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Car advice - first time buyer

New Member

Car advice - first time buyer

Hello, I live in Ohio and am getting my first car at the age of 23 in late July. I plan on getting a ford fiesta 2011-2012 or Mazda 3/6 2010-2012. My budget is 12-15k. The questions I have are with a current credit score of 610 and 1 medical bill in collections.... (85 dollars) I just found out this week, I had moved and never realized. They had a old phone number on record so was never contacted, can I get a decent loan? I will be putting 4-5k down. Should I use this money to pay off my collection? Will it update in time and affect my score enough that it is worth it.

I was going to go through the long Hipaa process, but it takes months and I have to have my car by early August for college. I don't know which is the best approach in my situation. Also what type of apr can I expect with 610 credit score and a 4k downpayment. I know it's a low score, it used to be 670, but I had got a new card a few months ago and it really tanked it.

My oldest credit is 1.8 years, and I have never made a late payment.
Message 1 of 5
Moderator Emeritus

Re: Car advice - first time buyer



So as long as DTI is in check and income is there, I think you have a shot at it. Definitely try with a CU or a bank your already have a relationship with. But I would take steps to address that collection first. Check out the links below and post in Rebuilding Your Credit if you need any help for that. I'd send a DV followed by a PFD if I agreed -or- I would call the OC and ask to pay it in exchange for them pulling it back. Paying the collection [agency] itself won't improve your FICO.


Common Abbreviations

Credit Scoring 101 - great for knowing what is in your credit score and to see how your score is impacted.

What Steps Do I Take - great for learning the repair process.

and Example letters - PFDs, GWs, DVs, etc.



Message 2 of 5
New Member

Re: Car advice - first time buyer

I just checked my new Fico score and it is 636. I make about 12k a year full time in college as well. Fico says the going rate for auto loans at that score is 10%. That seems awfully high. Is that what I will be looking at with 4-5k down. Basically a loan of 7000-9000? My DTI is at 16%. Across 3 cards, a total of $1080.00. Don't have any living expenses and covered full for college FA. So it would all go to car payments, and easily affordable... But I just don't want such a high rate -_-
Message 3 of 5
Established Member

Re: Car advice - first time buyer

12k a year?


I'm not a credit guru like some other here, but I do know a lot of lenders require a certain amount of annual income to loan money.  That is extremely low.


You can negotiate APR.  That being said, with your annual income and credit score, you're a risk so the APR will be likely cost you.

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Message 4 of 5
Established Contributor

Re: Car advice - first time buyer

Offer a PFD for the medical collection now. Have you asked the CA if it is normal procedure for them to delete after payment? Hopefully yes. If not, just pay it now and send GW letters. Make sure CA sends you proof of payment so if the CA is not marked paid or deleted before you talk to lenders, you can show them that the CA is already paid.


Your income is very low and has the chance of fluctuating while you are in school. I suspect that lenders might have a hard time justifying an approval with your low income. Most of the time auto loan payments should be about 7 to 11% of your gross monthly income. Some people advocate following the 20 - 4 -10 rule. In practice this is 20% down, 4 year loan, 10 % of gross income.


10% of your gross income now is ~$100 a month. With a 48 month loan and 20% ($5k) down, you can afford about a $9k vehicle. This is assuming that you can get an 8-10% APR.  Edit: I realize most of your school and living costs are already covered right now. I would still caution against taking on several hundred dollar a month auto loan on your income.


First, I would try hard to get the medical CA to accept a PFD. Second, pay down your CC utilization to only a couple of hundred bucks on the highest limit card. That 16% utilization is killing you. Not to mention unless you are in an intro 0% APR period on all three cards, your $1k+ balance is more to worry about than the APR on a auto loan you don't have yet.


Your best bet to get the auto APR you want will be to begin a relationship with a local credit union. Once you get approved with a loan, then see if the dealer can beat it.


Good luck!


Message 5 of 5