Please advise me!

[Poquelin]

My current vehicle gives me 15 MPG. I live 1 mile from my work so that hasn't been a problem.
I'm staying with same employer (been with them for 10 years) but I will be working at a different location 36 miles away.
I want to get a small high MPG vehicle that will save me considerably in gas which in turn I can apply toward new car payment.

I don't have good credit.
MyFICO score is 638
I have a bankruptcy ch 7 discharged 13 months ago
2 credit cards with total $5000 credit limit and total $1700 current balance.
I have 3 inquiries in my report.
I have no other credit accounts or loans. No mortgage or car loan.
Income is $75,000/year. Expenses are low.

Which are the banks that are most likely to approve me for a $15,000 new car loan.

I plan to finance as close to 100% as possible and then use my down payment money about $3000 to pay down the loan and every month pay extra toward principle to get loan balance below 50% as quickly as possible because I would also like to use this car loan as an opportunity to help me rebuild my credit.

This credit score thing is new to me and a lot of you seem to know a great deal.
I'll appreciate if you all can point me in the right direction.

I realize I won't get a great rate but my biggest concern is not going to a bank that will add an inquiry and then turn me down.

[HoldingOntoHope]

In your credit situation it may be best to just find the car you want and let the dealer shop the loan. You may get a better rate than you think. In any case if you apply extra to the car loan each month you will probably be able to refinance to a decent rate with a year of on time car payments. If you really want to try for pre-approval before you go to the dealership then apply at Capital One auto loans. They will almost certainly give you some kind of approval. But rate shopping on your own with multiple lenders when there are credit challenges involved is not the best idea.

[Poquelin]

Hello HoldingOntoHope,

I want to thank you for your advise. This is going to sound strange but up until 1 week ago the world of credit scores and reports was completely unknown to me. I've just known for years that I had bad credit and didn't think there was anything I could do about it. Since I've began to learn about the subject with MyFICO, I feel empowered and confident that I will establish excellent credit and be able to better manage my financial future.

I went to Ford dealership and they got me a $16,000 loan for 72 months at 16.78%. Pmt is $360/month. I put $1000.00 down.

I know this is not a good rate but I am just surprised I got approved at all. I actually had $3000.00 for a down payment. I will now use the other $2000.00 to paydown the loan immediately and I plan to pay extra every month to bring down the loan balance as fast as possible.

One of the main reasons for getting this car financed is to help re-establish my credit so I am not terribly concerned about the interest rate I got right now.

My question to you, and anyone else in the community that would like to offer their opinion, is this:

I have the ability to pay the loan in full by the end of this year. For purposes of improving my credit score, Would I be better off continuing making my monthly payments on time for the remainder of the term of the loan? or would my credit improve more if I pay off the loan in full by the end of this year?

Again, thank you all for your postings, I have learned a great deal in a short time. My next goal is to finance a house for my mother so she'll have her own place to live. She just lost her home to forclosure.

[boomhower]

Congrats on the approval.  A couple of things:

1.  Insallment loans like car loans behave differently than revolving like credit cards.  Utility of installment loans doesn't really matter.  Getting the loan to under 50% is really going to do anything score wise.  It's just important to make your payments on time and not have any lates.

2.  Take that $2k and put towards the loan and pay extra every month.  This is not for credit reasons but for refinancing reasons.  You have a very long loan at a very high interest rate.  Paying the scheduled payments is going to have you very very upside down for a very long time preventing you from refinancing to a better loan.  Pay as much as you can comfortably afford towards the prinicple every month and then in six months or a year apply to a good CU for a refinance to cut that rate in half.

[Dustink]

Why did you go with a 72 month loan?

The dealer could have gotten you a much better rate on a 36 month loan with the full $3,000 down.

Pay as much as you can as fast as you can. Then refi ASAP. Now you are paying over $7 per day in interest on that vehicle. That alone is eating up your fuel savings not even counting the $16k cost to aquire the vehicle.

[oscar_actuary]

The ole buy a new car to save gas rationalization

I feel like if I were to post my thoughts on here always, I'd come off as a real jerk; but sometimes tough love is what we need.

At that rate, who cares what makes your credit score marginally better, just get the darn loan down down down fast fast fast.

I sorta agree with the idea to sell, but at 75k/yr and the ability to pay it off quick, it sounds like you dont have cashflow problems.  I have an extra car and considered selling it.  But then realized at 6k miles per year, I could drive it for another 6-10.  So, why give that up to save $300 in insurance and tagging.

[Robertwd82]

I would take 1600 of that 3000 dollars and pay off one of your credit cards, and the other one, pay it down to let it report less than 9%. The rest of it to the car loan. Wait til it reports and you get a score bump, hopefully a big score bump, and THEN refinance it. It can even be right away after your score goes up, or you could wait 4- 6 months for the credit history of the car loan to help as well and then with the added bump from paying off credit cards you can hopefully get approved for 1.9 and DCU. You may be able to get 5.9 from them when your credit score goes up after paying off/down your CC's, but not sure if they are BK friendly. Worth calling them and asking.