Cars, scores and the future with a 635

[Anonymous]

I recently had to get a car. I had no choice. Capital One financing offered me a loan at 11%. Yes I know it is very high but again I had no choice and I only have a 635 Experian score. For background my credit situation is as such:

Average age of accounts=1 year

Number of credit cards=6(none of them have a balance). Cap 1 Platinum secured, Cap 1 Quicksilver 1, Discover secured(now unsecured), Open Sky, Credit One and Walmart

Wayfair=$2600 balance out of a credit line of 3k

Cap 1 car financing=$25k

Now that I have this car loan at 11% my goal is to refinance it as soon as possible. However I've read on this board that the car loan will actually pull my score down until I have almost completely paid it off. Is this true? Or if I pay atleast one year on the car with no late payments will it be easier to refinance? What expectation should I have of my credit score rising or lowering over the next 12 months?

Also some good news-my Capital One Quicksilver One raised my credit limit from $300 to $500 via the credit steps program. Should I expect this particular card to increase my credit limit over time? Or will I need to apply for a different card in the future?

I really want my credit score to rise. I know I need to pay down that Wayfair and thats my goal by the end of November. 

Also i recently placed a credit freeze on all my reports as a deterrent to apping. Frankly when I have apped I am getting small credit lines(like $400 etc).

[Jannelo]

My score didn't decrease with my new Cap One car loan.  After getting the car loan and within a couple of months a new CC,  my FICO scores rose quite a bit.  Other things were happening also, but it definitely didn't bring down my scores.   My FICO score was  590-something when I bought my car sometime in late April, I believe.  It's now 638 on Experian.

[Anonymous]

In most cases, if you're responsible with your loan and credit cards and pay them in a timely manner you're scores are going to rise. CRAs like to see a mix of accounts. It's been a while and I don't remember the details exactly but my scores took an initial hit from the inquires from the dealer and the bank to pull my profile. After a couple of months by score bounced back to normal and progressively rose.

What I found most surprising was that once I paid off my automotive loan, my scores dropped around 30 points. I had no clue what was happening and thought someone had stolen my information to open new accounts. After digging around, what caused my score to drop so much was that after paying off my car loan, my mixture of accounts were solely of credit cards.

[calyx]

Any score hit you will take from getting a new loan will be temporary - what you've done is reset your age of youngest accounts to 0 months and may or maynot have dropped your average age of accounts across a scoring threshhold.

The good news is that if this is your only installment loan, it will help your scores because FICO scoring likes to see a credit mix and that loan will boost you some points.   Another piece of good news is that the utilization % on that loan won't negatively affect your credit score like util% on cards does.   You will get a boost when your utilization drops below 9% on that loan, but I'm going to guess it will take a while.

What's really hurting your score is that high % being used on your wayfair card.  If you can drop it below 28% (840), you should get a rise in your scores.

[Hockeypnc1]

My experience with Capitol One Auto financing was pretty good. I too had a low score, but they re-financed my used car loan which was through Honda Financial at 19.99% down to about 14.4% -- that still hurt. But they were kind enough to take me in as a customer and allowed me to split up my payments with auto-pay every two weeks.

After about a year with them at $320 a month and 14.4%, I refinanced with DCU Credit Union at 6% and only $231 a month, a huge savings.

[KJinNC]

The car loan will help more than it will hurt, starting very soon and moreso over time.

In an ideal world, you want all of your cards at below 9% utilization (in a really ideal world, you want them to all report $0 except one that reports a very small amount, but that's "wrestler getting to weight" stuff that isn't necessary on an ongoing basis). The closer you can get to that, the better. Wayfair is the low-hanging fruit for you IMO. A human loan officer would circle your current balance/limit there with a red pen.

You should be able to refinance pretty soon IMO.