Buy where, pay where?
September 27, 2011 2:51 PM Subscribe
Help a guy with bad credit or no credit or no good credit (not sure which I have) get a modest car loan.
Welp, after being rejected by both Bank of America (my bank) and Capital One today, I am wondering where to go next for an auto loan, if I can get one at all.
My credit history is quite thin; I have three CCs, 2 from Capital One (both with a $500 CL) and 1 from Orchard Bank ($300 CL). The oldest CC account on my file is from February 2011.
I have no repossessions, "public records", foreclosures, late pays or bankruptcies. I have less than 1K in debt. I have two derogs; 1 account in collections set to fall off on in January 2012, and a good many inquiries from various applications I've made for credit cards (in an attempt to establish credit) and auto loans.
I've been employed with the same company for nearly 5 years, had the same residence (a rental) for nearly six years. My current salary is $43,500 a year.
In January of this year, before acquiring the three credit cards listed above, I was rejected by Capital One, Bank of America, Nissan, PenFed, a local credit union, and one or two others before I gave up.
Any ideas as to what I can try?
Welp, after being rejected by both Bank of America (my bank) and Capital One today, I am wondering where to go next for an auto loan, if I can get one at all.
My credit history is quite thin; I have three CCs, 2 from Capital One (both with a $500 CL) and 1 from Orchard Bank ($300 CL). The oldest CC account on my file is from February 2011.
I have no repossessions, "public records", foreclosures, late pays or bankruptcies. I have less than 1K in debt. I have two derogs; 1 account in collections set to fall off on in January 2012, and a good many inquiries from various applications I've made for credit cards (in an attempt to establish credit) and auto loans.
I've been employed with the same company for nearly 5 years, had the same residence (a rental) for nearly six years. My current salary is $43,500 a year.
In January of this year, before acquiring the three credit cards listed above, I was rejected by Capital One, Bank of America, Nissan, PenFed, a local credit union, and one or two others before I gave up.
Any ideas as to what I can try?
I don't think you'll get 20%--more like 8.99%. Fill out the form at LendingTree.com and see what happens.
When was the last time you looked at your credit reports?
posted by Ideefixe at 3:17 PM on September 27, 2011
When was the last time you looked at your credit reports?
posted by Ideefixe at 3:17 PM on September 27, 2011
Best answer: The local Kia dealer here has ads on the radio all the time about getting financing for people with bad/no credit. When I lived in Austin, it was also a Kia dealer that promised to finance almost anyone. Sure, the rates suck but once you get the car loan on your credit report (with a positive payment history) getting the next car.
Your new credit cards will help your credit in the future but after a few months they won't help (and may be negatively impacting you). Also, Capital One does not report your credit limit to the credit agencies. Instead it reports the high balance you've had. So it makes the scoring all jacked up. So if you've only charged $25 worth of stuff on it, and you have a $12 balance it means you're using 50% of your available credit. It also means that to their stupid formula your total credit worthiness is only $25. When I was rebuilding my credit with the subprime Capital One $500 limit cards was to run up the balance on each to close to $500 by buying everyday purchases I'd normally pay from my checking account with then and set aside that money. Then I'd pay the minimum amounts until my credit report showed the "high/limit" column at close to $500. Once that showed up, I paid the cards off. Once that balance was at zero on the credit report again, my score shot way up. The thing is to make sure when you run the card up, you have to have the cash on hand to pay it off right away because if you end up paying it off over time, it defeats the purpose (the credit utilization part of the score being bad offsets that Cap1 thinks your worthy of $1000 in credit). You should also use the card to buy small things and pay it in full -- or to Cap1's internal scoring -- almost in full so there's a tiny balance (spend $20 at the movies, pay $15 when the bill comes) from time to time show it active. After a year of having that Cap1 account being open you'll probably get a pre approved offer to buy a car from them. The interest rate will suck, but eventually your positive borrowing from subprime lenders will allow you to get prime credit. It takes a lot of time and patience.
Check out creditboards.com forums to learn how to help game your scores faster than it might happen organically. Subscribe to a service that lets you check your reports any time you want so you can track the positive changes, and avoid the negatives and do hacks like the Cap1 trick.
It is the catch-22. To have good credit you have to have good credit. Even people with bad credit seem to have better chances of getting loans than people with no credit.
posted by birdherder at 3:23 PM on September 27, 2011 [1 favorite]
Your new credit cards will help your credit in the future but after a few months they won't help (and may be negatively impacting you). Also, Capital One does not report your credit limit to the credit agencies. Instead it reports the high balance you've had. So it makes the scoring all jacked up. So if you've only charged $25 worth of stuff on it, and you have a $12 balance it means you're using 50% of your available credit. It also means that to their stupid formula your total credit worthiness is only $25. When I was rebuilding my credit with the subprime Capital One $500 limit cards was to run up the balance on each to close to $500 by buying everyday purchases I'd normally pay from my checking account with then and set aside that money. Then I'd pay the minimum amounts until my credit report showed the "high/limit" column at close to $500. Once that showed up, I paid the cards off. Once that balance was at zero on the credit report again, my score shot way up. The thing is to make sure when you run the card up, you have to have the cash on hand to pay it off right away because if you end up paying it off over time, it defeats the purpose (the credit utilization part of the score being bad offsets that Cap1 thinks your worthy of $1000 in credit). You should also use the card to buy small things and pay it in full -- or to Cap1's internal scoring -- almost in full so there's a tiny balance (spend $20 at the movies, pay $15 when the bill comes) from time to time show it active. After a year of having that Cap1 account being open you'll probably get a pre approved offer to buy a car from them. The interest rate will suck, but eventually your positive borrowing from subprime lenders will allow you to get prime credit. It takes a lot of time and patience.
Check out creditboards.com forums to learn how to help game your scores faster than it might happen organically. Subscribe to a service that lets you check your reports any time you want so you can track the positive changes, and avoid the negatives and do hacks like the Cap1 trick.
It is the catch-22. To have good credit you have to have good credit. Even people with bad credit seem to have better chances of getting loans than people with no credit.
posted by birdherder at 3:23 PM on September 27, 2011 [1 favorite]
I went to a car dealer several years ago with poor credit and when you're actually sitting there ready to sign over a bunch of money for a car they'll do pretty much anything they can to get you approved and make the sale. I had several defaulted credit cards and a repossessed car on my credit at the time and they still gave me a loan for ~$25k at 11%.
posted by tylerkaraszewski at 4:04 PM on September 27, 2011 [1 favorite]
posted by tylerkaraszewski at 4:04 PM on September 27, 2011 [1 favorite]
Just walk into a dealer and tell them what's up. You probably won't be the person with the worst credit they've seen that week.
Credit cards can actually be harder to get than a car loan, because if you default on a credit card, the creditor is basically screwed, but if you default on a car loan, they take the car back, so the creditor at least gets something.
posted by valkyryn at 5:01 PM on September 27, 2011
Credit cards can actually be harder to get than a car loan, because if you default on a credit card, the creditor is basically screwed, but if you default on a car loan, they take the car back, so the creditor at least gets something.
posted by valkyryn at 5:01 PM on September 27, 2011
If nothing else check out prosper.com as a borrower. You'll likely face a higher interest rate but it could be better than nothing.
posted by thorny at 5:02 PM on September 27, 2011
posted by thorny at 5:02 PM on September 27, 2011
Response by poster: Thanks for all the great answers ladies and / or gentlemen. I appreciate your time. My real question (the answer to which I didn't want to solicit) was, "should I just show up at the dealership". Looks like that will be my best option.
posted by DuoJet at 8:00 PM on September 27, 2011
posted by DuoJet at 8:00 PM on September 27, 2011
A few years ago, my best option was also showing up at the dealership; 2 years later, with a record of on-time payments, I was able to refinance the auto loan through a credit union with the rate nearly cut in half.
posted by Iris Gambol at 8:53 PM on September 27, 2011
posted by Iris Gambol at 8:53 PM on September 27, 2011
If you have the time to do it, establish your credit with a secured credit card -- that is, one for which you deposit, say, $1,000 in the issuer's account. It's frozen, and you get a card with a $1,000 limit (or probably a bit less).
Use it a lot and pay off the full amount every month. Once you show a good record, you'll get plenty of offers for standard credit cards.
Another possibility is to have another person (with good credit) co-sign the loan. But ask yourself whether you have the discipline to make the payments, in full and on time, EVERY month.
posted by KRS at 7:33 AM on September 28, 2011
Use it a lot and pay off the full amount every month. Once you show a good record, you'll get plenty of offers for standard credit cards.
Another possibility is to have another person (with good credit) co-sign the loan. But ask yourself whether you have the discipline to make the payments, in full and on time, EVERY month.
posted by KRS at 7:33 AM on September 28, 2011
1 account in collections set to fall off on in January 2012
'Suspect this is the root of your problem. My sympathies -- these can be a bear to resolve, regardless of circumstance (eg. their mistake ==> your problem). I'd wait until a few months into 2012 and see if things didn't magickly become easier.
The other classic (because it works) solution is to join a credit union, and get a loan through them (I think this is mostly because they're a smaller organization, and the loan officer you talk to is relatively high up the command chain, so you get to talk to a human that actually has power to make decisions).
posted by Tuesday After Lunch at 11:28 AM on September 29, 2011
'Suspect this is the root of your problem. My sympathies -- these can be a bear to resolve, regardless of circumstance (eg. their mistake ==> your problem). I'd wait until a few months into 2012 and see if things didn't magickly become easier.
The other classic (because it works) solution is to join a credit union, and get a loan through them (I think this is mostly because they're a smaller organization, and the loan officer you talk to is relatively high up the command chain, so you get to talk to a human that actually has power to make decisions).
posted by Tuesday After Lunch at 11:28 AM on September 29, 2011
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If going to a mainstream car dealership doesn't work, going to a car lot that says "everybody rides" or "we tote the note" should get you a car "loan" at a murderous interest rate.
posted by jayder at 2:57 PM on September 27, 2011