Perhaps you all can help me. So I started repairing my credit at the end of 2010, where my scores were in the low 500's. I unfortunately made the mistake of just paying off the outstanding debts rather than negotiating to try and get them removed in exchange for payment. (Hindsight is 20/20!) Anyhow, I watched my reports and my scores and did see improvement. I applied for a secured credit card that does report to all three bureaus to start obtaining new positive records. Now, at mid-2012, my scores have improved quite a bit, to the mid 600's. Much of this has been in preparation of an auto purchase, since my 1994 Honda may not last forever!
Recently, a representative from my credit union gave a talk on credit and discussed their rates, giving a range of rates depending on score. I decided to pull my two from myfico and saw they fell in a middle range with a decent rate of around 5.14%. Seeing this, I became hopeful so I applied for an auto loan with the credit union.
Well, they denied me. They said that my score was on the "low end" at 671. They also said I had some negative items on my credit report (some late payments and a couple of accounts in collections) as well as low credit (my secured card is for only $300) and therefore, they couldn't approve me without a co-signer. I explained that there are no current accounts that are late and no current accounts in collections and that they were all paid. They said they could see that, but they were still on there. I also explained that I had a previous auto loan that I knew reflected paid in full on my report. There was no comment about this.
I guess I am extremely confused. I thought credit unions were a bit more forgiving than traditional banks? I also thought that your credit score is derived from the information on the report and I never thought 671 was considered a "low" score?
Is my credit union giving me the run-around, or is this valid? Other than paying my bills on time and waiting 5 more years for those accounts to fall off, how do I improve my score? And if I do improve my score, will that even matter if negative items still show up on my report (even though they are paid in full???)
Help!
Starting Score: Jan 2011: 500
Thanks, Lel, for your reply.
All negatives on the report were paid in February of 2011 and all accounts are current, with no new negatives. One new negative showed up earlier this year, but it was erroneous and after I disputed it, it was removed reflecting instantly in my scores - they're back up where they should be.
I'm just wondering what my next course of action would be. Do I write to the creditors or collection agencies and ask them to remove the items since they are paid, hoping that I can't hear their laughter? Do I dispute them? Am I stuck with what I have, with no option but to wait it out?
And if I am stuck, how much difficulty will I have getting financing at all, from anyone?
(Sorry if these questions seem nebulous. I just feel a bit disillusioned as I always thought the score was the end-all/be-all to lending decisions....)
ps - the 5.14% number I referenced actually came from the credit union themselves. I agree, it was probably just a guide as a "best case" scenario and I shouldn't have taken it so literally. Live and learn!
@gusnoodle wrote:Thanks, Lel, for your reply.
All negatives on the report were paid in February of 2011 and all accounts are current, with no new negatives. One new negative showed up earlier this year, but it was erroneous and after I disputed it, it was removed reflecting instantly in my scores - they're back up where they should be.
I'm just wondering what my next course of action would be. Do I write to the creditors or collection agencies and ask them to remove the items since they are paid, hoping that I can't hear their laughter? Do I dispute them? Am I stuck with what I have, with no option but to wait it out?
And if I am stuck, how much difficulty will I have getting financing at all, from anyone?
(Sorry if these questions seem nebulous. I just feel a bit disillusioned as I always thought the score was the end-all/be-all to lending decisions....)
A FICO score is only one part of any lender's decision and with secured loans (which auto loans are) they can be an incredibly minor part of it.
Credit Unions in general are very well regarded by the forums here for a whole lot of reasons, and many times that's the case; however, individual credit unions do have their own individual underwriting standards, and some are every bit as conservative or even more so than the typical national bank.
You're facing a couple problems, but the main issue is your positive tradeline history is extremely slight. That said, auto loan approvals are almost totally dependant on downpayment... if you can toss enough cash at a vehicle (20% or more, 30% is laughably easy approvals) you can be approved even with my credit history, and it is in all ways worse than you described when Wells financed me.
Anyway, shop around, bigger lenders may actually do you better in your case with a positive historical autoloan, but if you have a downpayment you can get financed. Look in the auto loans approval thread for some ideas on lenders which you may want to approach. In addition, the dealer might be your best chance (since they have relationships with lenders), but also lendingtree isn't a bad place either to hit a bunch of different ones, and the inquiries will all roll up into one anyway score wise (auto inquiries at least) so that's no problem. I would try to find something out rate wise so you don't walk in blind to the dealership on rates.
Also, after you figure out your car loan, go get another credit card or two... one is really too few for FICO or underwriting purposes, two is about the absolute minimum anecdotally, and three is probably better.
