Auto loan advice.

[kcook998]

Hello everyone, I am looking to get some advice on how to go about an auto loan with a not HORRIBLE but not GREAT credit score either. I have had 3 auto loans in the past, two of them paid in full due to them being totaled but I only had them open maybe 6 months (unlucky when I got my license, got hit twice) one of them being from a buy here pay here that is charged off but 68% paid. The car was quoted more to fix than it was worth, and was deemed unsafe to drive by a mechanic but obviously the dealership wasnt going for that so i ultimately told them to come get it out of my driveway since i had a $3,000 warranty and they refused to work with me on getting anything fixed. I was making roughly 50,000 a year at the time and had more bills than income so I was not able to pay it while also trying to finance another vehicle so it went unpaid. All of this occured in 2022 early 2023, and I have not had an auto loan since. I do not currently have any open loans, I own my home with NO payment, and i now make over 80,000 a year. I cleaned up most of my collections and got my only late payment on a credit card back current and paid extra. I have a student loan out for 7,000 that isnt due until 2028, but i still pay on early to avoid interest going sky high. I have a score of 555 according to MyFico, and experian says 577 with them, and 588 with transunion but equifax is at a 520 and is VERY behind on all the things ive fixed on my report. This is the report most of these lenders are pulling from and they are seeing old debts along with accounts that have not been reported and old deregetory marks that SHOULD have been removed per the debt collector ive paid. I am having the crappiest time finding ANY vehicles at all that make sense with my loan structure and income. Its like the banks are confused and just say screw me because i have great income, but a thin credit profile. I will get an offer for $4500 down on a 2023 Honda accord sport hybrid with 60,000 9% apr 72 months $520 monthly. Okay i can agree with that because of my score being the way it is. But then ill get an offer for $8,000 down 27% apr, 72 months $350 for something CHEAPER or SIMILAR in price AND miles.. I understand LTV, resale value and all of the other factors, BUT why ask me for $7,000 down (27.9% APR) on a 2023 nissan kicks with 50,000 miles when it is $15,000 but then i get the $4500 down on a vehicle that is 8,000 MORE. Dealerships tell me to pick cheaper, then when i do it comes back the same or worse. I pick more expensive and its the same result. I dont have much debt and I have two things in collections one being a hospital bill for 1200 and the other for 229, But cannot get ahold of the debt company to pay it?? I know there are many others with worse off scores than mine that also have house payments and kids that make roughly 40,000 a year.. How are they getting brand new vehicles? I alone make over 100,000 with OT and no one wants to finance me... what am I doing wrong?? ANY advice is appreciated harsh or non. 

[radiofrequencies]

To put it bluntly... scores in the 500s are pretty bad. With an unpaid charged-off account, collections, and late payments, your profile is considered "dirty" and 20%+ APRs seem to be the norm for dirty profiles with scores in the 500s.

When you list your scores, you mention the credit bureau but not the scoring model and version. experian.com provides Experian FICO 8, myfico.com provides Equifax FICO 8, but equifax.com and transunion.com provide VantageScore 3.0 scores (VS3 scores are very rarely used by lenders). You can get your TransUnion FICO 8 from CreditWise. Chances are auto lenders will use one of the special FICO Auto scores. According to this, there are 9 different FICO Auto scores: FICO 8 Auto (3 total, 1 per bureau), FICO 9 Auto (3 total, 1 per bureau), Experian FICO Auto 2, TransUnion FICO Auto 4, and Equifax FICO Auto 5. The FICO Auto scores likely penalize a charged-off auto loan more than the FICO 8 model does.

You say your Equifax report is behind. Where are you seeing your report and how long has it been since you paid your collections? The best place to view your official reports is annualcreditreport.com and you can pull your reports once a week for free. Those reports will also list the contact information for your remaining collections. If the collection agencies you settled with haven't updated the accounts to reflect the balances owed as settled, you should reach out to them. If that doesn't get you anywhere you can dispute the incorrect balances with the credit bureaus. Did they agree to delete the accounts after you settled them? If the balances are correct, I don't recommend disputing accounts if they are still in the 7 year reporting window. The credit bureaus will not remove collection accounts because they are paid. It is up to the collection agencies to request deletion. I also suggest you settle your remaining open collections because seeking new credit with unpaid debts is a bad look for potential creditors.

I'm willing to bet the people with worse scores than yours that are getting new cars are paying the extremely high interest rates. Why not take the offer for 9% at 72 months and aggressively pay it off to reduce the total amount of interest paid over the life of the loan?

[Varsity_Lu]

I'm not being a jerk here, but I feel like you need to hear this: your credit is screwed up and you don't have the luxury of getting a loan. Your best option is to find a used Toyota or Honda that you can buy with cash.  Assuming you have money for a down payment, I suggest you swallow your pride and find yourself a Corolla or Civic with the lowest mileage you can afford with whatever cash you would have used for a down payment.  Drive it for a few years untill you are in a better spot.

[kcook998]

I appreciate your feedback! coming from someone who is also to the point, youre not being a jerk. As an adult I should have made better choices with my credit and I wouldnt be where I am now. I fully understand loan companies not wanting to finance someone who doesnt have much to back it up. I needed to hear an honest answer instead of what dealerships think I want to hear. Thank you! 

[FicoMike0]

Welcome to the forum! You've done to the right place.

let me say something good first, owning your home outright is great financial accomplishment. Good for you!

As far as credit is concerned, it's worth exactly nothing. 

Now, let correct you on one point, "not HORRIBLE but not GREAT credit score either." Scores under 600 are pretty horrible, don't kid yourself.

So, no loans at all, any credit cards? Sounds like bad credit and not much of it. 

The first thing to consider, to get credit, you need credit. You need to do a rebuild. Get three bank credit cards, having them report "paid as agreed" every month starts building good history. Secured cards with a $300 limit work fine, just keep the account open and never be late. Don't have to use them much.

@radiofrequencies have good advice.

Once you get better scores, credit unions like penfed are known to offer good rates.

[kcook998]

When I checked MyFico it had said it was the FICO 8 scoring model. I check Experian daily and I see things updating on my transunion side, but equifax is staying the same. I pay the $30 monthly for all 3 scoring models. It has been a little over 3 months now since everything has been paid. They were small things like Verizon for $200 and capital one for $160. I have a payment plan set up for my hospital bill that was $1200 in collections that is slowly going down (which is good) its down to $875 as of now. I did request that if i paid full balance(not a settlement), they put paid in full and delete off my report but so far only one has done that which was Verizon. Capital one has not updated on my equifax but has on my transunion. My report looks like a excuse my language **bleep** show right now due to all of the information being either wrong or not updated. I dont even look at credit karma or vantage scores because like you had said, lenders rarely use them. Thank you for your insight and advice! I was wanting to wait about another year until my credit reflected EVERYTHING positive and try again. My girlfriend is pregant and we have a 2022 ford escape we HATE but is my mothers so we dont own it but pay on it while we use it. I dont mind a civic or an accord  but with a child coming and my girlfriend having severe back issues and fibro she doesnt think a sedan will work (we also have 2 large dogs and leave a lot) so I am just stuck trying to find an SUV that doesnt have 100,000 miles on it from 2016. beggers cant be choosers, and I certainly dont expect any loan companies to offer me anything but the car we have now is having some major turbo issues that I just dont have time for anymore. I replaced my Manifold, intercooler and everything in between and Im pretty much sore of options. the Accord deal was pretty good despite my credit profile, they just wanted too much down for a CR-V. I would be out of my mind to finance a 2023 Jeep cherokee for 27% APR, but thats what the banks are throwing at me. I try not to compare myself to other people and their scenarios, I just thought it made more sense to delaerships to finance someone who doeesnt have a house or car payment (more money monthly to spend) with a large consistent income VS a single mom with 4 kids and a 40,000 retail job(credit scores the same). Ive been at my job 8 years and have had my house for 10. Do those things not matter to loan companies? I wish I could go to a credit union but I know with my one current collections bill they wont even consider it ( words from one credit union i called). I did not get educated on credit/how it works like I should have, so hearing from others who ARE is helping me tremendously. my score does suck and I just want to get into the 700 club.

[kcook998]

Youre right on that! it is a pretty bad score, I need to stick to that because anything under a 620 is awful in my own opinion, these **bleep** charts always changing whats "poor" and "fair" when i go to different websites is annoying lol. I do have ONE credit card that has a $300 balance, but I pay it as soon as i use it (bascially for gas) so it pretty much looks like its never touched. I thought about the self credit builder loan but was unsure of products like that. And thank for you the homeowners comment ! it is nice only paying property taxes haha. No open loans at all. I have literally never had a personal loan before. I have a student loan out for 7,000 but that is it. I just started college last fall. my loan payments dont start until 2028, but i have already started paying to avoid super high interest. 

[Thomas_Thumb]

If you only have 1 card you want it to report a small balance each and every month. Then PIF before due date. What is a small balance? Under 9% of the card's credit limit is a small balance. Even reporting a balance a balance between 9% and 29% of the card's CL is better than $0 reprting.

What's wrong with reporting a $0 balance? Nothing financially. However, it hurts your credit score. Why?

Fico typically penalizes 15 to 20 points for "no recent revolving activity". Any account REPORTING a $0 balance is considered not recently active by Fico although it may have been used. Only one revolving account needs to report a monthly balance to avoid that penalty.

When applying for new credit, particularly CCs, creditors will look at yout credit reports. They want to see some recent use of credit and ability to pay off balances without issue. This is another reason to report (not carryover) a balance on the card.

P.S.

I agree with your 620 score bench mark. Getting there would increase approval odds, available lender pool and more importantly open up access to lower interest rate products.

[dfwxjer]

I too am recommending you find a cash car. With the downpayment you're talking about you can easily find a vehicle you can buy in cash. 

We just bought our "about to be driving" son a 2004 Honda Element for $3000. It needed $600 for new tires, $120 for a new alternator, and $500 in front end work, but now we have a fully sorted vehicle for under $4500 with zero payment. Previously we bought our daughter a 2007 Volvo for $3500 for a similar situation. 

A car is a depreciating asset. With those credit scores you are lighting money on fire to finance a pretty vanilla car. No one really aspires to drive a Nissan Kicks so don't fall for the trap of paying $500 to be severely underwater for 2-4 years on one. 

[RiverJett]

Honestly, it sounds more like your credit profile is hurting you than your income. I’d stay far away from 27% APR deals. Try getting Equifax updated, clear those last collections and maybe get pre-approved through a credit union first. Also, cheaper cars don’t always mean easier approvals with lenders.