I'm finally making a lifetime commitment and will be purchasing my first home, hoping it will be by the end of summer. I have a few questions if anyone can help me.
I'll give you some back ground....
Cap One CC ... Credit Limit $1500 Balance $0 (If I do have a charge its gas and paid off imediately) NO late payments
Car Payment ... Total Loan Amoount $14,500. Balance $6100. (payments 275. but pay $300 plus every month) NO late payments (I have a Co-signer on this loan)
Best Buy ... Credit Limit $2000. Balance $1000 (0 interest for 36 mo) I pay $100-$200 each month NO Late payments (this dropped my Score down from 719 to 687)
Bankrupcy 2003 that will be off my Credit Report Oct 2013 (thank god)
Credit Score EQ 689
So my question is... My car is a 2009 I'm starting to have problems with it. If I get the lastest item fixed it will cost me over $1,100. How bad will I take a hit if I trade it in and purchase a newer used car purchase price around $20,000 with $5000. down/trade in? Is it better for me to just get my current car fixed or wait till I purchase a home? Which might not be for another 6 months or so. There for I will have to bite the bullet and dig into savings.
First question would be why are you waitng another 6 months before possibly buying a home? Is it because you are trying to build your scores up? Trying to save a down payment? Waitng on BK to come off reports?
You would be impacted by the credit INQ for new car loan, and depending where you purchase this car it may list many INQ's even though you would only get dinged for one.Then you could be dinged for new account reporting. Then you could be dinged for the increase in UTIL.. Then you can be dinged for impacting your AAoA.
While I dont feel it would be detrimental for a home purchase and your scores, I can give you my 3 cents... Those INQ's may all need a LOE (letter of explanation) which isnt a big deal. The new car payment may impact your DTI and depending where it is now can be an issue for the amount of home you want to buy. So nothing that is a deal breaker on purchasing from information provided.
In my opinion I would probably fix the problem and not put myself into a new additional loan. After I purchase my home and see what it will actually cost, then that is when I would contemplate if I could afford a higher car payment for additional time.
Why am I waiting you ask...
1) I would like to raise my credit score to at least 720 I'm currently at EQ 689
2) Trying to get more funds in my account for emergency funds.
3) Would like to wait til October to get the BK off my Record. However everyone tells me I don't need to...?
I am going to take your advice and get my car fixed. I don't want to take any chances on getting "Dinged" any further.
Do you think my BK will be a problem? It comes off in Oct of this year. Do you know if I will have to write a letter to have it taken off my Report?
Or will it automatically come off?
Your BK will fall off all by itself when it is due to come off.
If your BK is that old it wont be a determing factor for approval. UW may ask you to write a LOE (letter of explanation)
Raising your credit score plays more of a factor with CONV loans. If you are going CONV then I agree you should build up your score for a better rate.
Building up your funds is never a bad thing, but depending on type of loan especially if using FHA you may want to start the process before the increases start.
I wouldn't get a new car unless the amount you put down is less than the car repair. A 2009 is still a fairly new vehicle and probably has at least another 3 years. I traded in a 2006 for a lease on an Acura. My car broke down 3 months before I closed on the mortgage. They wanted $2700 to fix it. I traded that sucker in for $1467 down. It dinged my credit only slightly. I qualified for FHA with 703 mid fico. I also have a bankruptcy on my report from 2003. It falls off in August. The lender wanted a LOE and the discharge paper.
I also have a BK that will fall off in October 2013 (if it falls off in the same month?) May I ask what a LOE is? How did you obtain the discharge papers? It says discharge on my credit report isn't that enough?
PS... I'm taking this threads advice and NOT trading my car. I will fix it and keep it till I purchase my first home.
An LOE is a letter of explanation. The lender wants to know why you filed and the steps you took so that it doesn't happen again.
Your BK should fall off on or a little before 10 years after your filling date.
It says discharged on my credit report as well but that is usually not enough, no. Upon discharge, the bankruptcy court sends you a letter notifying you of the discharge that is signed by the bankruptcy judge. I still had my discharge papers for both the 7 and 13 (I had to file twice). The lender wanted the filing papers for the 13 and I couldn't find them so I had to pay for a search on www.pacer.gov ...that is where your discharge letter is located. You will need the case number to look it up which you can find on your credit report under public records. The 13 was discharged in 2011 and removed from my credit report at the 7 year mark in Oct 2012, but the underwriter still wanted an LOE plus discharge and filing papers for the Chap 13. The Chap 7 is all that remains on my credit report.
MovingForward.... wow you have been VERY helpfull. I guess I will know what I might be up against for when I go to talk to a lender and all the paper work I may or may not need. This will give me a head start and get my P's and Q's in a group. Man, I hope I saved my paper work from my discharge!
Thank you so very much!!!