Help! Financing troubles w/ med collections

Anonymous · ‎04-28-2017

Background: I'm in dire need of a new (used) vehicle. My needs are fairly specific because I have a bunch of kids, health issues, etc...can't just get anything. In other words, after lots of research and test drives, I have a specific vehicle in mind. We do all our own repairs and what I'm looking to buy is an older car (8-10 years, around 100K miles).

I've worked hard on my credit for a number of years, but it's still not great due solely to a number of medical collections. It had recently gotten to the point that they were all within a year or two of falling off, my score was improving, so I was going to let them go. Then, over the past month, I've had SEVEN new medical collections show up. I have no idea what they're for. I am in the process of validation, etc., but I never got any bills, notices of anything going to collection, nada. I do have a fairly common name so that could be it. Regardless, I can't clear those up immediately enough to get a new car as quickly as I need one. So it looks bad. I have one previous auto loan through a credit union that was never late and paid off in 2009. My FICO 8 scores range from 605-633. I have student loans that have never been late (but very high balance) and a couple of small store cards opened in the past year...something like 12% utilization. The ONLY negatives are a dozen or more medical collections, many of them small.

So...back to loan issue. I found a car. Applied through a local credit union who promised only one HP with TU (my highest score) and said my score only affected my rate...they quoted me about 6% for the vehicle I found at a local independent dealer that doesn't do in house financing.

Then they denied me. Said there "isn't much history except a bunch of collections." Also, they ran my credit THREE times through TU. I called several other credit unions (including the one who previously held my loan) to discuss my situation and see if they felt like financing was a possibility. Their answers indicated that the outcome would be the same as the denial I already received.

I do have a Capital One Auto Navigator preapproval for $35K with decent interest rates (4-7%). I'm only trying to finance about $10K on a $13-15K vehicle. I have a trade in worth $1500 and can put down $2000-3000.

The problem is that there are few dealers within a 100 mile radius approved by Cap One that have the vehicle I'm looking for. I have found several that may be better deals/nicer cars than the ones I could get with my preapproval.

I'm looking for suggestions of places to apply for auto loans that are likely to approve someone in my score range with numerous recent medical collections. I don't want to incur any more hard pulls than absolutely necessary. I also don't want a 20% interest rate. I found another vehicle I would like to look at, but it's out of town and the dealership is not on Cap One, and is a traditional dealership that doesn't seem to offer nonprime financing options.

Any pretty sure bets? Wells Fargo, maybe? I would like to use a lender whose restrictions on age and miles are a little wider than Capital One, just in case.

Thanks!

Anonymous · ‎04-29-2017

You have a few challenges but the fact that Capital One and your credit union are willing to finance you at fair rates is a good sign. Perhaps the biggest challange you will have is finding a car within your budget that also meets the lenders requirements. They don't like old, or high mileage cars because they don't maintain value reliably and frankly sometimes they have major mechnical issues that results in folks deciding to do a voluntary repo, this becomes more of a concern the more negative items and lower your scores are on your credit report. DCU, NFCU and Penfed are popular credit unions here, I believe DCU has the most liberal standards on used cars but I cannot find the specifics on their website. As strange as it sounds you may have to stretch your budget a bit more to get this done but take your time and perhaps it will all come together. Medical collections are viewed differently than other collections and from what I hear they will not count against your score when Fico 9 goes into effect, having said that lenders can use any version of FICO they wish and many are now using data from an agency and creating their own internal scores.

Wish I could be of more help, the amount you save on interest by going with a newer vehicle might offset the costs (your payment may be the same). For that reason I would look at this challenge from every angle before you set your budget and finalize your decision.

Best of luck, report back what you decide to do and the outcome

Anonymous · ‎04-29-2017

Thanks, I've kind of explored everything you mentioned before. I realize the issue with older high mileage cars, but I'm only checking with lenders that work with those kind of vehicles (and I'm trying to keep my loan around 36 months max anyway). We almost exclusively buy cars in this range and have not had issues before...and that's not the reason I was denied at all. It took some time to get to the point of actually trying to buy a car...like two years of budgeting, researching, living halfway-functionally with a vehicle that doesn't meet my family's needs. I'm not going to stretch my budget past the maximum of what I'm comfortable with, and for me, that's a certain payment range and loan length. In order to accomplish those things as well as get one of the very few vehicles that meets my family's specific needs, there simply isn't a much newer model I can go with. This is more of a necessity than a want, and after living pretty miserably for a couple of years while trying to repair my credit, research, and approach this problem from every possible angle, I feel incredibly defeated that unknown accounts showed up on my credit report the same month it became absolutely crucial that I get a new car ASAP. My scores dropped about 30 points from it, and this just can't wait.

I'm going to try to personally discuss my case with another credit union Monday, and ask them to review my credit report personally to see if they think there is even a possibility of getting me approved before pulling my credit.

I was REALLY hoping somebody with a bunch of medical collections would weigh in with a non-dealer based lender that had approved them with an interest rate under about 12%.

Anonymous · ‎04-30-2017

@Anonymous wrote:
Thanks, I've kind of explored everything you mentioned before. I realize the issue with older high mileage cars, but I'm only checking with lenders that work with those kind of vehicles (and I'm trying to keep my loan around 36 months max anyway). We almost exclusively buy cars in this range and have not had issues before...and that's not the reason I was denied at all. It took some time to get to the point of actually trying to buy a car...like two years of budgeting, researching, living halfway-functionally with a vehicle that doesn't meet my family's needs. I'm not going to stretch my budget past the maximum of what I'm comfortable with, and for me, that's a certain payment range and loan length. In order to accomplish those things as well as get one of the very few vehicles that meets my family's specific needs, there simply isn't a much newer model I can go with. This is more of a necessity than a want, and after living pretty miserably for a couple of years while trying to repair my credit, research, and approach this problem from every possible angle, I feel incredibly defeated that unknown accounts showed up on my credit report the same month it became absolutely crucial that I get a new car ASAP. My scores dropped about 30 points from it, and this just can't wait.

I'm going to try to personally discuss my case with another credit union Monday, and ask them to review my credit report personally to see if they think there is even a possibility of getting me approved before pulling my credit.

I was REALLY hoping somebody with a bunch of medical collections would weigh in with a non-dealer based lender that had approved them with an interest rate under about 12%.

One thing that might work to get those collections removed quickly is to file complaints against the collections agencies with the CFPB. Collection agencies don't like to have their scrutinty and if you suspect they are not valid that could be an option. My experience with the credit agencies is that they often times get things reported to them and do not followup in a reasonsible manner when you file a dispute. I went back and forth with the credit agencies on a dispute for some medical collections for my wife that killed her scores by over 50 points, I filed the CFPB on her behalf and in three days they were removed. I was shocked.

Best of luck, hope all works out.