Financing a vehicle...

[5150Joker]

I had bad credit since I was 18 years old because being young and stupid, I racked up a few thousand in charges and neglected to pay them. I'm in my early 30s now and finally started rebuilding my credit the past 2-3 years. Initially my score was in the 500s and now it just recently hit 700 and I managed to get a new 2010 car with 0% APR. Credit card companies are offering unsecured credit to me but it took the following to recover my credit:

1. private school loan
2. best buy credit card
3. amazon store card
4. bank of america visa card

I kept the balances low on the credit cards and paid them off. However, when I tried to get a limit increase on the visa, they denied me and said the reason was because I didn't keep a balance! So now I've kept a 25% balance on it and my score has improved as a result. Playing the credit score game is pretty tricky. Keep the hard inquiries on your credit to a minimum, that's actually hurt my credit a lot because I was applying for a lot of different credit cards initially (most were rejecting me when I was starting out). I could have gone the secured credit route but wanted to try my hand at getting an unsecured one and finally did. Probably wasn't the smart thing to do though.

 

[ayabe]

Look at your latest credit report from one of the 3 bureaus. Does it show any deposit accounts (savings or checking accounts)? Does it list the value of real estate or vehicles that you own? Does it even list your income?

Assets have NOTHING to do with credit a credit report or a credit score. Period! And those unsolicited junk mail offers for credit cards come from companies pulling credit scores. And most credit card companies only care about 2 things when it comes to deciding whether to give you a loan: your credit score, and your income. Take a look at a credit application. You give your SSN (so they can check your credit) and you give your annual household income (which, AFAIK, they have no real way of verifying -- your income is a matter between you, your employer, and the IRS). I don't recall seeing slots to list cars or other assets on any credit card application that I've ever filled out.

Of course, having any kind of assets will look better to a bank than having no assets -- if the bank is doing full underwriting (which I've never seen for credit cards). But $3000 in savings is just as good, or better than, a $3000 car titled in your name.

A secured credit card is the way to go. OP, save up $500, and no matter your credit score, you WILL find a bank that will give you a secured card. Also, if possible, put your name on any monthly bills that you pay. Electric, gas, water, phone bills -- they all submit payment info to the credit bureaus, and they will all help your credit score.

My roommate in college ran up about $5000 his cards and just stopped paying for....years, totally wrecked his credit. After he finally paid them all off(settling for %50 or less of the balance) he had zero luck getting anyone to give him anything.

Lucky for him his dad helped him out, his dad bought a new car for him in cash, and they worked out a payment plan that was akin to what he would have gotten if financed through the dealer. He now had a brand new car in his name free and clear.

Within a month of this occurring, he started getting bombarded with credit offers. Now they were low-balance, high interest rate cards, but these people wouldn't give him the time of the day before.

So it shows up somewhere.

 

[exar333]

OP - just be smart about it. I echo the advice of others in this thread to get a secured card. Most secured cards have a small limit ($250-500) and you generally get the secured amount back if you make a year of payments with (1) no delinqent payments and (2) don't go over-limit. This is a smart, and responsible way to re-build credit.

In regards to your car, financing 15k, even with a relatively high interest amount (9-13&#37 isnt that bad. Put as much as you can afford down, and try to add extra to each monthly payment to help pay it off sooner and reduce your interest payments.

If you follow-through and stay responsible, you should see your credit score increase quite a bit. I hit some snags with my credit during college too, and it took some time to rebuild my credit. You live, you learn.

 

[Vic Vega]

I think you guys are debating two different ends.

Will owning assets like a car change your FICO score in either direction? No. As was stated they do not have any bearing on your FICO score.

Will owning assets change a lender's decision to offer you a line of credit? Maybe, maybe not - it depends on the lender. Some lenders only look at your FICO score, others will take many factors including assets into consideration.

You're both right.

 

[JeffreyLebowski]

Well take this as you may, but sometimes a low credit score can help you get more off the car.
In order to make the payment something you say you can afford, they will have to discount the car to make it work. I had horrible credit when I bought my 1st car and was able to get into it at an acceptable payment.
A lot of people say don't shop based on monthly payment, but truth is, most people have to create a budget and the amount they can pay on a car is part of the budget. The trick is to know your score and roughly what you'd be paying (use online loan calculators).
When you go to the dealership, they love the I need you to come up with just $50 more a month, which is why you tell them some low number you know they'll balk at. That way when they, sorry, the bank, says your payment will be $50 more you're where you had planned all along. Sometimes they'll sell you that car for stupid low if you come in on the right day and thye have bad sales figures.
You are not coming into this trying to get out of a vehicle you are upside down on so you have more leverage in this as well.

 

[Turin39789]

Well take this as you may, but sometimes a low credit score can help you get more off the car.
In order to make the payment something you say you can afford, they will have to discount the car to make it work. I had horrible credit when I bought my 1st car and was able to get into it at an acceptable payment.
A lot of people say don't shop based on monthly payment, but truth is, most people have to create a budget and the amount they can pay on a car is part of the budget. The trick is to know your score and roughly what you'd be paying (use online loan calculators).
When you go to the dealership, they love the I need you to come up with just $50 more a month, which is why you tell them some low number you know they'll balk at. That way when they, sorry, the bank, says your payment will be $50 more you're where you had planned all along. Sometimes they'll sell you that car for stupid low if you come in on the right day and thye have bad sales figures.
You are not coming into this trying to get out of a vehicle you are upside down on so you have more leverage in this as well.

no.

 

[Turin39789]

Op, what everyone else has said. If you truly have bad credit because you have no credit then you need to seek out any credit. Credit Unions are good places, but even a secured crappy Orchard bank etc card would work. Get one, use it every month and pay it off every month and you should see a rapid change in score. The sooner you start the better off you will be, as the age of your accounts play a role.

Once you have your credit going and you are prepared to buy the vehicle, check with your bank or credit union about a loan before you go shopping. You should qualify for Penfed.org, they have great loan rates if your score is good. Find a car, sort out the price, feel free to let the dealer try to beat your bank rate.

Congratulations, you have bought a depreciating asset.

 

[Raduque]

Congratulations, you have bought a depreciating asset.

You know, people say this all the time, "Oh, new cars value drops to 50% as soon as there's more than 10 miles on the odometer" and such, but it really doesn't matter to me. I never buy things based on "how much they might be worth" or "how they hold their value".

I plan on driving this truck till ICE is outlawed and only outlaws have ICE.

 

[exar333]

Op, what everyone else has said. If you truly have bad credit because you have no credit then you need to seek out any credit. Credit Unions are good places, but even a secured crappy Orchard bank etc card would work. Get one, use it every month and pay it off every month and you should see a rapid change in score. The sooner you start the better off you will be, as the age of your accounts play a role.

Once you have your credit going and you are prepared to buy the vehicle, check with your bank or credit union about a loan before you go shopping. You should qualify for Penfed.org, they have great loan rates if your score is good. Find a car, sort out the price, feel free to let the dealer try to beat your bank rate.

Congratulations, you have bought a depreciating asset.

Almost everything is a depreciating asset. My car does help me get to work and earn $$$, so it is worth it to me. Also, I enjoy automobiles and like driving them. Life isn't just a balance sheet.