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#1 of 1033 Credit Scores and Vehicle Financing
by Kirstie@Edmunds HOST
Mar 15, 2005 (1:15 pm)
How does your credit score affect your financing rate for new or used vehicles? Ask questions and share your stories here.
#2 of 1033 Sub-Prime Financing
Mar 15, 2005 (1:37 pm)
I am a 30 year old single woman in Montana with sub-prime credit. I believe that my FICO score is around 600-610.
A little history: Supported myself through law school and relied heavily (and stupidly) on credit cards. I also had several late payments - up to 90-120 days on a couple occasions. Once I graduated and got a year long judicial clerkship (AKA lots of prestige and low low salary), I realized the severity of my money predicament and entered a dept repayment program through Consumer Credit Counseling Services.
This was two years ago. I repaid all my credit card debt within a year. I also purchased a home a year ago. I do have two credit cards again with a small balance but pay significantly more than the minimum and will have it paid off by the end of the year. In the last two years, no late payments etc. Also have been in a well paying job for the last year and a half as a prosecutor.
I currently own a 99 Subaru Forester outright and would like to purchase a used van (cost would be no more than 3K - 7K). I would not be trading in my Forester as I would be using the van to travel to dog shows and the Forester for all my other driving. However, I would need to finance the van.
Applied on Capital One Auto Finance and got turned down but RoadLoans said they would loan me up to 25K but at 16.49% (yikes!). Realistically, is this as good as it is going to get for me at this stage or are there other financing opportunities/places that I should look at? I wondered if I should apply at the bank that holds my mortgage since they would have evidence that my payments were direct withdraw and the money was always there.
I would be looking at a 3-4 year loan and it would be a direct withdraw deal (if possible). I have budgeted this out and would like to spend no more than 220.00 per month on car payments.
I am not sure that it is worthwhile to do it at 16.49% but I also do not know how long it is going to take me to get out of the sub-prime category. What is everyone's advice?
Thanks so much!
#3 of 1033 Re: Sub-Prime Financing [ingridr]
Mar 15, 2005 (1:43 pm)
Well nothing we can tell you will be guaranteed because we can't see your credit. On that note your interest rate is going to be higher because of your credit history. It will be higher on a used car vs an new car as well.
In order to get out of sub-prime you will have to bite the bullet and pay higher rates to reestablish your credit. You can try your bank, but typically they do not do sup-prime lending so you may be stuck with what you've got already. Don't be afraid to let the dealer try too as they will have more than one lending institution to deal with and can usually secure a better approval than what you can find on your own.
Are you a member of a credit union? They are easier to get along with in a lot of cases and your rate would probably be lower through one.
#4 of 1033 Credit Union
Mar 15, 2005 (1:54 pm)
Unfortunately I bank at a traditional bank. However, I work as a government employee and I know that we are affiliated with a local credit union. I will have to check with HR to see if they have any info on potential loans through that credit union.
Are credit unions more willing to lend to sub-prime buyers versus traditional banks or is it dependent on the bank/union and person applying?
Should I be concerned with applying at too many institutions (ie more inquiries on my credit report)?
Also, will my utilizing a sub-prime loan (and responsibly paying it off) specifically help me in the future with car loans or will it in a general sense just improve my credit rating which will than improve my chances of not being considered sub-prime?
Sorry for all the questions - can't tell I am a lawyer
#5 of 1033 Re: Credit Union [ingridr]
Mar 15, 2005 (2:06 pm)
Credit unions make up their own rules and criteria. They can be very different than standard banks. I would definitely look into it if you have one available to you.
You definitely don't want to run too many inquiries in a short period of time. I would say to check into the credit union first, then try a dealer, if all else fails you have a pre approval in hand already.
As far as rebuilding your credit rating, it won't matter where the loan comes from as long as it reports to your credit. Ask about that at the credit union because not all of them do. If they don't than you will not be helping yourself in the future by saving a few dollars today.
Feel free to ask questions. I may need a lawyer someday.
#6 of 1033 Re: Credit Union [ingridr]
by Kirstie@Edmunds HOST
Mar 16, 2005 (6:01 am)
Many years ago, we were in a similar situation as my S.O. had just moved to the United States - he had no credit history at all here, but had a job and had started to establish a few credit cards. Still, his credit score was way low. We worked with some dealerships and we were up-front about our credit situation. The F&I guy at the store was extremely helpful, and talked with Volvo Finance to approve us at a reasonable rate (~7%) for any used vehicle with under 60K miles.
Obviously, everyone's situation is different, but if you go to a dealership, the most important thing is to be honest with them like you have been with us. They will be more willing to go the "extra mile" to try to help you if it is clear you're not trying to be deceitful.
#7 of 1033 Re: Sub Prime Financing
Mar 16, 2005 (7:56 am)
I am no expert but I got financing 2.5 years ago via Toyota Financial with a 605 credit score. The interest rate was 12% but I refinanced with my CU within one year and got that knocked down to 5.1%. I was approved from Ford with a similar score for up to $33K. The mortgage on your credit should definitely help since that counts as a major purchase. I beleive Ford, GM, and Chrysler will offer you a rate of no more than 9%, which is high but not as high as 16%. Good luck. Please let us know how things work out.
#8 of 1033 Re: Credit Union [ingridr]
Mar 16, 2005 (12:48 pm)
Hey Ingrid. I'm no credit expert but will throw in my 2 cents. I just recently financed a new car purchase and am very glad that I pulled all 3 credit reports prior to seeking financing. Luckily I did. There was an error that was not there when I'd pulled the reports the previous year.
I found some useful info on the impact of inquiries here. There are some allowances made for several inquiries over a 2 wk period when auto or loan rate shopping. See the "What to know about rate shopping section".
Hope this helps and good luck!
#9 of 1033 Re: Credit Union [macarshopper]
by Kirstie@Edmunds HOST
Mar 16, 2005 (1:45 pm)
Thanks so much for sharing that information. I'm sure it will be helpful to many of our members!
#10 of 1033 Your score has a great effect
Mar 16, 2005 (2:12 pm)
on your offerred rates.
We got a mailing from our (former) mortgate /(current) car lender with an offer of $50,000 pre-approved out of the blue in Dec. This was while I was "between jobs" too.
The only reason I can think of was our credit score and history. When I called them about it it was for real (ended up spending about $35,000.00 at 4.3%) not "great" compared to some "new car" rates, but this was for a "pre-owned" car and I didn't have to bother with F&I at the dealership.