High Income / Lower Credit Score - Expected Interest Rate? .. and some other Qs

[Anonymous]

Hello!

I first would like to start off by saying that I wish I would have discovered this website sooner. I would have probably gained the courage & knowledge to do something about my credit sooner than when I finally did :/ Regardless, thank you all in advance for your help. I've been wanting to finally get myself a new car for a while now and this forum was the push that I needed!

*My Story*

I am 29 years old and with some good fortune, I make over $135k a year with a 4% DTI. I will be at my job for 4 years in June (started at $38k). I finally got around to doing something about my credit and went from mid 500's to now: 653 Equifax, 645 Experian, & 657 TU. I just paid in full two accounts ($75 & $261) that were in collections and now waiting for my report to reflect that. I have Capital One & Chase that is on my collections report and the balance shows a $0 balance.

I would like to get a $30 -$40K / 60 month loan for a new car. I plan on putting $10-15k down.

*Questions*:

1. What sort of interest rate should I expect given my current situation (higher income / fair credit score)?
2. Can i get that high of a loan?
3. How much should I expect my credit score to improve when those two collection accounts reflect that I paid them($75/$261)?
4. Is there anything I can do to get the two accounts that have $0 balances off of my collection report?
5. How much of a role does having a higher income play to the lending CU or Bank?                                -
6. If it does play a big role, should I expect much of a better interest rate when those collections are reported? (I need a new car now and would rather not wait for those two to report if it wouldn’t change much of my interest rate).

Ok that was a bit long. Any input would be extremely appreciative! I want to be the most prepared as possible when I finally get the car I've been wanting

Thank YOU!

[CH-7-Mission-Accomplished]

You have decent scores and a large down payment and great income.  You should be fine.  You should get like 2% - 3% interest rate.

You should try DCU first.

Paying off a collection will not raise your credit score.  Sorry.  Still it will look better to lenders to see them paid.

You can always send goodwill letters to try to get the collections removed.  If you can find anything wrong with the information on the collections, you can challenge them.  If the lender does not respond in 30 days they get deleted.

I wouldn't worry with good income, good credit, large down payment, little debt.  You should be just fine.

[CH-7-Mission-Accomplished]

Oh, you don't get a break on interest rate for having higher income.  Once you have enough income to qualify your income isn't relevant unless your loan is a close call and then it can be an offsetting factor.  But you won't get a lower rate for having higher income -- but you get lower rates for higher FICO scores.

[Anonymous]

it would help to know what if any installment loans or credit accounts you have on your report now.

Also, did you pay the collection or get a pay to delete agreement? Just paying the collection will just update it, making your score worse. Until fico 9 gets here.

You have to learn to dispute with your credit bureaus. 

If you put enough money down, your LTV (loan to value ratio) will be so good a bank will be quick to pick up the loan. Its like a super secured debt. 

The higher income helps due to DTI. But only if you can actually prove it. It also might give you a higher internal score at your own personal bank

With your stated income you could save that enough money to buy the car cash in full in like 3 months ?!? 

Your scores are plenty good enough to buy a car. DCU even conseders your score excellent. you qualify for their 2nd tier! 

[Anonymous]

Awesome. Thank you both for your input! I will definitely need to learn how to dispute. 

How much of a better deal can I really get by waiting until the end of the month to buy a car apposed to the beginning part of the month? I plan on going with the internet buying route..

I plan on applying through my two banks I currently bank through (BoA & Umpqua) and then go after some local credit unions (including DCU). Hopefully, I can get some of the lenders to get in a best offer competition. Is it better to apply online or in person for these loans? Would I have a better chance of them negotiating one another down if I was in person or is my luck all the same over the internet?

Thank you again..

[CH-7-Mission-Accomplished]

I would apply with DCU first.  If they approve you at 1.99% (or 1.49% with direct deposit), stop there.

The bigger banks have higher rates.  Car loans are the specialty of CU's.

Also, you don't want a whole bunch of inquiries on your credit reports.  

I think you would save a lot more money if you focus on getting the car price down the most you can.  At these rates the borrowing cost is almost zero.

Also if you do have financing before you go to the dealer, freeze your credit reports so they can't pull them.  They are known to shotgun your reports all over town -- even when they promise you they won't.

If you have 2% financing lined up, the only way I would let a dealer run my credit is if they have zero percent financing with their own house captive lender (like Toyota or Honda Finance, BMW Finance, etc.)

You might be working too hard on the interest rate to save a hundred bucks over 72 months when you could have worked on savings thousands off the purchase price.

Also when you have your financing lined up when you walk into the dealer, you can focus entirely on price and won't get into the smoke and mirrors of them financing and the car price etc., so you don't know where you are anymore.  Aside from 0% financing from the dealer, come with your own and DO NOT give them your social security number.  They will run your credit and shop you even without your consent.

[Anonymous]

You should have no problem getting a loan with the interest you want.  I would definitely pay any outstanding debt you have before you go for the loan.  With your income, it will look better on your report.  Have fun with your new car!   

[Anonymous]

Wow... I really didn't think i could get  rate like that. Thank you!

From what I've been reading, internet shopping seems to be an easy and safer route to ensure you're getting a good deal. Do you all agree with that? 

Also, by buying a new car closer to the beginning of the month instead of the very end - would I save thousands or more like hundreds (from the seller wanting to hit their #'s - etc.)?

Thanks.. 

[EddieK]

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@CH-7-Mission-Accomplished wrote:

I would apply with DCU first.  If they approve you at 1.99% (or 1.49% with direct deposit), stop there.

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Slight change in rates with DCU now...2.24%, 1.74% with DD.

[Anonymous]

I used the "fighting chance" method by James Bragg and it worked! Sticker price is $36,655 and I paid $30,882 plus TTL. 👊