Question for Financial Gurus....

[ashbeeigh]

I bought a car about 6 months ago at a huge interest rate (I think it's like 11%) with CarMax Auto Finance. They gave me a weekend to look for another lender to get a better interest rate/loan. I couldn't get one so I figured I would refinance at another time.

Well now, six months later I've gotten 4 refinance letters in the mail (Faragut, CitiBank, Capital One, and HSBC). All of them are those "you're preselected! Apply now!!" I applied with Capital One and HSBC the first go around and they declined me (too little income).

So, my question is now.... six months later and with a 20 point higher credit score and a 7% more credit amount for my income/whatever...would it be fair to at least send in one or two of those applications to see if they could refinance me? Like I said before I've got a 11% interest rate, 66 months worth of payments left, and a monthly payment of $334.52. Are those inquiries that those companies look at negative inquires or just inquires? Any thoughts?

[ShoogarBear]

The real question is not whether to send in an application (what does it cost you to do that?), but whether or not the lower rates in the long run save you the short-run costs of the refinancing charges.

I've never refinanced a car before, but I assume it's the similar to a mortgage. With those, because you're paying off over 15-to-30 years, a small drop in percentage leads to a large net dollar savings. Paying off a car over 5-to-6 requires that either you refinance at a significantly lower rate, or that the refinance costs are not huge.

There are lots of refinancing calculators on the net you can use to figure out what you would need to have in terms of rate change vs. finance costs to make sense. The ones I've seen are for mortgages, but you should be able to use them for car loans.

[scott]

I refinanced a car once... there was no fee (like a mortgage), just a lower rate.

However, there is a cost to sending in applications, just not an apparent monetary one. When you send in a lot of applications in a short period of time, it can lower your credit score. And a denied application can also lower your credit score.

[tsb2000]

If it says specifically "YOU ARE PREAPPROVED" then go ahead. If it says "check this box," or "click here" to see if you are approved, then suck up the payments for a year. Don't be late for anything or anyone, then refinance.

Did you try just going to your own bank? They might be willing to do you better than just blind forms. Just a thought.

[Nbadan]

Holy shit...you bought a $20K car with no money down? I hope your making $40 large..

[CubanMustGo]

I would look into joining a credit union and seeing if they would refinance your car. Rates are generally far superior to anything you are going to get with those huge lenders you mention and the service is going to be a lot more personal, too. There should not be any charge to refinance from a legitimate lender on auto loans. I have been with Randolph-Brooks FCU for nearly 30 years now and they have always treated me right. Their 66-month car loans start at 4.5% but YMMV.

In addition to your income/debt ratio and credit rating, being upside down (owing more than the car is worth) may work against you. A co-signer (such as a family member) might help you secure a new loan, but recognize that co-signers are as responsible for the note should you be unable to make future payments for whatever reason, and the loan will count against their credit rating as well as yours.

[CavsSuperFan]

The lending instition is supposed to give you a copy of your credit score...You don't need to run a credit check over & over just to compare rates...A credit application "can Possibly" take two points off of your score for each inquiry...

If it makes you feel better…During the Carter administration I financed a new car @ % 17.5…(I had perfect credit)…What concerns me is that you financed a used car for 60 months …That is not wise…Used car financing should not exceed 36 months…Also do you know what your credit score is? That puts you in a better bargaining position…If you have a fical score of 710 you would qualify for the most stringent new car financing plans…American Honda is offering %0.9 @ 36 months & %2.9 @ 60 months on new cars…Ford & Chevy have easier less stringent requirements…

For people that need to finance, purchasing a new car is sometimes the better deal…You need to factor in how long that car is going to last & what is the projected $ depreciation…

[Clandestino]

Like someone said, don't keep applying for credit. Each application you put in drops your credit score. Also, it is always a bit more difficult to re-finance a car. You bought used, but it is even more used and worth less to the lender. I'm assuming you're a first time car buyer so 11% is not too bad.

Also, next time buy new. Always, always better financing deals on new vs used. Also, depending on the type of car you bought a new car barely costs more. 2 year old hondas, nissans, etc, generally cost about 1-2k less.

[xrayzebra]

I second the credit union solution.

[ashbeeigh]

Thanks for the help y'all. I know what my credit score is, it's in the high 500s, just because of student loans and higher credit limits at the moment, so I don't want to chance lowering my credit by applying for refinancing if I may not get it.

My bank doesn't do car stuff anymore. :td and I may consider the credit union thing at some point. The thing that's getting me is that I'm getting the complete opposite advice that i got in my last car thread. Everyone was saying "Buy used! Buy used!" and now I have a used car and everyone is saying i screwed. Oh well. Hindsight is 202/20 I guess.


So now that I have some of the answers, is anyone financed with any of the above mentioned companies? Capital One, Citi, Faragut or HSBC?

[robino2001]

Something that's helped me a lot in the past couple of years - just a thought - I have most of my major stuff all through Chase and because I have everything through one company, I get massive discounts/bonuses across the board. We have our mortgage, checking (w/ 2 direct deposits), savings, 2 credit cards and a CD with Chase... all of that linked together gets me awesome interest rates across the board. I know, I know - don't have everything with one financial institution - we don't... we have other stuff elsewhere - all of this combined along with not f'in up our credit got us into a house 0-down, 30 year fixed rate at 5.75% - not bad for only being 23 years old at the time.

Anyways, the moral of the story - often times, grouping your stuff through one place will help with the rates... just like having car/house insurance through the same company will typically get you a discount. But yes, sometimes you can get better rates by just going for the best option wherever.

[MannyIsGod]

Can you afford to pay more on your car per month than you are paying now?

[ashbeeigh]

Can you afford to pay more on your car per month than you are paying now?

a little bit more, but not too much, Manny.

[MannyIsGod]

Well any refinancing with a shorter time frame is more than likely going to drive up those monthly payments even if you get a lower interest rate. Early on all you do is pay interest so the majority of your car loan is still the same since what you've been doing so far is paying mostly interest.

Refinancing is good, but its not always easy. You should send as much extra on that payment as you can each month in any event so that you can lower your balance as quickly as possible and lower the amount of interest you will pay in the long run. The problem with financing (well one of the problems) a used car for that amount of time is that you end up paying far more than what the car is worth and you run the risk of having to pay for a car that won't work in the end. Getting rid of this loan as quickly as possible should be your goal and that means spending more of your money on hand to pay it down as quickly as reasonably possible.

[ashbeeigh]

Getting rid of this loan as quickly as possible should be your goal and that means spending more of your money on hand to pay it down as quickly as reasonably possible.

I'll see about that after I get my first salary check, move into a new apartment, and get all my other finances in order. Thanks for the advice.

[CavsSuperFan]

I did not mean to imply that buying 2nd hand is not smart…For me, I am quite content with purchasing 2nd hand…My last 4 cars have been previously owned…Mother on the other hand has to have the right color, navigation, brakes that work...She is a pain in the rear...

You did not mention student loans…That is another thread...Fed Student loans are your best best…Privarte student loans have no protection under bankruptcy laws…Have we confused you enough?

[tlongII]

I hope you really like that car.

[ashbeeigh]

You did not mention student loans…That is another thread...Fed Student loans are your best best…Privarte student loans have no protection under bankruptcy laws…Have we confused you enough?

:lmao I have a combination of federal and private loans, of course, already paying down the ones with the highest interest rate and the biggest amount first. Finances and being an adult are the biggest pain in the ass!


I hope you really like that car.

I will be living in it by the time I'm 30 at this rate.

[Clandestino]

don't worry about it. just pay it down quick. that will build your credit and now you have a better idea of the car buying process.... just wait til you try to buy a home! hahaha

[CubanMustGo]

Thanks for the help y'all. I know what my credit score is, it's in the high 500s, just because of student loans and higher credit limits at the moment, so I don't want to chance lowering my credit by applying for refinancing if I may not get it.

High 500s is pretty borderline, I'm afraid. Manny's advice is spot on - pay down your outstanding credit as much as possible since % of available credit is a big factor in your credit score. So is on-time payment history - if you have missed payments then the longer you go making on-time payments the more your credit score will go up. You're not going to lose very much just applying for a loan (unless you apply for a lot - and then creditors will want to know why you're applying for so much credit) but with a score in the upper 500s you're not likely to get a huge improvement over what you have now.

Why are you unlikely to get a much better interest rate right now? From a blurb on credit scores (http://www.realestatewebmasters.com/thread24.html):


Lenders began to take a closer look at FICO scores and this is what they found out. The chart below shows the likelihood of a ninety day delinquency for specific FICO scores.

FICO Score Odds of a delinquent account

595 2.25 to 1
600 4.5 to 1
615 9 to 1
630 18 to 1
645 36 to 1
660 72 to 1
680 144 to 1
700 288 to 1
780 576 to 1

Lenders don't really want to loan money at good rates to people who are likely to have problem paying their accounts on time. So start paying things down, try not to draw on your existing credit lines, make your payments on time, and in six months to a year your score should improve to the point that you'll be able to get a better rate.

Many of us have been where you are so don't beat yourself up - just resolve to do better going forward.

BTW I greatly disagree with the assertion that buying new is smarter. As soon as you walk out the door with the car you lose 15-30% of the value of the car. If you want a new car, that's fine, most of us do, but buying used is a better deal because most of the initial depreciation was paid by the guy who had the car before you. Right now small cars are retaining value much better but that simply means the dealer's not going to be motivated to give you a great deal on a new one because they can probably sell it at a premium to some guy tired of getting 8 MPG in his SUV.

[ashbeeigh]

High 500s is pretty borderline, I'm afraid.
Why are you unlikely to get a much better interest rate right now? From a blurb on credit scores (http://www.realestatewebmasters.com/thread24.html):


Lenders began to take a closer look at FICO scores and this is what they found out. The chart below shows the likelihood of a ninety day delinquency for specific FICO scores.

FICO Score Odds of a delinquent account

595 2.25 to 1
600 4.5 to 1
615 9 to 1
630 18 to 1
645 36 to 1
660 72 to 1
680 144 to 1
700 288 to 1
780 576 to 1

Lenders don't really want to loan money at good rates to people who are likely to have problem paying their accounts on time. So start paying things down, try not to draw on your existing credit lines, make your payments on time, and in six months to a year your score should improve to the point that you'll be able to get a better rate.





That was an awesome little blurb. There isn't anything delinquent in my history and my oldest credit card is coming up on that three year mark where a lot of creditors consider it "history." So, from what I've read in the past, I think I'm just moving in the right direction and should probably wait a bit longer to get the car refinanced or get anything else credit related.

[1369]

Ash, since you're "just starting out", I'd recommend follwing this program. (http://www.daveramsey.com/)

[Clandestino]

High 500s is pretty borderline, I'm afraid. Manny's advice is spot on - pay down your outstanding credit as much as possible since % of available credit is a big factor in your credit score. So is on-time payment history - if you have missed payments then the longer you go making on-time payments the more your credit score will go up. You're not going to lose very much just applying for a loan (unless you apply for a lot - and then creditors will want to know why you're applying for so much credit) but with a score in the upper 500s you're not likely to get a huge improvement over what you have now.

Why are you unlikely to get a much better interest rate right now? From a blurb on credit scores (http://www.realestatewebmasters.com/thread24.html):


Lenders began to take a closer look at FICO scores and this is what they found out. The chart below shows the likelihood of a ninety day delinquency for specific FICO scores.

FICO Score Odds of a delinquent account

595 2.25 to 1
600 4.5 to 1
615 9 to 1
630 18 to 1
645 36 to 1
660 72 to 1
680 144 to 1
700 288 to 1
780 576 to 1

Lenders don't really want to loan money at good rates to people who are likely to have problem paying their accounts on time. So start paying things down, try not to draw on your existing credit lines, make your payments on time, and in six months to a year your score should improve to the point that you'll be able to get a better rate.

Many of us have been where you are so don't beat yourself up - just resolve to do better going forward.

BTW I greatly disagree with the assertion that buying new is smarter. As soon as you walk out the door with the car you lose 15-30% of the value of the car. If you want a new car, that's fine, most of us do, but buying used is a better deal because most of the initial depreciation was paid by the guy who had the car before you. Right now small cars are retaining value much better but that simply means the dealer's not going to be motivated to give you a great deal on a new one because they can probably sell it at a premium to some guy tired of getting 8 MPG in his SUV.

regarding used vs new.

the depreciation part is true, however, why buy a 2 year old car for 19k when you can buy a brand new one for 21k? that is what you will find if you go out and car shop.

[Clandestino]

Ash, since you're "just starting out", I'd recommend follwing this program. (http://www.daveramsey.com/)

and stay away from this idiot. he preys on church goers to get them to buy his get out of debt program. him and suze orman are some of the worst financial people out there.

some advice he gave recently on the air to a dr fresh out of school.

dr had 100k in student loans at 2-3%. somehow he was going to be ablel to pay them off bc one of his family members passed away. ramsey told him to pay off student loans early.

why pay off a tax deductible debt at such a low interest rate when you can invest elsewhere?.... ramsey's response, "the debtor is a slave to the lender..." stfu... whatever.

[1369]

and stay away from this idiot. he preys on church goers to get them to buy his get out of debt program. him and suze orman are some of the worst financial people out there.

some advice he gave recently on the air to a dr fresh out of school.

dr had 100k in student loans at 2-3%. somehow he was going to be ablel to pay them off bc one of his family members passed away. ramsey told him to pay off student loans early.

why pay off a tax deductible debt at such a low interest rate when you can invest elsewhere?.... ramsey's response, "the debtor is a slave to the lender..." stfu... whatever.

So you'd rather owe money to someone else in an attempt to "game the system" instead of owing nothing to anyone and paying yourself?

[ashbeeigh]

Ash, since you're "just starting out", I'd recommend follwing this program. (http://www.daveramsey.com/)

I'm really not too worried about my debt now. Yeah, I have a lot, but it'll go down eventually. All my student loans are consolidated and I'm paying higher then the minimum on them. My credit cards are getting paid off, not the full balance, but not the minimum either.

And I'm sure I'll have a Debbie Downer come in and say I'm not right in thinking this way, but I'm not going to go out and buy a house in the near future (what else is there that has a huge impact on your FICO score?), so I'm not too worried. I don't need to buy into some guy's scheme to get my debt down.

[xrayzebra]

Finances and being an adult are the biggest pain in the ass!

Just for grins, if you are eligible to join a credit union, go
talk to the one you can join. Explain to them what you want
and see what you can work out.

Remember when you belong to a credit union, you own part
of it. A small share, but you are still part of it. Many of them
have people that can help you set up a budget and show
you how to save. Also if you pay off a loan ahead of time
you will never have to pay a penalty. This is not always
the case with commercial loans through banks or finance
companies.

One other thing, buying used cars is not wrong. I have
purchased both new and used. One thing when you buy
used you let the original owner take the write down from
the original purchase price. And at the price people pay
for new cars today they may not be in that great a shape
after 5, 6 or 7 years. So don't despair. We all have or
did go through the same learning curve that you are now
going through.

One thing I forgot to add. Next time you want to buy a car go to the lending
company, find out what the rate is and tell them how much you can afford
before you even start looking. They will tell you how much you can borrow to
stay in your budget. The loan will be pre-approved and you will have the
ease of mind of knowing how much car you can get and stay within your
budget. Also it will help when you start dealing with the dealers.

[MannyIsGod]

Better advice imo for your next car purchase: Buy in cash. Financing vehicles ftl, imo.

[Clandestino]

So you'd rather owe money to someone else in an attempt to "game the system" instead of owing nothing to anyone and paying yourself?

it's not gaming the system... it is being financially smart.

[xrayzebra]

Better advice imo for your next car purchase: Buy in cash. Financing vehicles ftl, imo.


An excellent idea. Except, most people have a hard time
paying themselves. It takes a ton of discipline to make
it work. On the other hand you must pay back to loaner
and you keep your money in hand for other uses. One
side item, don't forget you are drawing interest on the money
you have in a saving account or money market account.
Which helps to offset the interest you are paying the
loan people.

[1369]

it's not gaming the system... it is being financially smart.

There's where we disagree. I believe it is financially smart to not carry any debt and to invest with my income, not borrowed money.

If you're system works for you, who am I to say it is wrong?

[Clandestino]

There's where we disagree. I believe it is financially smart to not carry any debt and to invest with my income, not borrowed money.

If you're system works for you, who am I to say it is wrong?

I'm speaking financial sense, not what makes you feel good.

Some people do what makes them feel better emotionally vs fiscally smart.

[Anti.Hero]

Better advice imo for your next car purchase: Buy in cash. Financing vehicles ftl, imo.

I agree. It's a depreciating asset. Buy used cars you can buy in full at once (or at least pay off in 2-3 years) and move up the ladder gradually until you can easily throw down $25k+cash on something nice.


Contrary to belief (of the non-financially secure), vehicles are NOT a status symbol!

[Anti.Hero]

I'm speaking financial sense, not what makes you feel good.

Some people do what makes them feel better emotionally vs fiscally smart.

Emotional behavior is what drives people into debt on depreciating assets. Just slows you down.

[Anti.Hero]

and stay away from this idiot. he preys on church goers to get them to buy his get out of debt program. him and suze orman are some of the worst financial people out there.

some advice he gave recently on the air to a dr fresh out of school.

dr had 100k in student loans at 2-3%. somehow he was going to be ablel to pay them off bc one of his family members passed away. ramsey told him to pay off student loans early.

why pay off a tax deductible debt at such a low interest rate when you can invest elsewhere?.... ramsey's response, "the debtor is a slave to the lender..." stfu... whatever.


Ramsey is mainly aimed at helping the idiots who have gotten into $50k, or some ridiculously high amount of debt, and have no idea where to start. Better to completely alter your mindset/lifestyle than to just claim bankruptcy like many would do.

Of course you must get into debt to build your networth, but a lot of people spend money they don't have on the stupidest of shit and ruin their lives and their children's lives.

You can't take 100% of what he preaches and turn it into most people's real lives, but he is still great if you understand the bigger picture imfo. He's a good guy with a great purpose. Just like every other person in this life, you take the good and educate yourself enough to recognize the bad and go onto someone else.

[Das Texan]

So you'd rather owe money to someone else in an attempt to "game the system" instead of owing nothing to anyone and paying yourself?


say my student loans are 10k.

My interest rate for me at least I think is about 2%.


If i can find an investment that pays about 4-5% for the same amount of money and simply make payments, I will come out ahead.


Paying off federal student loans off early should be at hte bottom of the priority list if you have a great interest rate.

[Fabbs]

Offers from the legit credit cards of 0% for a limited time and/or 0% balance transfers be all over like you know what on you know what.
If the envelope says "You are approved" then you most likely are.

In plain English it means you can get goods or services at 0% for a limited amount of time. Usually a year but even 6 months is okay. If you are buying stuff with your high % card, cease and desist immediately and use instead the 0% card.

0% Balance transfers: Now here is where you really can make some headway on getting rid of interest on cards or loans. A balance transfer means they are going to loan you money (loan, not give) at 0% (for real) due back in an amount of time, most usually a year but again sometimes 6 months. So, take the max amount they will give you (lets say 2,000) and pay 2,000 on your car loan or other high interest card loan balances. You still owe the 2,000, but it is accumulating 0% interest for one year. Whereas you car and credit card balances are accruing and charging interest on the balance. Make sure you pay off the 2,000 given at 0% and you absolutely will get this offer again next year. And next, and next. Also the other credit card companies will get onboard. Your fico score might be too low at present for you to be getting any 0% offers. But if you are, be all over them. Just exercise self control, knowing that they still are loans. Because they will allow you to transfer them into your checking account. (oftentimes, other times they will only let you transfer them into your other credit cards. And thats okay. Again, by transfering the money into your high interest cards you pay down that balance and are that much closer to paying off the high interest cards. Or car loan.)

There will most likely be a fee for the balance transfer of either 3% of the loan total but capping at a max of $99. Try to schmooze the rep into waiving the balance transfer fee. They are salavating at the commision they get off the loan, and/or how much more it pushes them to hitting quota. However, they may not be able to waive the fee. Still, 3% is peanuts and if for some reason you can get a larger balance transfer loan of say 6,000+, then $99 is a reasonable fee indeed. If for some reason you can get a 6,000 plus 0% balance transfer, the $99 you spend for that will be far offset by the interest you save by paying down on your car or crappy percentage cards.

Your crappy percentage cards: Sometimes just asking, periodically to be given a lower rate will get you a yes answer. Even if you only lower from 17.9 to 14.9, it's progress.

Car loan back to it. If you could get two or three balance transfers at 0% and pay off the entire balance of the car loan, while you would thus still have 3 seperate balance tranfer loans to pay off, remember you are paying them off at 0%. Plus the total monthly payment of the three combined may be the same or even less then your current car payment. Most likely not since the car loan is 66 months and 11K. With your current sitch you probably will only get balance tranfer loans of 1-200, but it still helps to get the ball rolling. Once you do one of these balance transfers successfully you be in the Robots system and you will get more offers.

Capital One has one of the easiest to qualify for balance transfers. Your current bank may have one. Or if the credit union offers one so much the better. The "season" for balance transfers is Oct-Nov as they know a lot of people want money for the holidays. However check those envelopes, take em whenever you can get once you make sure they are legit.
BOA is excellent. Discover is okay too.

Inquiries. What others have written is true. Inquiries can drag down your credit scores. Therefore when talking to credit card or any other lending institions, ask them if it will be a hard inquiry or an in house soft one. Often times they can get your credit history in house without alerting the radar. This is what you want. Othertimes they do alert the Robots, that being Experian, Equifax and or the third one. That is the type inquiry you do not want. If the rep does not know, simply ask for the credit manager. In fact on this inquiry front, always ask for the credit manager as you want a factual answer not a guess.

[BacktoBasics]

Lots of bad advice in here. I work hand in hand with lenders every day. So far except for a few other points in here the only good advice in this thread is to work with a credit union. They play by their own set of rules but you need to be smart before you go and talk to them. Here is a step by step process of what you do to get refinaced at a better rate.

Preface: You're spinning your wheels for nothing with a score in the high 500's. Be happy you got 11% with that kind of FICO. You need to raise the score first and stop filling out applications at other places. The Credit Union should handle nearly all of your financing not just your vehicle.

Go ahead and buy all three credit reports with scores. Forget the free shit just pay to get all them and get them with scores. Personally I pay the 15 bucks a month to get all three reports and scores in real time so I can access my credit report any time I like.

1. Pay down any revolving debt such as credit cards. You need to take a couple of months and pay your credit card balances down to below 35% of limit. Taking a 1k credit card with a 750 balance and paying it down to a 325 dollar balance will raise your score a good 30 or 40 points. Do that with all your credit cards and your score will climb and its all real time so as soon as the credit card companies update your file you'll see the increase. Assuming you have reasonably limited credit card limits.

2. Any delinquet accounts or past due accounts need to be paid or brought to current. No Credit Union will offer you financing if you have 60 days or 120 days late on something.

3. Print out an NADA book value with every little feature and option on it to take to the credit union. White out the part at the bottom that says "base price includes blah blah blah". Then make a good copy to take to them. Some won't accept this because they want to look it up but most will because people are fucking lazy, I know my banks won't look anything up if I bring it in for them. Most banks typically just look at the base value not all the options. Do the work for them and it will give your car additional value.

4. Put a minimum 1k down if not a full 10%. Offering the downstroke up front might potentially keep them from asking for more money down. Partnering up a small downpayment and a strong book value from the NADA with a low debt to income ratio is a good start for getting a loan at a better value.

The never financed used for more than 36 months is sound advice but if you keep your vehicles and you're in a tight budget I wouldn't feel bad pulling a 48 or 60 month note if you have to. Send at least one additional payment to pricipal every 7 months. Its worth it.

The never finance used car advice Manny gave is probably the worst advice on here. You need to use your credit....use not abuse. If you have been in the bureau for 10 plus years and have at least 3 lines of credit payed off that had an initial line of 10k or more then yeah pay cash if you can but if you're new to credit and have a limited or lean bureau you need to finance but only if it works with your budget.

As the times change in the finance world comparable credit is now the new debt to income. I have a good 4 or 5 customers come in a month who have high tier one FICO scores like 710 715 and so on that run into problems. The problem being is that they pay cash for everything and might have a few credit cards or a home loan thats been paid off 15 years ago.

They look at comparable credit within the last 8 years. So once your life swings upwards and you start pulling in good money and you want to buy that 25k car or that 20k boat or RV or motorcycle you need good comparable credit within 8 years so or you're gonna get the 2 point or 3 point increase in rate or worse you can't get the loan. I have all the big banks turing prime borrowers down completely based on a lack of comparable credit.

For the first time in the finance world I'm seeing a rush of prime buyers struggle to get good deals.

Now if you can start building a good history with your credit union you'll never have to worry about any of that. I started with a small loan then my land loan and now I don't even have to fill out an application just an information update card. Last two loans I got from them they didn't even run my credit.

[Nbadan]

I got an idea....don't be buying $20K cars and financing it for 72 months, especially a used car...that's sure to raise your credit score....

[BacktoBasics]

I got an idea....don't be buying $20K cars and financing it for 72 months, especially a used car...that's sure to raise your credit score....
Actually no. With a limit file and low debt to income financing a 20k car would probably raise your score a bit. You'd be upside down for the duration of the note but it likely wouldn't hurt your score. Not to mention even if it did lower score due to the debt, after hitting the 8 month mark with timely payments it'll begin to help you. Plus a payed off trade line like that is highly valuable for the next 8 years if you decide to purchase a home or luxury item.

You people have no idea how all this works.

[ashbeeigh]

I got an idea....don't be buying $20K cars and financing it for 72 months, especially a used car...that's sure to raise your credit score....

It was $14,000. You all over estimate me. :rolleyes

[BacktoBasics]

It was $14,000. You all over estimate me. :rolleyesHe doesn't know what he's talking about anyway. Follow my advice and you'll be happy. I deal with underwriters and banks every day.

[Clandestino]

don't pay 15 a month for your credit score...that is ridiculous. Almost nobody needs to see their credit score every month

[BacktoBasics]

don't pay 15 a month for your credit score...that is ridiculous. Almost nobody needs to see their credit score every monthYou could not have just given any worse advice. You're the kind of guy that probably thinks that simply making timely payments will ensure a strong credit rating. Horrible advice here. Being that I work in retail and finance and work hand in hand with many national lenders and local I can tell you first hand your advice sucks.

People who give a shit should be keeping tighter tabs on their credit. I have like most people a very common name. Its never a bad idea to be able to keep up to date information on one of the most influential aspects of your purchasing life.

Other than your free report which does not give you a credit score it costs roughly 25-30 bucks to pull a bureau with score and thats just one time with no updates and there are 3 different bureaus all with different information and all with different scores. Do that once for each and then once again to follow up if you are trying to get something removed or changed and you've nearly spent the same amount of money you could have spent to simply be able to access all three with scores each day.

Half the problem with people making large purchases is that they have no clue how to prep their credit for a big buy. Its not as easy as just making timely payments and it'll all work out. You have to be smarter than that expecially with how tight the banks are getting right now and even more so if you have a lot of revolving debt.

I see people with good credit everyday that could have earn way strong rates and terms had they simply preped their credit for a purchase. Such foolish arrogant people who know nothing are the ones that pay more and have no idea they could have done better.

You are an absolute fool to think its not beneficial to be able to access your credit file at any given moment. Thats why people have such a hard time making purchases.

[robino2001]

Other than your free report which does not give you a credit score it costs roughly 25-30 bucks to pull a bureau with score and thats just one time with no updates and there are 3 different bureaus all with different information and all with different scores. Do that once for each and then once again to follow up if you are trying to get something removed or changed and you've nearly spent the same amount of money you could have spent to simply be able to access all three with scores each day.

I did mine last fall and spent no more than $7.... it was either $5 or 7, don't remember. Yes, it was from one of the big 3.

I won't act like I know jack crap about this stuff because I know simply what I've experienced, but I am with the others when I think there is no reason to have 24-7 access to your credit history/report unless you've had your identity stolen and there is new stuff going on the report daily. I also don't agree with everyone having to do this and that to prep for purchases unless you've really f'd up your credit and you need to recover it - then, alright... for everyone... really? My wife and I simply made common sense decisions, not missed payments, etc... and we've had no problems with cars, house, whatever... so I simply don't get the soapbox-type rant. You apparently do what works well for you - that's great - but using "fool", "you have to be smarter", "arrogant", etc... there is more than one way to successfully live your financial life and they're not arrogant if it's not your way.

[BacktoBasics]

I did mine last fall and spent no more than $7.... it was either $5 or 7, don't remember. Yes, it was from one of the big 3.

I won't act like I know jack crap about this stuff because I know simply what I've experienced, but I am with the others when I think there is no reason to have 24-7 access to your credit history/report unless you've had your identity stolen and there is new stuff going on the report daily. I also don't agree with everyone having to do this and that to prep for purchases unless you've really f'd up your credit and you need to recover it - then, alright... for everyone... really? My wife and I simply made common sense decisions, not missed payments, etc... and we've had no problems with cars, house, whatever... so I simply don't get the soapbox-type rant. You apparently do what works well for you - that's great - but using "fool", "you have to be smarter", "arrogant", etc... there is more than one way to successfully live your financial life and they're not arrogant if it's not your way.Successful and the best are two different things. Lots of people succeed but most could have saved hundreds a month if they had known how it works but lets not forget you guys are already successful so any addition knowledge on how to do it better and save money doesn't matter now does it. Lots of people are happy with 4.99% in interest but they probably had no idea that they may have qualified for 2.99% had they done a little prep work....hell minimal prep work.

So typical of the average joe to tell me he know more about finance and that I'm on my soapbox despite the fact that I work balls deep in this shit daily and you people haven't got the slightest idea on how to prep for a big purchase.

Typical guy just wants to hear what he wants to hear and has no idea on how to make it better for himself....WHY because he already knows everything.

Pulling one bureau for 5-7 bucks is fine sounds like a good deal but there are 3 and there all different and its usually more if you want the score. Over 80% of the population has wrong information on their credit report.

You also probably have never heard of auto induced scores or mortgage induced scores but common sense will take care of you. Most people don't even know what those scores are.

For most people simply knowing what the DTI and available credit to limit numbers are can cut a rate in half if not just 1 or 2 points. Its your money you do what you want but there is a better a way a way that would likely save you 2-3 hundred a month if you'll stop thinking you know everything.

A perfect example

Guy yesterday comes in says he has great credit. He does...he scores a 721.

Earned himself a rate of 6.25% on a recreational loan which is half a point lower than prime for these types of loans.

Had the guy payed his two credit cards down an addition 80 bucks each he would have lowed his credit to limit below 35% of available. He would have earned 5.49% had he done that and waited the 30 days for it be updated on his report.

He would have saved nearly 2k on the difference had he payed the extra 160 and preped his credit for the purchase. He had no idea.

[BigZak]

thanks for the tips life coach! :tu

[1369]

A "recreational" loan?

I know there's a joke in there but I'm serious.

Like for an RV?

[BigZak]

once a home loan rate is locked in, can they raise it if my credit cart debt to limit ratio has gone slightly upward? it wasn't below 35% to begin with mind you....

[BacktoBasics]

once a home loan rate is locked in, can they raise it if my credit cart debt to limit ratio has gone slightly upward? it wasn't below 35% to begin with mind you....
Yes and no. Usually there is a time limit. Thats why they say don't make any purchases until you close. Everything can potentially change from time of quote till time of closing.

[BigZak]

Yes and no. Usually there is a time limit. Thats why they say don't make any purchases until you close. Everything can potentially change from time of quote till time of closing.



shit...thanks brah...it never clicked til now that alot of small purchases...like gas for a few months can add up to a big one! doh!!!
:pctoss

[BacktoBasics]

A "recreational" loan?

I know there's a joke in there but I'm serious.

Like for an RV?A recreational loan is

Boat
4 wheeler
RV
Some times Motorcycles
Water Craft

and stuff like that.

Those rates are higher than what you get on Cars and Homes but thats why they have induced scores in the Auto and Home world. Its far far far different having a raw score pulled from your home than it is when an Auto dealership pulls it.

Just ran a simulator on my credit here is an eye opening example.

I have 2 credit cards I've used recently because I was in a pinch.

1k limit on one and 800 limit on the other.

1,000 had 415 on it
800 had 380 on it

Transunion had my score at 694

if I pay the cards down to 300 and 300 my score jumps to 721 in real time.

According to the rate sheet from Bank of America

675-699 6.49%
700-740 5.25%

On a 30k purchase thats a 1,020 dollar difference over 60 months and it would have only costed me 195 dollars to qualify for the better rate. No one pays attention to this stuff.

[BacktoBasics]

You guys probably also didn't know that a paid Time Warner collection for 300 buck listed as a zero balance charge off has the same negative impact as if the collection was never paid. Cargeoffs are nearly as bad as having the unpaid debt and for 90% of the banks out there its an automatic disqualification for Lock in approvals.

[BacktoBasics]

You guys probably didn't know that unpaid child support through any state is far worse than a bankruptcy.

[ashbeeigh]

And just fyi if any of y'all are behind on house payments, have an adjustable rate that is going to reset soon or anything of that sort PM me or let me know I can probably get you hooked up with a counselor who can take care of it.

[BacktoBasics]

And just fyi if any of y'all are behind on house payments, have an adjustable rate that is going to reset soon or anything of that sort PM me or let me know I can probably get you hooked up with a counselor who can take care of it.What does this counselor offer? Who is it? There are a lot of very dangerous things that counselors can get you envolved in. If you have Credit Counseling and there is a payment plan for those of you who have used that type of service...the CCC or like. When that shows up on your credit report its a huge red flag that sticks with you almost as long as a bankruptcy. CCC being a good example Consumer Credit Counseling. If they show up on your credit report you can't qualify for prime notes for a minimum 8 years from initial set up.

There are however some counselors that do the right thing and it never shows up on your credit report but they are few and far between.

[ashbeeigh]

What does this counselor offer? Who is it? There are a lot of very dangerous things that counselors can get you envolved in. If you have Credit Counseling and there is a payment plan for those of you who have used that type of service...the CCC or like. When that shows up on your credit report its a huge red flag that sticks with you almost as long as a bankruptcy. CCC being a good example Consumer Credit Counseling. If they show up on your credit report you can't qualify for prime notes for a minimum 8 years from initial set up.

There are however some counselors that do the right thing and it never shows up on your credit report but they are few and far between.

I'm just doing the outreach. They're all HUD certified and go through the banks loss mitigation department. There's a National grant provided by the federal government for us and our sister organization to do Housing counseling throughout the country.

http://www.acornhousing.org

There's a form there that explains the whole program.

[Das Texan]

I should stop paying my mortgage just so I can get a get out of jail free card like so many of the other morons in this nation who are getting one.

[BacktoBasics]

I should stop paying my mortgage just so I can get a get out of jail free card like so many of the other morons in this nation who are getting one.Its not quite that easy. Nothing comes without reprocussions.

[ashbeeigh]

I should stop paying my mortgage just so I can get a get out of jail free card like so many of the other morons in this nation who are getting one.

check your PMs.

[Das Texan]

Its not quite that easy. Nothing comes without reprocussions.


oh its totally tounge in cheek, unlike the 90% of the morons out there who dont read shit, I know what I get myself into and dont rely on big brother to help me out because I cant read shit.

Its also the lending companies fault too because they are greedy bastards and made idiotic loans in the first place and they also are looking for said get out of jail free card.

Awesome financial world we are living in right now!

[Nbadan]

It was $14,000. You all over estimate me. :rolleyes

Your paying $335 for 72 months on a $14K principal loan and I'm the one who doesn't know what he's talking about...

:lol

[ashbeeigh]

Your paying $335 for 72 months on a $14K principal loan and I'm the one who doesn't know what he's talking about...


oh. haha haha.

[Clandestino]

You could not have just given any worse advice. You're the kind of guy that probably thinks that simply making timely payments will ensure a strong credit rating. Horrible advice here. Being that I work in retail and finance and work hand in hand with many national lenders and local I can tell you first hand your advice sucks.

People who give a shit should be keeping tighter tabs on their credit. I have like most people a very common name. Its never a bad idea to be able to keep up to date information on one of the most influential aspects of your purchasing life.

Other than your free report which does not give you a credit score it costs roughly 25-30 bucks to pull a bureau with score and thats just one time with no updates and there are 3 different bureaus all with different information and all with different scores. Do that once for each and then once again to follow up if you are trying to get something removed or changed and you've nearly spent the same amount of money you could have spent to simply be able to access all three with scores each day.

Half the problem with people making large purchases is that they have no clue how to prep their credit for a big buy. Its not as easy as just making timely payments and it'll all work out. You have to be smarter than that expecially with how tight the banks are getting right now and even more so if you have a lot of revolving debt.

I see people with good credit everyday that could have earn way strong rates and terms had they simply preped their credit for a purchase. Such foolish arrogant people who know nothing are the ones that pay more and have no idea they could have done better.

You are an absolute fool to think its not beneficial to be able to access your credit file at any given moment. Thats why people have such a hard time making purchases.

I love the forum subprime lender giving advice! haha:rollin

[BacktoBasics]

I love the forum subprime lender giving advice! haha:rollinI love even more how the arrogant posters here, who know nothing, love to hand out bad advice on top of bad advice.

[RandomGuy]

The real question is not whether to send in an application (what does it cost you to do that?), but whether or not the lower rates in the long run save you the short-run costs of the refinancing charges.

I've never refinanced a car before, but I assume it's the similar to a mortgage. With those, because you're paying off over 15-to-30 years, a small drop in percentage leads to a large net dollar savings. Paying off a car over 5-to-6 requires that either you refinance at a significantly lower rate, or that the refinance costs are not huge.

There are lots of refinancing calculators on the net you can use to figure out what you would need to have in terms of rate change vs. finance costs to make sense. The ones I've seen are for mortgages, but you should be able to use them for car loans.

Actually applying for a lot of credit in any given year DOES negatively affect your credit score somewhat.

http://www.bankrate.com/brm/news/credit-scoring/20031104a1.asp

1. How you pay your bills (35 percent of the score)
The most important factor is how you've paid your bills in the past, placing the most emphasis on recent activity. Paying all your bills on time is good. Paying them late on a consistent basis is bad. Having accounts that were sent to collections is worse. Declaring bankruptcy is worst.

2. Amount of money you owe and the amount of available credit (30 percent)
The second most important area is your outstanding debt -- how much money you owe on credit cards, car loans, mortgages, home equity lines, etc. Also considered is the total amount of credit you have available. If you have 10 credit cards that each have $10,000 credit limits, that's $100,000 of available credit. Statistically, people who have a lot of credit available tend to use it, which makes them a less attractive credit risk.

"Carrying a lot of debt doesn't necessarily mean you'll have a lower score," Watts says. "It doesn't hurt as much as carrying close to the maximum. People who consistently max out their balances are perceived as riskier. People who never use their credit don't have a track history. People with the highest scores use credit sparingly and keep their balances low."

3. Length of credit history (15 percent)
The third factor is the length of your credit history. The longer you've had credit -- particularly if it's with the same credit issuers -- the more points you get.

4. Mix of credit (10 percent)
The best scores will have a mix of both revolving credit, such as credit cards, and installment credit, such as mortgages and car loans. "Statistically, consumers with a richer variety of experiences are better credit risks," Watts says. "They know how to handle money."

5. New credit applications (10 percent)
The final category is your interest in new credit -- how many credit applications you're filling out. The model compensates for people who are rate shopping for the best mortgage or car loan rates. The only time shopping really hurts your score, Watts says, is when you have previous recent credit stumbles, such as late payments or bills sent to collections.

"Then, looking for new credit will be seen as an alarm because statistically, before people declare bankruptcy and default on everything, they look for a life preserver," Watts says. Also, if you have a very young credit file, an inquiry can count for more than if you've had credit for a long time.

[BacktoBasics]

5. New credit applications (10 percent)

The final category is your interest in new credit -- how many credit applications you're filling out. The model compensates for people who are rate shopping for the best mortgage or car loan rates. The only time shopping really hurts your score, Watts says, is when you have previous recent credit stumbles, such as late payments or bills sent to collections.

"Then, looking for new credit will be seen as an alarm because statistically, before people declare bankruptcy and default on everything, they look for a life preserver," Watts says. Also, if you have a very young credit file, an inquiry can count for more than if you've had credit for a long time.

That is not entirely accurate, somewhat but not entirely. Although multiple pulls from one central agency typically can be consolidated. I can easily shotgun someones credit. Give me 3 days and I can lower your score by 30-40 points simply by shopping you from bank to bank. I can take you from earning 4.99 to just barely qualifying for 8.99 in 72 hours.

Its one of the oldest tricks in the book.

Get a customer that makes you the first stop and they aren't going to buy right then and there because they want to keep shopping. Simply tell them to go ahead and fill out the application to see what the rate will be. That way we can lock the rate in :winkwink: If a few weeks down the road they decide to come back the rate and deal is already in place...how wonderfully convienent. Then send their credit to every lender available and lower their score so the next few dealers are unable to secure as low a rate and they'll likely come back to you thinking you got them the better deal.

The rest of that post is spot on! Thanks for posting it.

[RandomGuy]

Thanks for the help y'all. I know what my credit score is, it's in the high 500s, just because of student loans and higher credit limits at the moment, so I don't want to chance lowering my credit by applying for refinancing if I may not get it.

My bank doesn't do car stuff anymore. :td and I may consider the credit union thing at some point. The thing that's getting me is that I'm getting the complete opposite advice that i got in my last car thread. Everyone was saying "Buy used! Buy used!" and now I have a used car and everyone is saying i screwed. Oh well. Hindsight is 202/20 I guess.


So now that I have some of the answers, is anyone financed with any of the above mentioned companies? Capital One, Citi, Faragut or HSBC?

You should buy a used car, generally in the 2-4 year old range.

I have calculated your total financed price of about $17,500, and would guess this includes all the tax, title, and license stuff.

You haven't gotten screwed at all, if the car is in decent shape and you plan on keeping it for a while.

The number one thing about owning a car that the vast majority of the buying public doesn't know:

The largest cost of owning/operating a car is the REPLACEMENT cost. Not gas, not maintenance, not nuthin' else. Replacement.

Do the math:

You will have paid (roughly) $23,000 for this car when all is said and done.

If you decide to sell it in 6 years, then you have to pay another chunk of cash for THAT future car.

But, look at that $23,000 over the six years you will own it, assuming you sell it then, and the trade in value is minimal.

23/6= 3,900 per year in acquisition costs.

Gas, as outrageous as it is, still comes in behind this cost. 3900 divided by $4 per gallon, muliplied by assumed miliage rate of 30 miles per gallon is 29000 miles worth of gas. If you put less than 29k miles per year on your car, even with gas at four bucks a gallon, the replacement/acquisition costs of this car STILL are bigger than gas costs.

The real answer to reducing the costs of owning/operating a car, is simply to hold on to that car for longer, generally about 10 years.

After you get this sucker paid off, yes, it will be old, and require a good chunk of maintenance, but odds are the amounts sunk into repair will STILL be less than buying a new car.

New cars do make sense if you plan on holding on to them for a long time, say 10+ years. Used cars tend to be cheaper if your intended holding time is less.

[BacktoBasics]

Basically what I'm saying is don't shop your credit until you are 100% sure you found what you wanted. Most dealerships have multiple banks available to be competative. Furthermore you are way better off securing financing from your own bank...who is on your side of the battle or go open an account at a credit union. That way you only have one inquiry and you're building a good history with your own bank. I never and I mean never fill out an application at any dealership.

[BacktoBasics]

You should buy a used car, generally in the 2-4 year old range.

I have calculated your total financed price of about $17,500, and would guess this includes all the tax, title, and license stuff.

You haven't gotten screwed at all, if the car is in decent shape and you plan on keeping it for a while.

The number one thing about owning a car that the vast majority of the buying public doesn't know:

The largest cost of owning/operating a car is the REPLACEMENT cost. Not gas, not maintenance, not nuthin' else. Replacement.

Do the math:

You will have paid (roughly) $23,000 for this car when all is said and done.

If you decide to sell it in 6 years, then you have to pay another chunk of cash for THAT future car.

But, look at that $23,000 over the six years you will own it, assuming you sell it then, and the trade in value is minimal.

23/6= 3,900 per year in acquisition costs.

Gas, as outrageous as it is, still comes in behind this cost. 3900 divided by $4 per gallon, muliplied by assumed miliage rate of 30 miles per gallon is 29000 miles worth of gas. If you put less than 29k miles per year on your car, even with gas at four bucks a gallon, the replacement/acquisition costs of this car STILL are bigger than gas costs.

The real answer to reducing the costs of owning/operating a car, is simply to hold on to that car for longer, generally about 10 years.

After you get this sucker paid off, yes, it will be old, and require a good chunk of maintenance, but odds are the amounts sunk into repair will STILL be less than buying a new car.

New cars do make sense if you plan on holding on to them for a long time, say 10+ years. Used cars tend to be cheaper if your intended holding time is less.Either you're in retail or are very close to someone who is. Good advice here.

[RandomGuy]

That is not entirely accurate, somewhat but not entirely. Although multiple pulls from one central agency typically can be consolidated. I can easily shotgun someones credit. Give me 3 days and I can lower your score by 30-40 points simply by shopping you from bank to bank. I can take you from earning 4.99 to just barely qualifying for 8.99 in 72 hours.

Its one of the oldest tricks in the book.

Get a customer that makes you the first stop and they aren't going to buy right then and there because they want to keep shopping. Simply tell them to go ahead and fill out the application to see what the rate will be. That way we can lock the rate in :winkwink: If a few weeks down the road they decide to come back the rate and deal is already in place...how wonderfully convienent. Then send their credit to every lender available and lower their score so the next few dealers are unable to secure as low a rate and they'll likely come back to you thinking you got them the better deal.

The rest of that post is spot on! Thanks for posting it.

oooh man, that is nasty. I am in the process of shopping for a new car, and will keep this in the back of my mind before giving my credit info to any dealer.

[RandomGuy]

[RandomGuy], Either you're in retail or are very close to someone who is. Good advice here.

I am an accountant who is shopping for his own car.

Thanks.

[BacktoBasics]

I am an accountant who is shopping for his own car.

Thanks.Just hook up with your bank instead of a dealership for financing and you'll be fine.

Like you posted above 30% balance of available credit on your Credit Cards. You can really raise the shit out of your score and get a better rate if you pay your cards down and wait for the new balances to show up in your bureau...30 or so days. Then do your app at your bank once that happens. Unless you're already scoring over 680...most accountants have good scores because they manage their money well.

[Clandestino]

I love even more how the arrogant posters here, who know nothing, love to hand out bad advice on top of bad advice.

you don't know what my profession is subprime.

[RandomGuy]

Just hook up with your bank instead of a dealership for financing and you'll be fine.

Like you posted above 30% balance of available credit on your Credit Cards. You can really raise the shit out of your score and get a better rate if you pay your cards down and wait for the new balances to show up in your bureau...30 or so days. Then do your app at your bank once that happens. Unless you're already scoring over 680...most accountants have good scores because they manage their money well.

Unfortunately, I am just out of grad school with a good chunk of debt, and two small growing kids.

All things considered, I am ok, but definitely could be better. Give it another 5 years, and I should be fine. Now if I can just get our two old jalopy's to last that long...

Actually I just did a cost analysis of whether or not to replace my old, fully-paid-for car with a new one that makes better gas mileage.

Gas would have to go to about $8-10 gallon before it would make sense to get a newer car that had better gas mileage than the tank (crown vic) I am driving now.