cancel
Showing results for 
Search instead for 
Did you mean: 

Missed a "normal" car loan rate by 5 points

GSPatton
Established Member

Missed a "normal" car loan rate by 5 points

I inquired about a used car loan with my CU, and I saw that my FICO was just 5 points below their 630 tier. The difference in rate is 6.5% from 9.5%. I guess this is their bad score cutoff. Is there something I can do to bump my score slightly? I have one existing car loan and one CC, but my utilization is already 1%. I have 8 inquiries on my report from a year ago, when I last tried to buy a car. (I didn't realize the dealer did this when he offered to find financing.) It's all the same date. Does it count more than once? I could pay off the first car loan ($6000), but that would hurt my score, right? I have one collection on my report for $120. Would paying that help? Could I start with a bad rate and realistically hope to re-fi quickly? Any advice would be welcome.
5/10/17: EX 595 EQ 585 TU 579
6/20/17: EX 670 EQ Uknwn TU Unkwn

Message 1 of 8
7 REPLIES 7
workingfor850
Valued Contributor

Re: Missed a "normal" car loan rate by 5 points


@GSPatton wrote:
I inquired about a used car loan with my CU, and I saw that my FICO was just 5 points below their 630 tier. The difference in rate is 6.5% from 9.5%. I guess this is their bad score cutoff. Is there something I can do to bump my score slightly? I have one existing car loan and one CC, but my utilization is already 1%. I have 8 inquiries on my report from a year ago, when I last tried to buy a car. (I didn't realize the dealer did this when he offered to find financing.) It's all the same date. Does it count more than once? I could pay off the first car loan ($6000), but that would hurt my score, right? I have one collection on my report for $120. Would paying that help? Could I start with a bad rate and realistically hope to re-fi quickly? Any advice would be welcome.

There are several things you can do to increase your score, the rebuilding section has the best advice for bumping your score.  The good news is as long as you have an acceptable loan to value ratio and scores you can pretty much always refinance and there are no fees to do so.  I refinanced twice in two weeks to bring my rate from 12.57% to 4.29%.  The progress I made was in about 6 months.  Dealers will pretty much always blast your credit to a bunch of lenders to get you financed so that is one of several reasons that the folks here will suggest getting preapproved through a credit union before you go shopping.  I would suggest focusing on getting your scores improved (vistit rebuilding) and then applying with DCU or Penfed for the best rates (NFCU is great also if you can get in).   I would not pay off the current car loan because you are correct it will cost you points.  If I were you I would pay off that collection, you may not get a significant bump in score but not having any open collections is a good thing and 120 bucks is a cheap way to clean up your credit.  You can certainly allow a dealer to give you a crappy rate and refinance assuming the loan to value etc is good, that is what I did three years ago when I was in a bind but if you can avoid that it is better to do so.  Do you need a car ASAP or can you wait a couple of months while you maximize your scores?  Also have gotten your annual free credit report and examined what else could be holding you back?  Your score seems low for someone with good utilization and only one collection.  

Message 2 of 8
GSPatton
Established Member

Re: Missed a "normal" car loan rate by 5 points

We have a short sale that is 5 years old. I have 4 30-day lates on my current car loan. I think we have that sorted out going forward. I might ask for forgivness on the last one back in Dec., since we paid on their website 2 days before the 30 days, but it didn't get counted until after. Not expecting anything there from WFDS, but who knows. Yes, I need car fast. Public transit can take 2.5 hours to get me to work (one way). I hope we can purchase and refinance when my score improves. I just opened an account with NFCU, so I will apply there and with Patelco. When I refinance, I'll have to move the loan, right? Would a credit union re-fi their own loan? Also, I heard that paying the $120 won't help my scores at all, so I wasn't going to bother, especially if it just extends the reporting period. If it would gain me 5 points, I would pay it immediately and try to get experian to update the info before I do the loan apps.

5/10/17: EX 595 EQ 585 TU 579
6/20/17: EX 670 EQ Uknwn TU Unkwn

Message 3 of 8
workingfor850
Valued Contributor

Re: Missed a "normal" car loan rate by 5 points


@GSPatton wrote:

We have a short sale that is 5 years old. I have 4 30-day lates on my current car loan. I think we have that sorted out going forward. I might ask for forgivness on the last one back in Dec., since we paid on their website 2 days before the 30 days, but it didn't get counted until after. Not expecting anything there from WFDS, but who knows. Yes, I need car fast. Public transit can take 2.5 hours to get me to work (one way). I hope we can purchase and refinance when my score improves. I just opened an account with NFCU, so I will apply there and with Patelco. When I refinance, I'll have to move the loan, right? Would a credit union re-fi their own loan? Also, I heard that paying the $120 won't help my scores at all, so I wasn't going to bother, especially if it just extends the reporting period. If it would gain me 5 points, I would pay it immediately and try to get experian to update the info before I do the loan apps.


Paying the collection will not extend the reporting period, it reports from the date of first delinquency.  The only time they can reset that date is if you made a partial payment and then became delinquent again. Those 30 day lates on your auto loans will be a factor but like any late they diminish with age.   Most lenders do not refinance their own car loans but DCU actually does, NFCU does not.  If you need a car loan asap then get the best loan you can from a credit union or even a subprime lender and then work your rebuild on scores so you can refinance a few months down the line.  Those 30 day lates will diminsh at the 1 year mark and effectively have no impact at the 2 year mark.  On the WFDS late that you want to get removed, they won't do it for you voluntary (been there).  I would dispute that late with all three credit agencies and then if they refuse to remove it still file a complaint with the consumer financal protection buereu (CFPB).  I have found the CFPB to be very effective, lenders don't want to risk their wrath so they are quick to remove anything that is even close to borderline but you will need to dispute the regular route first to have a strong enough complaint to get their attention. I can't guarentee that paying the collection will get you 5 points but I can guarentee it won't hurt you at all to resolve it and having no open collections is a good thing.  To me it would be well worth the 120 bucks but that is a call you have to make.  

 

If you have to take a loan that is not ideal with the idea of refinancing you want to make sure your loan to value is around 100% or less if possible to give you the best chances of refinancing, if its a new car 120% will be ok.  We see a fair number of folks here that get stuck with high interest loans because they have too much negative equity to refinance, negotiating a good price, avoiding any add ons like extended warranties and putting some money down are all good ways to ensure you can preserve a acceptable loan to value ratio.  

Message 4 of 8
GSPatton
Established Member

Re: Missed a "normal" car loan rate by 5 points

Thanks for that specific help. We got turned down by my CU, but I signed up and got approved by NFCU. I had requested $25K, but they approved for $30K @ 3.99%. It looks like they used TU, so I guess our TU score was higher. This is great. The only uncertainty I have now is that we were approved for a used car loan, but we have since been looking at new cars of a different model at about the same price. Hopefully, if we try to process for a new car, they can simply adjust the rate a little in our favor. We'll put $10K down, so the loan to value should be fine. I'm surprised and happy at this result. I will enjoy working on the items you mentioned without having them blocking our purchase.

5/10/17: EX 595 EQ 585 TU 579
6/20/17: EX 670 EQ Uknwn TU Unkwn

Message 5 of 8
GSPatton
Established Member

Re: Missed a "normal" car loan rate by 5 points

The final rate was 2.39% over 60 months. For a short while we'll have two car payments, but we'll get through it. The SUV is so much more practical than our compact 4-door for a family of five. I just had to add it to my sig. Thanks to the community for helping us get on track and making this possible.

5/10/17: EX 595 EQ 585 TU 579
6/20/17: EX 670 EQ Uknwn TU Unkwn

Message 6 of 8
tydawg
Valued Contributor

Re: Missed a "normal" car loan rate by 5 points

Congrats! I would tell your old CU to take a hike!

Message 7 of 8
oldman87
Valued Contributor

Re: Missed a "normal" car loan rate by 5 points

Do not underestimate the impact of your open collection account on your score.  Call the collection agency and politely ask if they would "remove" the account if you pay the $120 in full, some agencies will do this in exchange for your payment.  When I checked my score for the first time (in my life) back in March, my score was in low 700s, the report was clean except for 1 closed and paid $600 medical collection and 1 open $50 co-pay collection.  I immediately called and paid, explained I was unaware of the $50 collection, they agreed to remove both accounts in the next cycle.  A month and half later when those 2 collections came off the report, my EX score soared to 825.  I know you already got your loan but you should call the collection agency and negotiate for removal regardless.
Message 8 of 8
Advertiser Disclosure: The offers that appear on this site are from third party advertisers from whom FICO receives compensation.