Help!

[Arklatex]

Hi, I have a crappy credit score. I was recently interested in purchasing a new to me vehicle. Talks with the credit union resulted in some distressing information. For a vehicle loan they want to charge me around 10% interest. Outrageous in my opinion. I have not gone to a dealership yet so I do not know what their interest rates are for folks with my score.

Some generic background. All bills are setup with automatic payment. I am never late. The only revolving lines of credit I have is a charge card with Home Depot that I used once to buy a new washer and dryer. I paid them off early (mistake, hindsight is 20/20) and have not used it since. I have taken out several small loans over the last few years from my credit union. All were under 3 grand and we're for fun stuff like vacations and big boy toys. One was paid off early (hindsight) and the others were all paid as per the terms. 7 years ago I had a vehicle repossession due to a layoff. That must be a big part of the problem. I also think the fact that I generally do not finance things is an issue that has risen to bite me in the butt. I usually just save up and buy outright. Don't like payments or living beyond my means. But I cannot afford to outright buy the vehicle I would like... it costs too much! I am not about to cash in my retirement funds for a truck!

So far I have been told to:

Get a credit card, use it and pay the balance off every month.

Go ahead and finance at +/- 10%. Make payments for a year and then refinance at a lower rate. Rinse and repeat.

Quit dreaming that a young man with a stable, well paying job should be able to have a nice ride. Those are for the welfare rats and wealthy folks.

So, I am asking all you experienced people. What is your advice? I can easily afford payment. I balk at that interest rate. Am I crazy? Give me tips and tricks on how to do raise my score. Or have I already been given the proper advice?

[Arklatex]

BTW. I have learned that paying off early is not going to mess with my score too much

[OSFG]

Ark...the repo going to be the biggest issue..drops down after 3 years and off after 7. Get a normal credit card and buy stuff like gas and groceries. But fixed credit is a part too. car loan or home loan. Some smart folks will say that a credit rating is just a score that others know how much they can make off you. That is true. But when you live a life that demands credit access its not a bad thing. Join a credit union and look for their fresh start programs... they will help build your credit.

I have a 780 and the wife an 820 score. also keep your debt to income ratio low

[Inor]

Hey Ark -

OSFG is correct I think. The repo is a problem, but that should drop off after 7 years.

The one bit of advice I would suggest is to go to one of the credit reporting agencies, Equifax or one of the others, and ask them to give you your credit report. They are required by law to give you one once per year for free. Double check and make sure everything on your credit report is accurate. When Mrs Inor and I bought our house we had a hell of a time getting the mortgage because my credit report showed that I had not paid a bunch of medical bills that I had paid off in full, on time. When I found it, I had hospital write a letter to credit agency explaining that I had not only paid them, but paid them on time and we got the loan without problem and the interest even dropped a full point.

Also, if there are any outstanding negatives that are legitimate, you can sometimes soften the blow by writing an explanation of what the issue was. For example, if your truck was repo'd because the company you were working for went away and you lost your job because of it, sometimes adding a note to your credit file will help. It will not make the problem go away, but they might go a bit softer on you.

If you have credit cards that have a low or 0 balance, those can be a problem especially if they have have a large credit limit on them. Some creditors do not look at how much you currently owe, but how much you would owe if you maxed out every credit line you have. By the same token, closing those accounts out may also have a negative effect on your credit score. But, I expect that could be remedied with adding a note to your credit file or at least call the creditor and ask them to reduce your limit AND include an explanation that it was at your request. Catch-22? Yes.

And the really shitty news of it all is that it might just be your age. In my 20's I had a hell of a time getting credit even though I always paid my bills on time and in full. In my 30's it was easier to get loans, but still expensive. After I turned 40 I got people lining up to give me money on a signature with no collateral and at ridiculously low interest. (Obviously I do not accept their offers.)

But take this advice fro you paid for it...

[Slippy]

First, do not buy the car on credit unless you get 0%...better to pay cash.

Like others have pointed out, the repo is killing you, time is the only thing that will change As far as a Credit CARD? NO..I would never advise anyone to get a credit CARD. If you have any store cards, like Home Depot I think you mentioned, close them.

But there are a few ways around that to help your score and not put yourself into the SLAVE to the LENDER situation;

My Credit Union offers a VISA ACCOUNT. When I opened the account many years ago they also sent me a CREDIT CARD, which I immediately destroyed. But the account stayed open. Since I don't have the actual card, I cannot use it on stupid impulse buys that tend to get people in credit trouble.

I use the account mainly as an emergency "fund" as well as to keep my score high. A few times a year I'll the use the Visa Account to buy something by transferring the borrowed funds into my checking account and using cash for the purchase.

BUT here's the kicker, I SAVE THE MONEY FOR IT FIRST. As with most banks and credit unions I can do it all using transfers within my credit union accounts on line.

I do have a couple of mortgages for investment property and try to keep my DEBT to Income at about 30% or less. I feel much more free when my DEBT to Income ratio is low. Unlike you Ark, I travel a bit for business so I use an American Express to handle the Reimbursed Business Travel Exp as well as my monthly whiskey purchases to keep Mrs Slippy guessing. But the AMEX gets paid monthly.

That's it, no other debt. My credit score (average of the 3 reporting agencies) was about 814 last I looked. You can maintain a good credit score without going in debt.

DEBT is BAD, CREDIT is GOOD but it needs to be managed.

[RWalls]

Like everyone said, repo is the problem. 10% isn't awful, can you pay it of early?

[rice paddy daddy]

When we bought our current house in 1999, we ended up paying a higher interest rate than standard. This was because we did not have much "credit history."
We did not have credit cards, still don't. We had no auto loans, we paid cash for beaters. We had no small loans, and had sold the old house and satisfied that mortgage. We were renting at the time.
It seems being frugal and not being in debt CAN work against you.
Instead of a 30 year loan at 7%, we had to take a 30 year loan at 8.25%. Might not sound like much, but for a $72,000 loan over 30 years that little bit gets really BIG.
In the end, by 2008 we were all paid off, and now we are back to being debt free.

Bottom line - you are still young, plenty of time to rebuild your credit. If it was me, I would take out the 10% vehicle loan, have fun with your new ride, make the payments on time. Who knows, in a couple years when the repo falls away and you have a good record on that auto loan it just might be time to trade in on a newer model WITH a lower interest rate.

[Innkeeper]

After my divorce I had horrible credit , big surprise....... so after a couple government sponsored vacations to help me pay off my bills and getting a couple credit cards which I used to buy gas and other items like that and pay off every month my credit started going up. After 6 months I got a car through my bank.... low interest rate, and 1 year after that my credit was restored enough to buy a house through my VA loan, takes time but you can fix things. Good luck buddy.

[Arklatex]

Thanks everyone. So far I have done a bunch of pm work on my current daily driver. It's running great, you wouldn't realize it has over 220k miles on it. Meanwhile I am going to be doing some small things to get some credit history. I may get an American Express card and use it for my groceries and gas, and set it up with auto pay so I'm never late. Eventually my score will go up enough to warrant a better interest rate.

Thanks.

[DerBiermeister]

The stuff listed is good advice. I use several credit cards for ALL PURCHASES. I usually rack up 3-4 grand per month on groceries, gas, ..... you name it. I of course pay them off completely every month. I have not spent one dime in interest in the last 15 years other than home mortgage loan. I also have some excellent credit cards that pay handsomely in cash rewards. Typically, I earn around $1000 a year in cash rewards -- without it costing me a red cent.

I recently checked my credit score and It is 840. I have not been below 750 for these past 15 years. In over 50 years of marriage, my wife and I have never missed a payment on anything.

One thing you want to avoid as much as possible -- and that is having a LOT of folks checking your credit -- like auto dealerships. Only allow them to do so when you are very close to arranging for financing. It turns out that a lot of activity in outfits checking up on you is detrimental to your credit score. Just like if you were shopping around for refinancing a mortgage -- DO NOT let them ping your credit until you are in the final stages.

[Coppertop]

The stuff listed is good advice. I use several credit cards for ALL PURCHASES. I usually rack up 3-4 grand per month on groceries, gas, ..... you name it. I of course pay them off completely every month. I have not spent one dime in interest in the last 15 years other than home mortgage loan. I also have some excellent credit cards that pay handsomely in cash rewards. Typically, I earn around $1000 a year in cash rewards -- without it costing me a red cent.

I recently checked my credit score and It is 840. I have not been below 750 for these past 15 years. In over 50 years of marriage, my wife and I have never missed a payment on anything.

One thing you want to avoid as much as possible -- and that is having a LOT of folks checking your credit -- like auto dealerships. Only allow them to do so when you are very close to arranging for financing. It turns out that a lot of activity in outfits checking up on you is detrimental to your credit score. Just like if you were shopping around for refinancing a mortgage -- DO NOT let them ping your credit until you are in the final stages.


I agree with the Beer Man- This is how I have done things for years also- I get gear and plane trips with my credit cards- BUT I pay them off monthly- do not allow anything to "stack" up on you.

I have had a few loans for vehicles and homes, but the biggest thing to help my credit score was using and paying the cards off monthly.

Thanks

[Montana Rancher]

I understand all the posts, I have a really high credit rating but IMO the need for it will change really quickly.

Here is a intellectual blue pill, red pill series that you should see

http://www.peakprosperity.com/crashcourse

IMO when you finish the 3 plus hours of video's, you will not buy a new or newer car.