QuestionIt is the beginning of February, I am planning to buy a new car in mid March. The drive out price of the new car is $26,500. I am trading in my old car and will receive approx. $5,000 for it. I will also be putting down $2500-$3000 down, so I will need to finance about $18,500. I defaulted on all my credit cards over 5 yrs ago and I was continually 30 days late on my car note for 11 months straight from December 2002 to November 2003, but the vehicle has been paid off since November 2005. 3 yrs ago I entered into a debt settlement program and have successfully settled all of my credit card debt. I started re-establishing my credit by getting 3 credit cards, over the last two years, with $500 credit limits, charging about $200 a month on them and paying the full amount off every month. My credit limits on the cards have since been raised to $7,100, $1,000 and $750. I ran my credit reports and score last month. My Experian Score is 683. I am currently disputing several things on my credit reports because the information is incorrect. When the investigation on my disputes are concluded in mid February I expect my credit score to rise by 10 - 20 points minimum. I calculated my Debt to income ratio and figured it to be less than 1%. I have been in the military for 4 yrs and live on base so I have no mortgage or rent and no utilities to pay. Other than the credit cards I pay of every month, I have no other debt. Now that I went through my whole life story I can ask my questions. As my credit score sits now, 683, is it possible to approved and get a good interest rate on an auto loan, say 8%? Will lenders look at my credit report as well as my score to determine if I will qualify for an auto loan or will it just be based on the score? Do they take into account my debt to income ratio? I am buying the car in TX, what can I expect my interest rate to be on a 60 month loan? To re-iterate, I have no debt, I live in a house on base for free, I have money saved in the bank and I am financially stable.
AnswerFirst of all, congratulations. You had some rather serious credit issues- to have cleaned them up WITHOUT filing bankruptcy, AND achieve a 683 score is outstanding.
First off, I'm in no position to figure out just what interest rate you'll receive. They vary from state to state and bank to bank, not to mention the loan's term, amount financed and percentage of amount financed. I can tell you that the only influence you have on the rate is your credit score- the actual credit report will determine whether or not you actually receive the loan.
A few observations:
more than once I heard a loan officer mutter something like, "military- can't stand those people. They don't pay their bills, and you can't track 'em down when they don't pay." I know that sounds as wrong as wrong can get, and it turned my stomach then just as much as it does now. But it exists, and I felt you should be aware of it.
it seems to me that your debt-to-income ratio is a little TOO low. It's difficult to raise your score if you don't give them anything to raise it on. I'd consider carrying a small balance on one or two of those credit cards. Also, a REALLY good down payment will help you as much as anything right now. Maybe you could kill two birds with one stone, BUT YOU HAVE TO BE VERY CAREFUL IF YOU DO THIS. Maybe a cash advance against one of those cards, which will allow you a bigger down payment AND build your credit score. Again, you have to be careful doing this- I'd hate to see you get back into the problem you had before (not to mention the fees and increased rate some banks charge on cash advances).
I hope I've answered all your questions- if not, please don't hesitate to ask any follow-up questions. And good luck.
