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Need Advice when Rebuilding Credit for Auto Loan

sporks
New Member

Need Advice when Rebuilding Credit for Auto Loan

Goal: 

I would like to apply for an auto loan around October 2020 and qualify for a low interest rate.

 

Positive Financial History:

1) Mortage: only $50k balance left and always paid on time. I don't have any other loans.  Will pay off early if I can get a low enough interest rate on the auto loan.

2) American Express Credit Card: opened in 2003, Paid in full every month, $5k credit limit

3) Kohls's store credit card: always paid in full

4) All Utility Bills and Phone bills paid on time.

5) Credit card utilization pretty low at $600 per month.

 

Negative Financial History:

Credit Card 1:  card owner wrote off debt in 9/2017 and sent 1099-C tax statement for 2017.

Credit Card 2:  stopped paying in 12/2016 and finally settled with them in 2/2019.

 

Recent History:

1) First credit card company that issued 1099-C is now bombarding my mailbox with preapproval offers (two years later). 

2) Applied for a Chase credit card this month 9/2019 and was approved for an $9k credit limit.  I used to have this same card years ago, but Chase closed it since I had not used it for a long time.

 

FICO:

1)  FICO 8 is currently at 702, but i'm guessing it might drop a little due to that Chase credit card application.

2) FICO says Key Factors affecting score:  Serious Deliquency and Too few accounts currently paid as agreed.

3) FICO went from 613 to 696 in February 2019.  I'm guessing due to settling with the second credit card in February.

 

Questions:

 1)  Is there anything else I need to do to continue building my credit? Seems like my credit score is already heading upwards as these negatives start having less impact.

2)  Should I establish a savings account with a company like Penfed to get some sort of history going before I apply for a loan?  Not sure if that's is worth hard pull now or I should wait until next year when I am shopping for auto loans. 

Message 1 of 10
9 REPLIES 9
AllZero
Mega Contributor

Re: Need Advice when Rebuilding Credit for Auto Loan

1) You have 3 revolving credit cards and an installment (mortgage) loan. That will help you to maximize points, positive payment history and time. Practice All Zero Except One card with utilization 8.9% or less.

Can you pay off the CC #1 charge off?

2) You can join DCU, its a soft pull EQ for membership. Check out if their rates are competitive with PenFed or a local CU.

PenFed will be hard pull EQ to join. Maybe it's best to wait until your charge off is addressed and your score rises a little bit.

ETA Once you close your only installment loan, you will lose +- 20-30 points. Take that into consideration if you plan to pay off mortgage early and car shop.
Message 2 of 10
AllZero
Mega Contributor

Re: Need Advice when Rebuilding Credit for Auto Loan

When was the last time you asked for a Credit Limit Increase on that AmEx?
Message 3 of 10
sporks
New Member

Re: Need Advice when Rebuilding Credit for Auto Loan

Thanks AllZero

 

The CC #1 charge off could in theory be paid off, but it's fairly sizeable.   You could buy a car for that amount.  Both of those credit cards were opened up by my spouse who died.  They were old cards and our recollection was that I was an authorized user on those cards.  Credit card companies claimed they were joint accounts.   So when my spouse died it turned into this circus trying to sort it out with the credit card companies since they don't keep any paperwork on accounts established that long ago.

 

I haven't actually checked how these two problem credit cards are reporting on my actual credit report so I should probably do that to.   When I inquired in writing, CC#1 actually sent me a letter saying that their card isn't even reporting on my credit report after they generated the 1099-C, but I really doubt that.  Still worth checking.

 

Would there be any benefit to trying increase the credit limit on the American Express that is currently at 5k credit limit?  I don't need the credit since I charge only $600 a month and the new Chase card with $9k limit puts me at about 4% utilizaton.

Message 4 of 10
sporks
New Member

Re: Need Advice when Rebuilding Credit for Auto Loan

AllZero:

 

Regarding your second post about the American Express card:

 

I increased the limit from $2500 to $5400 in April 2019.  At the time, they were hounding me to put my income when i logged in and also sent emails that I was preapproved for a credit limit increase.

Message 5 of 10
AllZero
Mega Contributor

Re: Need Advice when Rebuilding Credit for Auto Loan

You've joined a good forum to be on. Stick around and absorb the knowledge here.

 

The Definitive Amex 3X CLI Guide

 

One thing we try to do here is push limits.

Message 6 of 10
AllZero
Mega Contributor

Re: Need Advice when Rebuilding Credit for Auto Loan


@sporks wrote:

Thanks AllZero

 

The CC #1 charge off could in theory be paid off, but it's fairly sizeable.   You could buy a car for that amount.  Both of those credit cards were opened up by my spouse who died.  They were old cards and our recollection was that I was an authorized user on those cards.  Credit card companies claimed they were joint accounts.   So when my spouse died it turned into this circus trying to sort it out with the credit card companies since they don't keep any paperwork on accounts established that long ago.

 

I haven't actually checked how these two problem credit cards are reporting on my actual credit report so I should probably do that to.   When I inquired in writing, CC#1 actually sent me a letter saying that their card isn't even reporting on my credit report after they generated the 1099-C, but I really doubt that.  Still worth checking.

 

Would there be any benefit to trying increase the credit limit on the American Express that is currently at 5k credit limit?  I don't need the credit since I charge only $600 a month and the new Chase card with $9k limit puts me at about 4% utilizaton.


I'm sorry to read about the loss of your spouse. We'll cherish the memories of our loved ones.

 

If you were not the primary account holder and not joint, it would be something to check into.

 

You can pull your own 3 bureau report at creditchecktotal.com (part of Experian) for $1. Cancel in 7 days or less to avoid the reoccurring charge.

 

Higher credit limits help with utilization padding and unforeseen expenses.

 

I believe its a 6 month interval for CLI request with AmEx.

Message 7 of 10
sporks
New Member

Re: Need Advice when Rebuilding Credit for Auto Loan

That Amex thread was super helpful.  Looks like my 180 days will be up on October 2nd. What great timing that I posted for advice. Thanks again.  Will keep this thread updated to see how it goes.

 

Any idea how much i should request from Amex?  Card is from 2003 so i haven't proactively requested anything since then. (except for this past April when it went from $2500 to $5400.)

Message 8 of 10
AllZero
Mega Contributor

Re: Need Advice when Rebuilding Credit for Auto Loan


@sporks wrote:

That Amex thread was super helpful.  Looks like my 180 days will be up on October 2nd.

 

What great timing that I posted for advice. Thanks again.  Will keep this thread updated to see how it goes.

 

Any idea how much i should request from Amex?  Card is from 2003 so i haven't proactively requested anything since then. (except for this past April when it went from $2500 to $5400.)


I'm glad you found it helpful. Having higher credit limits will make your credit profile stronger.

 

For AmEx, I would try 3x your current limit. Then, repeat every 6 months. Unfortunately, I don't believe CLI can be  retroactive from 2003. It would be nice, though 😉.

Message 9 of 10
randomguy1
Valued Contributor

Re: Need Advice when Rebuilding Credit for Auto Loan

FYI - If you apply to open an account for PenFed, there will be a HP as mentioned earlier but wanted to add to that. If you apply for an autoloan, it will be most likely a separate HP as they use different systems. This happened to me in the last couple of weeks. I called PenFed and they confirmed this is what they do. They would not remove the second hard pull.

Message 10 of 10
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