db2012

Well my bank turned me down today for a loan for a C32. I could probably take the dealership route but I know they would slaughter me with rates. Very embarrassing and disappointing. I checked out my Credit score, and its not good, 635. I took screen shots of the report, I was hoping to get some advice/help from you guys, I'm still pretty young and this is definitely not my area. I know this isn't the best place to ask such questions, but I think there are a lot of knowledgeable smart people in these forums, that I could probably learn from.

So what I would like to know is what can I do to improve this score as fast as possible (I know it takes time). What I have to work with is about $5,000 in the bank, and $5,000 in stock (which I will be selling soon because the market is going south. My income will be much higher after I report tax's also so that should help as well (not sure when that would reflect). The collections for $100 is a mistake and I'm disputing it. I have the Dr writing a letter to the bureau trying to get it removed. The $585.00 in revolving debt from my cards is completely paid off. I'm not sure if I should keep the balance on these cards at $0 when I re-apply for a loan? or should I keep making purchases? I really am not sure what else to do besides what I stated. I have considered paying off a chunk of my student loan, but I'm not sure how much, (I still need $ for a down payment on the car, I figure at least $5k) I also considered refinancing because the loan has a 15.9% APR.

I apologize that this is so lengthy, Its just very important to me so I really appreciate any advice or help I can get from you guys. If this is the wrong section feel free to move it Mods.

Here are the pics of my report:


2:


3:


Thanks again

FrankW

635 and declined on the loan on a used car. what kind of bank is this? or maybe they thought your saving was too low? to qualify for the loan? It is better if you get the car first and then take it to the bank that you need a loan for the car.

amdeutsch

That is a credit bureau score and NOT a FICO score. Most institutions work with FICO. The score as shown, 635/596, is misleading. Whats with that printout from 08-26-2006 as depicted on the 596 score. Something is missing here.

BTW, you have a right to see the FICO score from the bank that rejected you AFAIK.

zoink

Collection account certainly hurts your credit.

But couple more things you need to look:
- What's your oldest account? I think <6 years may be considered too short.
- How much do you claim your income to be? If it's too low, your debt ratio (min. payment on credit cards + installments divided by your income) may be too high and you may be considered not able to afford any more debt.
- When did the 6 inquiries happen? Did most, if not all, happen recently? If so, those do hurt your credit.

Just my 2c.

bmjdevelopment

OK, here is my 2 cents.

You have $5,000 in the bank making 1.5% interest. $5,000 in stocks losing money. Damn market. You said in another post you are selling 2 cars which should get you another $5,000. You are paying 15.9% interest on around $10,000. Assuming you have an income you can get a loan, but the interest rate will be killer. I mean look at the report. You have $10,000 in assets and $11,000 in liability. Not good. I understand you have more, i.e. 2 cars and household stuff, but banks can not see past this.

Here is what I would do. Sell one of the cars you currently have. Sell the stocks you have. PAY OFF THE STUDENT LOAN!!!. Yes this may only leave you with $2,000 in saving, but look at the other side. You will pay $24,402 on this loan if you just continue paying the $294. Paying this loan off will do two things. One, it will show creditors you pay your loans off, very good for credit rating. It also removes all of your liability. Wait 6 months, sell your other car, then go back and get a good loan.

///AMG4EVER

+1. Pay off that student loan asap; with numbers like these you should wait before getting into more debt.

Also, keep in mind you'll need at least $2K/year to maintain the C32; it's an expensive toy going for cheap.

Try applying online at Capital One. My brother was in the market a few months ago and that's where he got the best rate.

Factor all that in your budget and list your priorities. Good luck.

*Random advice: you should save at least enough money to cover your operating cost for at least 4 months, also known as an Emergency Fund. Whatever the amount is, put it in a short term CD or MM.

loudandheard

I was under the impression that if a debt is payed off like that it is red flagged. Plus they like to see a history of steady payments. If I were you I would do that same thing that they said, but not pay off the loan completely. Maybe leave it 3-5k left on the loan. Remember it's good to have money in the bank in case of an emergancy, other wise you're going to go back to credit cards and loans.

epj1906

Go to this website, it has tons of info on how to improve your credit and dispute errors on your credit report.

http://creditboards.com/forums/

spr

This thread is somewhat comedy. I assume this person is very young due to the short credit history.

There is Zero need to pay off that student loan, and in fact, it's actually better not to since you have short credit history, as it will establish longer payment history and more creditworthiness.

Get rid of that collection. Whether it's a real debt or not send a letter disputing it or call them and work out a deal to pay it conditioned only on removal from your credit report.

You must have really low income or something at least claimed as well to have such low credit offered. Any amount over 50% on cards brings your score down. Do all of those things and maybe apply for another card with a single digit interest rate, xfer the balance from the higher and you'll be better off interest wise as well as % of carrying on cards wise and you're fico will be better, or pay off the amount on cards to under 40% and you should be decent-

fivepointfivev8

I tend to wonder if the "longer payment hx leads to more credit worthiness" is really worth doing in this case. There will be all kinds of opportunities to do this down the road and a car loan is not considered substantial credit, thus applying for it is not nearly as difficult as say applying for a mortgage.

I agree that the age, employment history (or any employment at all) would play a factor in it. I wouldn't hesitate going the dealer because they work with a number of banks that will try to get you the best interest rate. If you get turned down from them or are given a 20% interest figure, then I'd reconsider your strategy.

If I was a loan officer, I wouldn't consider you either, if you default on the loan, which you have a known history of doing on just a 100 bucks, how much would I get for your ghettofied C32 to cover my losses. (When I say ghettofied, chances are, you won't have enough money to support the propper upkeep on it either - just assuming)

In all seriousness, if you are going to prepare yourself (your credit hx) for the future, now is the time to do it.

DarkXerox

well from a financial standpoint, you stand to gain more from paying off your loan than keeping your money in the market right now. Remember you would be needing a yield/gain on your stocks that would match your interest rate on your student loan just to break even on that amount of money. Start investing again once all debt has been repaid since the market would probably be a little friendlier.

Plus in one year, you will be able to get a C32 for a song, especially when the C63 hits our shores. Our residuals are dropping like a rock.

flush

eh? You probably didn't read his other thread where he mentioned that he was paying 15.9% on his student loan. That crazy rate far outweighs any gains he might have to "keep" the loan in the long term. Keep those low-limit credit cards, don't use them, cut them up.

His available credit is at 35% - either he has very small limits or he's spending too much.

Either way, it reflects upon his current earning potential and it would behoove him to clear out any major expenses (in this case, student loan and credit card debt) while he is able to. He's already mentioned that he's disputing the collection. Wait till it clears, check your credit report again with FICO score BEFORE you head into any dealership otherwise you are wasting another hard inquiry into your credit report (2 hards = -10 FICO, no more than 2-4 every 2 years)

Suffice to say, forget the C32 for the '08 year, clean up the loan and collection, sell off a car, stock etc, rebuild your stash of cash.

///AMG4EVER

My thought exactly. Cash is King.

Ridege55

Get that collection off of your report. You need to call all 3 credit agencies and put in a dispute. You then need to followup with documentation to the agencies substantiating the dispute. It would also be wise to work with the collection agency to clear the item.

I just went through the process, and it took several months. An erroneous collection was put onto my credit from a check fraud incident. My FICO went down 100 points from 785 to 685. As soon as the collection came off, my FICO went back to 785.

DarkXerox

Exactly, he would have to have a gain of 15.9% on his stocks and savings combined--Just to break even!!!!--and I highly doubt that bank account is giving more than 4% or so. That means he would need to make $1,590 on his $10,000. Say he gets $200 from the $5k savings (assuming a generous 4%), he would need to make up the remaining $1,390 in his $5k in stock, which is a yield of 27.8%--pretty high!

So paying it off would be far better than sitting on it and eating the interest.

zoink

I used this when I tried to dispute some derog items in my credit report...

http://www.lexingtonlaw.com/

Easy, cheap & successful.

epj1906

I would do this only as a last resort, especially if there are fees involved. His finances are not that complicated, it will just take a little effort to write letters and make phone calls. There is nothing he can't do himself that the law firm will do. There are no magic tricks here.

spr

No I didn't see that. I have never heard of such a high student loan. Mine were 3%. Agreed then. Wow what a raping, even private student loans are only 8%

Ted Baldwin

............little known secret is that it is easier to get a loan on a new car than a used one especially if the bank considers you a credit risk. If you default, the bank has no recourse since the value of the used car is not much. Although there is an overall credit crunch, not getting financing for a used car with a credit score of 635 is a bit odd. There is a separate automobile credit score that is not available to you to see that banks use to make credit decisions for car loans, especially for used cars. Find out what yours is.

Ted

c32AMG-DTM

hmmm... that's interesting, I didn't know that. You'd think it'd be the exact opposite, since new cars depreciate so much faster than used cars. Buy a new car with very little down, finance the rest, drive it for 6 months and default on the payments, and the bank's screwed on the 6 month old used car value (i.e. that's the steepest part of the vehicle's depreciation). Buy a 3-4 year old used car with very little down, finance the rest, drive it 6 months and default, and the bank should be able to get back a much higher percentage of the financed amount, comparatively.

Quick Silver

Buy an AFFORDABLE house (1. great investment 2. believe it or not but that is a chick magnet -- shows commitment, responsibility 3. and given the current market...), pay off high interest loans, pay other bills on time, wait on the car.

db2012

Thanks for the advice guys, lots of good mixed info in here. I think I'm going to pay off about 1/2 of my student loan before I re-apply and wait for that collections to clear. I figure this should take about 3 months to clear with all 3 bureaus. by then my score should be in the 700's and I think I'll make the move to buy the car.

What do you guys think about re-financing the loan, any effect at all on credit? At least I could do it for the lower monthly payment to give me more flexibility?

db2012

Are you guys saying you think i should have been aproved, but just with a nasty Interest rate???

Quick Silver

Have you checked on insurance. My C55 is about 300 dollars more a year than I paid for my 2000 Corvette. My point is harder/more expensive to insure, maybe harder to get a loan. Welcome others comments.

zoink

I guess some of the posts mix it up between why your credit score is low and how you should prioritize your money.

To me, paying off half or all of your student loans is more about how you prioritize your money than about your credit. If you have enough income, once your collection account has been disputed, you shouldn't have any problems getting a loan for your car.

I understand that your overall utilization is 65%... but to be honest, it's not that bad.... couple of my credit cards have close to 90% utilization (0% interest and put the money to money market = free money ), yet my FICO score is still above 700. This is mainly due to my long (which you cannot control) and clean history (in addition to tons of available credit - I think around $300-400K total lines on credit cards alone, hence, low overall utilization).

Refinancing won't hurt your credit other than additional inquiry posted to your credit report, which only gives temporary impact. Your score may not even be affected at all given additional accounts (which is good) and lower debt ratio that would offset the inquiry impact.

So another tip when you're ready to buy a car.... shop for loans at the same time... if possible, do all on the same day. Inquiries from the same industry (i.e. car loans) within a short time period (I think up to 1 week) will be deduped by credit bureaus at the end of the month... so you could put 10 inquiries on one day... and it will only hurt your credit report up to 1 month. The next month, they will be only 1 inquiry.