting man, I would bet that if the balances were accurate and you paid them all to $1, your FICO score wouldn't change. I certainly wouldn't bet the farm on a score gain beyond a few points.

Once the report changes, then the positive and negative reasons will change too. Your FICO reports are a great guide to see what impacts your FICO score the most.

[Anonymous]

Thanks for those comments llecs they are very helpful. I know how to write a GW letter to a OC but not collection, are there any examples of that somewhere on here? The 120 day past due is an error that shows up from July, that should be removed ASAP, I already spoke to my student loan company and they stated they would make sure it was removed because its definitely an error. I think the 163% I can take care of very soon, that is the balance on my DMP and I intend to pay that off when I get my year end bonus sometime in January. The accounts in the payment program aren't continuing to show up late every month they show a balance due but no reported activity since the accounts were closed other than the balance declining. So it's not showing late on my report every month and as mentioned the balance is now to a point where I can pay them in full shortly. The 60 days late I can't do much about they are pretty old, my last listed 60 day past due is March 2008, I think I might be able to get that removed with a GW letter, its a student loan which was in forebearance and I forgot to renew the forebearance until they called me, they ended up bringing me current through a forebearance for that 3 month period and I've made every single payment on time since then. I figure its worth a try anyway. Other than that my last 60 day past due is in November 2007. So like I said they are pretty old. I'll send that GW letter to the student loan company and if your wouldn't mind pointing me in the right direction for a sample GW letter for the collection I'd really appreciate it. According to the score simulator if I do nothing but what I'm currently doing I will have a 720 FICO in 24 months, if I could speed up that process I'd be really happy! 

[llecs]

Per GWing a CA, just mold it to the GW examples found on here. Skip the payment history and skip any mention of commendable customer service, but make a mention in there somewhere in one sentence that X event happened (e.g. job loss, health issue, whatever) and that after getting back on your feet, you paid this past debt (if you paid in full, mention that. If you settled, don't say settled). Then start a new paragraph and be specific in your request, which is in this case deletion. Then maybe toss in another sentence that you are looking to right past wrongs, or you are looking to buy your first home, or what have you. Then type your name and/or sign (IMO, I think it is OK to sign if the debt is paid and they are no longer collecting on any past debt). BTW, be sure to enclose any identifiable info in the GW to make it easier for them to find you.

For example,

Dear Sir or Madam,

I goofed. I made a mistake. Due to a job loss back in 2006, I had several accounts go into collections. I tried my best to work out arrangements with everyone but some fell through the cracks and ended up with collection agencies, including the account referenced above. I managed to get back on my feet, become gainfully employed once more and already have taken steps via an aggressive savings program to make sure this never ever happens again. During that time, I paid off the collections a couple years ago, including with your agency, and am moving forward.

I am writing today to ask for a big favor. You are reporting a paid collection on my three credit reports. I am writing today to humblely ask if you could delete your account off my credit reports. My husband and I have expanded our family and are looking to move into a new home soon. With tightened credit standards, we are looking for every bit of help we can find to clean up our credit.

Respectfully yours,

xxxxxx

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*shutters at what I typed....it was tough submitting my ego to a CA*