How to find what I would qualify for?

[MarineVietVet]

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@Mailak wrote:

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Definitely, I will do that.

I was thinking of going first to my bank (Wells Fargo). I'm not sure if they would try to pull the auto enhanced but I will report back on whatever I find. What other places should I try? I know it is recommended to try credit unions as well.

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I think it's a good idea to contact lenders you already have a relationship with; in this case WF. But my last few car loans have all been through a local, small CU. I feel more comfortable working that way.

Plus I can call the LO anytime and she will tell me my EX FICO without a HP. That in itself is worth alot!

[Mailak]

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@MarineVietVet wrote:

I think it's a good idea to contact lenders you already have a relationship with; in this case WF. But my last few car loans have all been through a local, small CU. I feel more comfortable working that way.

Plus I can call the LO anytime and she will tell me my EX FICO without a HP. That in itself is worth alot!

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Ooh, nice!

I myself have been thinking of establishing some savings account or something with a CU just to get a relationship going.

[OptimalFICO]

Mailak,

According to the Wall Street Journal:

 ~ You're usually better off obatining auto financing from a financial institution, not the car dealer.

 ~ Your monthly car payment should represent no more than 20% of your disposable (net) income. This amount should cover not only your car payment, but all of your car related expenses, such as insurance and gas. It is easy to be persuaded to spend more at the dealership. Set a reasonable price limit ahead of time and stick to it.

 ~ Long-term auto loans will cost you dearly in interest over the long run. The ideal car loan term is anywhere from 3-5 years.

Car dealers are notorious for talking payments, rather than interest rates, often resulting in you paying a higher rate and more overall for the vehicle. You can get an auto loan preapproval from your bank, Wells Fargo, but I have found credit unions to be way less expensive for car loans. Pentagon Federal Credit Union, for example, currently has rates at 1.49% and 1.99%. Ally Bank is also good. Most importantly, before you apply make sure the lender reports to all three major credit bureaus. Maybe check BankRate.com for current rates as well. Once you are pre-approved, you're basically a cash buyer and can concentrate on negotiating the price of the car.

There is a time period during which you can shop multiple lenders for an auto loan and have the inquiries count as one. But you are right to be wary.  If the inquiries are not coded properly as an auto loan and the lenders cannot be identified clearly as auto lenders, they may result in FICO counting them as multiple inquiries. Six or more inquiries within a 12 month period can "moderately" affect your FICO scores (but if you won't care about your scores for the next 12 months, getting the best rate might matter more than multiple inquiries that will no longer count after 12 months). Be prudent when selecting your lenders and whom you allow to pull your credit report. Do not allow an auto dealer to take your loan application and shop your application with multiple lenders. Maybe request your auto loan from one lender, then take your report and shop your loan with other potential lenders (comparing interest rates and terms, find out if there are any pre-payment penalties for an early payoff). Once you've decided on a lender, then that lender can then pull your credit report. That way you can limit the number of inquiries to one or two for every new loan. If this doesn't work (lenders won't work with you this way), then maybe try a multiple online service like eLoan.

Here is an old article with still good info from Bank Rate about financing an auto online:

http://www.bankrate.com/brm/news/auto/car-guide-2004/finance-online1.asp

Consumer Reports: Where to Shop for an Auto Loan

http://www.consumerreports.org/cro/cars/car-buying-advice/guide-to-new-car-buying/financing/where-to...

Wall Street Journal: How to Finance an Auto Purchase

http://guides.wsj.com/personal-finance/buying-a-car/how-to-finance-an-auto-purchase/

You mentioned you opened two revolving credit accounts in May. Do you need to buy the new car now? It would be better for you to wait, at least until those inquires are 6 months old and you have more payment history reported for them. Here are some inquiry rules - an inquiry only impacts your scores for the last 12 months. But inquires in the prior 3-6 months have a greater downward impact than those that are 9-12 months old and the drop for those may not be as much.

Best wishes!

[Mailak]

Thanks, OptimalFICO. I will give those links a good read.

Would the new accounts truly have a serious adverse effect? I actually have 3 new accounts from May and so lots of newly available credit. I had only one low limit CC before May, so I applied for a couple. It has 2 associated inquiries: one on EX and one on EQ. I was probably looking to do the purchase by the end of August. If it's a serious issue, I could probably delay it but I'd rather not. It would have major utility to me within the rest of this year.

Any agreeement or divergences of opinion on this issue?

[OptimalFICO]

Under the FICO algorithm of New Accounts, there are five direct sub-factors that adversely impact your scores. You may see some of these "Reason Codes" when you pull your FICO scores from MyFICO. These sub-factors are:

Inquiries:

~ 19 - Date of Last Inquiry Too Recent (TU only - only slight impact to FICO score)

~   8 - Too Many Recent Inquiries Last 12 Months (can have slight to substantial impact on FICO scores)

New Accounts

~   7 - Account Payment History is Too New to Rate (very slight impact)

~ 30 - Time Since Most Recent Account Opening Too Short (slight/moderate impact)

~   9 - Too Many Accounts Recently Opened (moderate/substantial impact)

It is possible to drop your scores up to 100 points in a matter of days from opening multiple new accounts, so you should be prudent with new credit. The real drop to your scores from opening new loans varies. For example, your scores will not always drop 30 points when opening two loans in quick succession. The FICO algorithm is more complex and looks at the types of loans you open. There are loans of financial need (mortgages and student loans) and loans of consumption (auto loans, credit cards, merchant accounts and other). Loans of consumption can have a substantial adverse impact to your scores when opened in quick succession.Note however, that because the FICO algorithm takes into account the types of credit, maybe getting the auto (installment) loan within six months of the three credit cards won't be so bad. For example, the FICO rewards getting a new type of credit that you didn't have before. So when you opened the first revolving line of credit, that should have helped your scores. But when you then rapidly opened the other two, it should have impacted your scores negatively. So since you don't currently have an installment loan on your reports (or do you?), maybe it will help your scores even if you are opening the loan within 6 months of the three new credit card accounts. But I really don't know and it's a decision only you can make. Ultimately as time passes, it will have less of any negative impact anyway once the accounts are no longer considered new if use has been responsible and within other FICO scoring factors.

Note that "New Accounts" factors accounts for 10% of the FICO score.

Also note that I have opened both new credit card accounts and an auto loan in rapid succession without dropping my scores tremendously, but I have high scores and well/long established credit.

[bettercreditguy1]

If you have an established relationship at a financial institution or two, go to them first. Then if you want, you can check out other avenues like the dealer and places you do not have any savings or checking accounts.

[Revelate]

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@MarineVietVet wrote:

Mailak,

As I said in my other post I might be 100% wrong about you not having an auto enhanced score since you've never had a car loan.

So if and when you do apply could you report back and tell me (all of us actually) whether they try to pull an auto enhanced score and if they do if one was generated for you.

I would much appreciate it.

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MVV,

I apologize for being pedantic but I think the issue got confused here: if a person has a FICO score as available from say, here, then they have an auto-enhanced (or credit-enhanced, or the not currently used mortgage-enhanced) industry option as well, at least from the bureau they were able to receive a FICO score from.

Doesn't matter whether someone had an auto loan or not in terms of generating the score, what does matter is the specific industry option assigns different weights to various factors: i.e. for a Classic score an auto loan is probably just a basic installment loan as far as FICO goes; however, for an auto-enhanced, your payment history on that auto loan becomes far more relevant in terms of the overall percentage it factors into the score.

In this case Maliak has an auto-enhanced score, but there's a non-zero chance that his will be lower than his normal Classic or credit-enhanced FICO.  Nobody really knows for certain, but anecdotally someone with just credit card / other revolving accounts, and student loans, typically will be lower by some amount.  In my case it was around 50 points because I didn't have an auto loan on record, but I still had an auto-enhanced score.

[Mailak]

If I apply for the auto loan within months of the inquiries and getting new CC accounts, will that affect the loan approval or is the concern there that the score could fall much further after the loan registers as a new account with CRAs?

I suppose the answer is both. However, I thought, to some extent, the new CC accounts have already been factored in to the FICO scores e.g. the EQ score I have already reflects the lowered AAoA. So, it might not affect the loan approval as much so long as the score remains relatively good (I think mine is, ignoring for the moment that they might use a different auto industry flavor). The other concern with new accounts is that a person is in needed of credit. I think my zero or near-zero utilization should help in that regard.

Will it be a bad idea to pursue an auto loan in this situation?

[Revelate]

Nah.  You might get some benefit to waiting as most peoples' scores trend upwards over time (assuming no new derogatory marks) but auto loans are the easiest of any loan to obtain.  Your score is your score, and if you need a car, you need a car.  You can always refi later, repeatedly if need be, to get to a solid rate even if you don't get it the first time.

[Mailak]

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@Revelate wrote:

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@MarineVietVet wrote:

Mailak,

As I said in my other post I might be 100% wrong about you not having an auto enhanced score since you've never had a car loan.

So if and when you do apply could you report back and tell me (all of us actually) whether they try to pull an auto enhanced score and if they do if one was generated for you.

I would much appreciate it.

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MVV,

I apologize for being pedantic but I think the issue got confused here: if a person has a FICO score as available from say, here, then they have an auto-enhanced (or credit-enhanced, or the not currently used mortgage-enhanced) industry option as well, at least from the bureau they were able to receive a FICO score from.

Doesn't matter whether someone had an auto loan or not in terms of generating the score, what does matter is the specific industry option assigns different weights to various factors: i.e. for a Classic score an auto loan is probably just a basic installment loan as far as FICO goes; however, for an auto-enhanced, your payment history on that auto loan becomes far more relevant in terms of the overall percentage it factors into the score.

In this case Maliak has an auto-enhanced score, but there's a non-zero chance that his will be lower than his normal Classic or credit-enhanced FICO.  Nobody really knows for certain, but anecdotally someone with just credit card / other revolving accounts, and student loans, typically will be lower by some amount.  In my case it was around 50 points because I didn't have an auto loan on record, but I still had an auto-enhanced score.

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Arguments from both of you make sense to me!

Revelate - did you have other loan history? Any kind of installment loans?