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Car loan, credit cards, and too many accounts?!

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Regular Contributor

Car loan, credit cards, and too many accounts?!

 

I went into a dealership last night to look at a car that I decided I wanted to go ahead and make a purchase on (Toyota Prius). After speaking with the loan officer, I was a bit puzzled by some of her comments regarding my current credit profile.

 

1) My score showed up for the auto loan as 595... but my updated fico score is in the 600's? That's one thing I'm a little puzzled about.

 

2) She made a comment about how many CREDIT CARDS I had open. She said that the amount of credit cards I had was hurting my score and that I needed to cancel most of them and only have about 5. That's something else I was super confused about- I didn't think it mattered that I had a couple of store cards that I use and pay in full before the statement cuts? Am I wrong?
UPDATE: I already have plans to cancel GAP, JCP & AE in January because I really don't use them as much as I should and they just sit there... but aside from that, I'm not sure why there's a number on how mnay credit cards I should or shouldn't have?

 

3) She said that once I'm approved for my auto loan, my credit is going to "go through the roof" and get so much higher.. this is also something I was confused about considering they pulled my credit at the dealership roughly 7 times (I kept getting inquirey alerts sent to my phone) and it would be considered another credit line that I need to pay off... will it really increase my scores? I have perfect payment history- I've never missed one in my life. My AAoA is low, and my oldest line is 2 years old (it's a baby), inquiries are super high and utilization is a little higher than it should be right now- but will be paid down to 25-30% on Sept 1st.

 

The dealership I went thru is fairly reputable in the automotive department, but I just wanted some clairy in the areas that I am confused about.

 

I'll find out if I am approved for the loan to proceed with the purchase of the new car on Monday or Tuesday. 

 


Message 1 of 8
7 REPLIES 7
Valued Contributor

Re: Car loan, credit cards, and too many accounts?!

Welcome to MyFICO, The following questions are not meant to offend or pass judgement on you, just try to see why you were not approved.

 

You did not list your income but that is likely also impacting your chance of approval. No need to share something that personal but that can play a big factor. 

 

Auto FICO scores can differ from the FICO 08 and FAKO scores obtained. 

 

You also do not mention what your 'debt to income' ratio is currently. Will the new Prius payment bring it over 40% or are you already above 40%?

Additionally, with a below 600 Auto score they will likely want utilization to also be low, say below 10%.

Since to loan company is looking at a 'snapshot' of your finances they are having issues with your overall credit portfolio.

 

The loan officer is trying to make the sale and that is why he ran your credit that many times. If you are car shopping, the scoring models SHOULD lump them all as one inquiry over 30 days (they still all show up as an inquiry!). That is why most people on these board recommend having financing in hand prior to stepping onto a dealer lot, you can avoid the 'shot gunning' of your application to a ton of places from the dealer.

 

What type of down payment were you bringing? You bring in a substantial down payment and they will find ways to approve.

 

I have been there and understand the frustration of trying to get the new vehicle when credit was not great. 

 

Please feel free to post any questions.

Continue to have the 100% perfect payment history. Get the utilization lower, ideally less than 10%. 

Good luck!

Message 2 of 8
Regular Contributor

Re: Car loan, credit cards, and too many accounts?!

 


@Appleman wrote:

Welcome to MyFICO, The following questions are not meant to offend or pass judgement on you, just try to see why you were not approved.

 

You did not list your income but that is likely also impacting your chance of approval. No need to share something that personal but that can play a big factor. 

 

Auto FICO scores can differ from the FICO 08 and FAKO scores obtained. 

 

You also do not mention what your 'debt to income' ratio is currently. Will the new Prius payment bring it over 40% or are you already above 40%?

Additionally, with a below 600 Auto score they will likely want utilization to also be low, say below 10%.

Since to loan company is looking at a 'snapshot' of your finances they are having issues with your overall credit portfolio.

 

The loan officer is trying to make the sale and that is why he ran your credit that many times. If you are car shopping, the scoring models SHOULD lump them all as one inquiry over 30 days (they still all show up as an inquiry!). That is why most people on these board recommend having financing in hand prior to stepping onto a dealer lot, you can avoid the 'shot gunning' of your application to a ton of places from the dealer.

 

What type of down payment were you bringing? You bring in a substantial down payment and they will find ways to approve.

 

I have been there and understand the frustration of trying to get the new vehicle when credit was not great. 

 

Please feel free to post any questions.

Continue to have the 100% perfect payment history. Get the utilization lower, ideally less than 10%. 

Good luck!


My annual income is right around 32k. Utilization currently is right around 35%. They told me my chances for approval are fairly good considering that I've never taken an auto loan before, so I'm not really worried about approval or denial. If I'm denied then it wasn't meant to be and I'll try again when my scores have improved!

 

My main question tho is about the credit cards as I listed in the original post... her comments really confused me.


Message 3 of 8
Moderator Emerita

Re: Car loan, credit cards, and too many accounts?!


@inutown wrote:

 


@Appleman wrote:

Welcome to MyFICO, The following questions are not meant to offend or pass judgement on you, just try to see why you were not approved.

 

You did not list your income but that is likely also impacting your chance of approval. No need to share something that personal but that can play a big factor. 

 

Auto FICO scores can differ from the FICO 08 and FAKO scores obtained. 

 

You also do not mention what your 'debt to income' ratio is currently. Will the new Prius payment bring it over 40% or are you already above 40%?

Additionally, with a below 600 Auto score they will likely want utilization to also be low, say below 10%.

Since to loan company is looking at a 'snapshot' of your finances they are having issues with your overall credit portfolio.

 

The loan officer is trying to make the sale and that is why he ran your credit that many times. If you are car shopping, the scoring models SHOULD lump them all as one inquiry over 30 days (they still all show up as an inquiry!). That is why most people on these board recommend having financing in hand prior to stepping onto a dealer lot, you can avoid the 'shot gunning' of your application to a ton of places from the dealer.

 

What type of down payment were you bringing? You bring in a substantial down payment and they will find ways to approve.

 

I have been there and understand the frustration of trying to get the new vehicle when credit was not great. 

 

Please feel free to post any questions.

Continue to have the 100% perfect payment history. Get the utilization lower, ideally less than 10%. 

Good luck!


My annual income is right around 32k. Utilization currently is right around 35%. They told me my chances for approval are fairly good considering that I've never taken an auto loan before, so I'm not really worried about approval or denial. If I'm denied then it wasn't meant to be and I'll try again when my scores have improved!

 

My main question tho is about the credit cards as I listed in the original post... her comments really confused me.


She is confused.  There is no magic number of cc's.

 

You are being hit hard with your score because you have a lot of new accounts and you have balances that total 35%.  How many credit cards do you have and how many have balances?  

 

You might want to wait to improve your score - and get a loan through a CU rather than the dealership.  

 

Appleman is right - the DTI factor is important and are you trying to purchase without a down payment? 

Message 4 of 8
Regular Contributor

Re: Car loan, credit cards, and too many accounts?!


@StartingOver10 wrote:

@inutown wrote:

 


@Appleman wrote:

Welcome to MyFICO, The following questions are not meant to offend or pass judgement on you, just try to see why you were not approved.

 

You did not list your income but that is likely also impacting your chance of approval. No need to share something that personal but that can play a big factor. 

 

Auto FICO scores can differ from the FICO 08 and FAKO scores obtained. 

 

You also do not mention what your 'debt to income' ratio is currently. Will the new Prius payment bring it over 40% or are you already above 40%?

Additionally, with a below 600 Auto score they will likely want utilization to also be low, say below 10%.

Since to loan company is looking at a 'snapshot' of your finances they are having issues with your overall credit portfolio.

 

The loan officer is trying to make the sale and that is why he ran your credit that many times. If you are car shopping, the scoring models SHOULD lump them all as one inquiry over 30 days (they still all show up as an inquiry!). That is why most people on these board recommend having financing in hand prior to stepping onto a dealer lot, you can avoid the 'shot gunning' of your application to a ton of places from the dealer.

 

What type of down payment were you bringing? You bring in a substantial down payment and they will find ways to approve.

 

I have been there and understand the frustration of trying to get the new vehicle when credit was not great. 

 

Please feel free to post any questions.

Continue to have the 100% perfect payment history. Get the utilization lower, ideally less than 10%. 

Good luck!


My annual income is right around 32k. Utilization currently is right around 35%. They told me my chances for approval are fairly good considering that I've never taken an auto loan before, so I'm not really worried about approval or denial. If I'm denied then it wasn't meant to be and I'll try again when my scores have improved!

 

My main question tho is about the credit cards as I listed in the original post... her comments really confused me.


She is confused.  There is no magic number of cc's.

 

You are being hit hard with your score because you have a lot of new accounts and you have balances that total 35%.  How many credit cards do you have and how many have balances?  

 

You might want to wait to improve your score - and get a loan through a CU rather than the dealership.  

 

Appleman is right - the DTI factor is important and are you trying to purchase without a down payment? 


17 cards currently. 4 carry a balance.

I am actually getting a loan through a CU- it's a used car dealership so they said they don't finance used vehicles through themselves. So that's a plus for me.

My down payment is $1400 on an $8,900 car.


Message 5 of 8
Regular Contributor

Re: Car loan, credit cards, and too many accounts?!

According to Wells Fargo, 

My Debt-to-Income Ratio before car is 9%

 

After car would be 19%.


Message 6 of 8
Valued Contributor

Re: Car loan, credit cards, and too many accounts?!

The number of credit cards, I am unsure of the best advice on this subject.

I would think leaving them open to let them age would help long term (meaning you already took the HP to open the tradeline). The big thing will be keeping the utilization in check with only a few ever reporting a balance. (I pay off charges almost immediately with the exception of few cards that I carry a balance transfer on).

 

There may be some underwriting people/bank that have an ideal number of credit cards for a given score. If someone has a low score and 20 open credit cards there is always the chance they could run up the cards is my thinking.

 

Very glad to hear you are getting the car and my guess is your score will rise with time and positive payment history.

Message 7 of 8
Moderator Emeritus

Re: Car loan, credit cards, and too many accounts?!


@Appleman wrote:

The number of credit cards, I am unsure of the best advice on this subject.

I would think leaving them open to let them age would help long term (meaning you already took the HP to open the tradeline). The big thing will be keeping the utilization in check with only a few ever reporting a balance. (I pay off charges almost immediately with the exception of few cards that I carry a balance transfer on).

 

There may be some underwriting people/bank that have an ideal number of credit cards for a given score. If someone has a low score and 20 open credit cards there is always the chance they could run up the cards is my thinking.

 

Very glad to hear you are getting the car and my guess is your score will rise with time and positive payment history.


 

I kinda doubt that for used auto financing; it's all about the down payment when we're talking dealer financing.  If you can put down enough cash you get financed. and 16% doesn't suck even if it's not the historical gold standard 20%.  From a personal example, I wound up subprime with WF Dealer Services (at a 551 Auto EX go figure) but as the UW stated he had 12000 reasons to approve me (admittedly this was with a ~40% DP).

 

And this is with a large federal tax lien open at the time, well in excess of the value of the vehicle.  Can find many other examples of similar in the auto loans forum historically.

 

Fact is with enough downpayment on any secured loan (cars, houses, etc) even if gets repossesed they still make money on it, virtually no risk especially when talking used cars when the bulk of the depreciation is already out of the price.  Someone will pick up the OP, may not be the best rate, but 6 months later with the auto loan on record can refinance the nasty APR away to something around 6% or maybe lower assuming positive history over the next six months




        
Message 8 of 8
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