Help me! How to rebuild credit!

[Anonymous]

Hello all,


i am planning to purchase a new vehicle by late spring/early summer (targeting may/June). I am currently saving for money down (10k is my minimum). I want to get my score in shape to get competitive offers, even potentially get special financing rates.  The brand I'm looking at purchasing is Dodge, which I believe works with Ally Financial. I ran an app on the dodge/Chrysler website. It gave me an approval amount but no APR which was annoying.  They stated that I just contact a dealer, which I did but could not give me a rate until I came and it wanted to purchase a vehicle (or so they say). The amount was 40k on my pre approval. I also ran a pre approval on cap one auto navigator. Max amount was 35k with rates ranging from 7.36-16%. The confusion came from when I attempted to use the cap one website to search for cars it was giving me rates in the 12% range for a brand new car. No matter what I did I couldn't make the system show me payments based on the 7.36. It got rather frustrating because I was trying to figure out if I wasn't missing a catch. 


Ok so here are my stats
scores: 597 Transunion - data captured from Discover whom uses FICO Score. Credit Karma has 575 transunion & 591 equifax


credit profile summary. 

Credit cards: 
discover: 430/500
cap one: 527/600

Collections per CK:
Equifax: (5yr acct: 1042; 1.7yr acct: 377) both I've disputed as I do not know what these are from. Apparently the info is accurate but I still haven't received any info on the accts or even how to handle them. I did the dispute sometime back in early 2016.
TransU: same two previously noted accts. I have two accts from the same creditor/agency, same exact dollar amount ($127, but with two dates. 1 states 8/16 the other 2/13) I will dispute these as well, unless otherwise recommended. The biggest is an account with a balance of 2100 that's 3yrs old. (I've been making payments on that one here and there).

Other debt is student loans which are paid on time as they are direct debt.

So where should my focus be? Should I just pay both the cards down in full and let them sit? I've been reading that utilization hurts my score a lot.

Should I & What should I be attempting to do with the collection accounts?

Any help and direction is needed and appreciated.

Thanks!

[Gidgetmom]

Two things I've learned....high utilization hurts your score and paid collection accounts won't help your score, but look better on a manual review.

The first thing you can control easily is your utilization.  This will give you an increase in your score.  Probably not enough for special financing rates, but high enough you might get an approval.

These prequalifies from Cap One and Ally are not a given.  Something in your file meets their bare minimum requirements, but does not necessarily mean an approval.  Also, with your current scores, you should probably expect to pay a pretty high interest rate.  The really good rates go to those with mid 700's and above.  Not sure with the collections that you would be able to get that much movement from the high 500's to the mid 700's by spring/summer, even with the collections paid.

Im in a similar boat...wanting a new truck spring/summer but have high utilization dragging my scores down.  I have a few paid collections.  I'm at 632/671/670 (myFICO scores).

Before you head out to buy, I strongly suggest you purchase your Fico 3B report and check your Fico Auto scores.  The higher that score the better your chances of approval and better rates.

ive only been rebuilding for a year and hopefully more experienced rebuilders will join in to help!  Good luck to ya!

[Anonymous]

I would continue to work on your scores, but from what I've personally seen, Cap1s Auto Navigator is very reliable. I was able to use it last year and got a pre-approval for an amount and set APR. I did not have to have a specific car or dealer in mind. Walked in with the pre-approval and was out of the dealership in about an hour

[EAJuggalo]

Those advertised rates generally need at least a 720 score.  Pay down the credit cards, letting one of them report $20-30 and the other reporting $0.  That will get you some points and get you over 600.  Do you have a credit union?  I purchased a vehicle last year without a credit score and my CU beat the dealer's financing by 7%.    With that big of a down payment you should be able to get qualified for just about anything, but the interest rates are going to be fairly high.  I would take care of the collections with some of the money you have saved for a down payment, that sends up a big red flag if you have unpaid things on your report.

[Anonymous]

So I know right now I could walk in and use the cap one and get a car under the 35k just on how the program works. I also reached out to someone since posting this and typically cap one comes in at the lowest APR if the car is brand new, so maybe it was just a glitch with the system.  But I will call them as well to get clarification. I'm trying to get offers now to be able to compare them to closer to when I went to buy. 

As as far as Chrysler they said the dollar amount just could not exceed the 40k, well it was a very specific amount, it was like 39,871 or something like that. But the APR will be based on the deal structure. So term I picked and total amount financed and new/used I guess. 

Common misconception is that you do need a 720 or higher to get a lot of the promo rates but that's not true. Toyota financial TFS actually only looks for 650-675 to earn their promo rates. Of course the higher the better but with the lower scores the dealer can make a call. Also they work in tiers, 1+/1/2/3/ etc.  so while I may not get the 0% from dodge which I would love, maybe I could get 2.9 or something who knows. 

But it seems like the general consensus is to pay down the cards? 

Would paying off all the collections help as well?

[Anonymous]

IMHO ... pay down your cards, the high util is hurting your score. 

And honestly, unless you NEED a new car, (like your old car is dead/dying and repair bills are more than the car is worth) I'd wait at least a year. STarting at just under 600 you can be in the mid 700s by this time next year through responsible use and growing the tradelines you have. 

And even then, if you need a car, looking at maxing your budget from the start is a bad idea. Maybe consider something used? Maybe something that won't hurt your monthly budget so much? Have you really looked at what a car payment is for a $40K loan with a subprime auto loan? 

I work in the auto industry, behind the scenes, and let me tell you, dealers will tell you ANYTHING you want to hear to get you into that door. And when they do, they're going to overwhelm you with information, and they're going to ask you what you want your monthly payment to be, not what your max budget is, and they will run you to the brink of that monthly payment, sometimes extending your loan to seven years just to hit your monthly payment number. 

I know you think mid 600s will qualify you for promo rates, but they won't, plain and simple. You're going to want a score of 720, minimum, to have any kind of leverage when you're shopping for a car. Otherwise, you're on a ride and they won't let you off until they hit you with 15+ inquiries when they run your credit and you're left wondering what happened. 

Be patient and play the long game. My scores went up 150 points in under a year through smart use and using the suggestions and expertise here. You have two credit cards, with toy limits at this point. No one is going to salivate at the idea of loaning you $40K for a car. 

[Anonymous]

Ok just because I am able to get a 40k car, I never stated that was the loan amount I was seeking. Now the loan amounts are coming based on my DTI. I'm applying now like I said simply for APR and to see where I stand. The dollar amount is important because I knew what I could get approved for.

As far as knowing the tier scores it's from first hand experience based on previous work experience. I just wanted to know if anyone knew what score the other banks were looking for that's all. Just want to have a goal to shoot for is where I'm at and what makes the most sense to attack first.

As far as replacing my current car it needs to happen sooner than later. I'm trying to be better with planning out larger purchases. I don't want to keep stringing the car along and then have it break and be forced to make a hasty decision I will regret.

I know myself I'm not going to let a dealership pin me into something that i don't want to do, if it doesn't work out when the time comes I will just walk away.

I'm not unrealistic to the point of expecting a 700 score in the next four to five months. But I figured with the amount down and the paid off credit cards I can get my score well over the 600 border.

I'm just gonna pay both the cap and discover card off in the next 2-4 weeks. And take it from there.

[EAJuggalo]

A couple things to remember, if you pay both cards off and have them report $0 you will actually lose points.  It looks like you're not using any credit.  Ideal is about $20 on one card.  If the collections are for tradelines listed in your report they might be doing additional damage to your score, I would take care of those first.

[Anonymous]

Ok that's good to know. i was under the assumption to pay it in full.

As far as the collections none are from trade lines. I know two or three are the smaller amounts seem to be medical (idk from what) - maybe I'll just try to settle on them. The other ones are from utilities and such from an old apartment. (Stupid roommate while in college, never trusting someone again).

But thanks For the info. I'll leave the cap card with the balance on it since it has the higher limit. Pay that one down to about $20-$50 bucks. And clear out the discover totally.