Credit Score Drop Right Before Auto Loan Apps

[Anonymous]

Hello all! So I have been working on myEquifax FICO score for almost a year now and brought it up from 523 to 642 by making on-time payments with my credit card and not going delinquent on any accounts. It dropped so low originally because I went over 90 days delinquent on my credit card while I was in military training and was unable to pay it. I read that it would be better to slowly pay off the card over time to establish reliablity, so I did that, and last month I made the last payment. When I checked my score today, it dropped 47 points back down to a 595. What are my options for raising it or at least making my score not look as bad when I apply for an auto loan at the end of this month? I am really panicking because I thought I was doing well by paying it off, and this is such a shock to see a big score drop. I assume it would not be a good option to open a new credit line because it would be too much of a recent inquiry on my report. Thanks so much for any advice!

-Also, this was my one and only credit line, open for 4 years until closed recently.

[0REDSOX7]

If it is closed, and you have no open credit - you have pretty much removed one of the biggest pieces of the scoring model - available credit and utilization.

Open another line of credit (revolving) and let it report and score will increase.

Very important.

[guydiver]

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@Anonymous wrote:

Hello all! So I have been working on myEquifax FICO score for almost a year now and brought it up from 523 to 642 by making on-time payments with my credit card and not going delinquent on any accounts. It dropped so low originally because I went over 90 days delinquent on my credit card while I was in military training and was unable to pay it. I read that it would be better to slowly pay off the card over time to establish reliablity, so I did that, and last month I made the last payment. When I checked my score today, it dropped 47 points back down to a 595. What are my options for raising it or at least making my score not look as bad when I apply for an auto loan at the end of this month? I am really panicking because I thought I was doing well by paying it off, and this is such a shock to see a big score drop. I assume it would not be a good option to open a new credit line because it would be too much of a recent inquiry on my report. Thanks so much for any advice!

-Also, this was my one and only credit line, open for 4 years until closed recently.

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So did the lender close the account once you finally paid it off?  Probably.  Anyways, the fact that you have a 90-day late(major derogatory) reporting on a closed account, that is why your score dropped so suddenly.  Your available credit went to $0, and you have no positive history of revolving credit tradelines reporting now?  I agree with the previous poster.  You need to get a positive tradeline reporting.  Are you still in the military?  Have you looked into a credit union?  Try to get a credit card, even if a very low limit, to re-establish a positive tradeline to improve your scores.  Even if you have to get a secured card to get started again.  It will pay off in the short run. 

Good luck!

[Anonymous]

Thank you for your replies! So if plan to apply for an auto loan next month, it would not drop my score even further to apply for a new credit card? From my understanding, it would be a pull on my credit to apply for a credit card, correct? I have to get the new car before January (two babies that won't fit in the coupe I have now are due then), so it would be better to just apply for a new credit card, let it report, and then apply for a loan? I was just worried about applying for credit back to back like that. Sorry, just looking for clarification. Thanks!

Oops forgot... I do have one open car loan that I have never paid late for about three years now.

Also... I've been getting lots of mail from Capital One offering me a credit card due to my improved credit score. Should I just go with that or try to apply with my bank, USAA? Thanks!

[0REDSOX7]

Youll take a hit for the inquiry, then, once the credit card reports, you'll see an increase because you have available credit and utilization now factored in to your scoring.

[guydiver]

Your car loan will be challenging with your current score.  Depending upon who you finance with and what they pull, your best chance will likely be the auto enhanced Fico considering your positive auto tradeline history.  You can always talk to the finance person before allowing your credit to be pulled to see who they will pull, and if they use auto industry option scoring.  Are you going to trade your current car?  You might have a better chance of financing with whoever has your current car loan.  As for the credit card, I'm pretty sure Cap1 still pulls all three bureaus.  I don't know about USAA, but you can certainly find that info over on the credit card forum. 

[Anonymous]

I was approved for a low limit cap 1 credit card. Thanks! I will just wait until it reports and then car shop maybe at end of dec/jan. I know my score is dicey right now, unfortunately I planned on trying my auto loan credit union, then if that fails the two big maryland local credit unions, then cap 1, then as a last ditch effort maybe roadloans (although I really don't want to go there). I lurked these forums a lot trying to improve my score, so thank you all for your advice!

[b_diddy]

Congrats on the Cap1.  Good luck on the car loan.  Unfortunately, subprime loans will most likely be your only option at this point in your journey.  Just make sure you know your actual score before you talk to anyone at a dealer.  The Finance guy's job is to get you into the highest interest they rate because they get points (kickbacks).  They will often tell you your scores are even worse than they actually are ... I know yours are pretty low now but make sure you know for yourself before you walk in the door.  If at all possible, see if a local CU will work with you to preapprove a loan before you head to the dealer.

[Anonymous]

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@Anonymous wrote:

I was approved for a low limit cap 1 credit card. Thanks! I will just wait until it reports and then car shop maybe at end of dec/jan. I know my score is dicey right now, unfortunately I planned on trying my auto loan credit union, then if that fails the two big maryland local credit unions, then cap 1, then as a last ditch effort maybe roadloans (although I really don't want to go there). I lurked these forums a lot trying to improve my score, so thank you all for your advice!

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I hate to say this but from 1st hand experience the Cap One card may not report that fast. It takes 2--3 statements before it reports. I also have some experience with acquiring a subprime auto loan.  The dealer will try to get you trapped in the hiighest rate possible.  They kept mentioning ALL my baddies before they told me the rate to make me feel bad and accept the offer.  It was a mind game.  You have the power to say no to a high rate and walk away, especially since you have a car!  A lot of folks have no car or one that no longer works;so, they take the high rate out of necessity.  I believe if I had walked away they would have called me back later with a lower rate.  They want to make the sale.  There is a thread in this forum where a poster who owns a dealership answers questions.  He said buy at the end of the month at the end of the year because the dealership needs to increase sales. I bet if you walked away they will call you back!  Please don't go there desperate and not knowing your options and scores.  They will rape you.  You are military so you have all sorts of credit union options.  Get approved at the first credit union as you have planned and then go the the dealer.  Talk with the credit union and ask them what you need to do to quailify.  If you can get to 620 they will give you a very good rate.  I've read about folks who were only 600-619 and their credit union still gave them a non-subprime rate. I have the utmost respect for military people who protect us and don't want to see you get taken advantage of as I was.

[Anonymous]

Soloman - thank you for the advice! I will read that thread and see what I can learn from it. Good news is, somehow the inquiry from cap 1 raised my score to a 607. I'm happy for the small things after that big score drop. I will definitely get a loan before going to the dealership because I am absolutely terrible at dealing with high pressure car dealers. They tend to try to bully me into things. What would be an acceptable interest rate to expect?? I personally want less than 10% for sure. im looking to buy a 13-15k car with a monthly income of a little over 4k so I don't think it's unreasonable