What is relied upon more, my history with the credit union, or my credit score when applying for a loan?

[kevinm440]

I have been a member of Air Force Federal Credit Union since 2009. I have my savings, checking (with direct deposit), a credit card, a recently paid-off personal loan, and an active auto loan with them. I have always had a good history with them and went overdrawn for a day or two during the holidays, then quickly deposited money. My credit card and loan payments have always been on time, never, ever late.

 

Here's my situation. I purchased a 2010 Kia Forte in back in Nov. 2011, financed with Air Force FCU. The pay-off balance is $10,701, and I'm thinking of selling my 2010 Kia to closely pay off the balance of the car, and just use savings to pay it off completely. I want to purchase the 2014 Kia Forte, when released this spring. My FICO score has always stayed around 601, doesn't change since the utilization rate on my 4 cards is very close to 100% and there are 3 collection accounts on my credit that have been there since 2008 (before I bought my car).

 

I've worked for the same company for 5 years already and have been promoted since I purchased my car. My pre-tax, monthly income has gone from $1,700 to $2,200 since I bought my car. If I were to apply right now, do you think I would qualify for a higher loan amount that previously because I one, have built a history with the credit union, and two, now make more money? Or, would my credit card utilization percentages put a damper on my approval amounts? What do credit unions look at more, good, long history with them, or credit scores?

 

I know it's long, just curious.

[hrguy]

It varies for most CU's. Most will be leary of lending more credit when you are close to 100% utilization, but when you are borderline approvable, they will use the history factor to make a decision.

[cv91915]

I don't mean to be snooty, but is the 2014 Kia really keeping you awake at night?

[BobWang]

If you have 4 credit cards at 100% utilization, IMHO,

 

you're in no position to add more debt.

[turnpike]

this is definitely judgemental, but your 2010 kia is pretty reliable and not that old, you are in so much debt you can't *ever* pay off your credit cards, and yet you want to squeeze out a larger loan so you can buy a brand new car? this is like that first time timmy decides to buy a candy bar instead of a real lunch and 20 years and 400 lbs later he wonders where it all started.

[cv91915]

this is definitely judgemental, but your 2010 kia is pretty reliable and not that old, you are in so much debt you can't *ever* pay off your credit cards, and yet you want to squeeze out a larger loan so you can buy a brand new car? this is like that first time timmy decides to buy a candy bar instead of a real lunch and 20 years and 400 lbs later he wonders where it all started.

And I thought I was being Chocolate Goodness.

[kevinm440]

I don't mean to be snooty, but is the 2014 Kia really keeping you awake at night?

No, it's not. My 2010 already has 58,000 miles on it and I'd like something with less mileage because I drive pretty far to work during the week. Don't get me wrong, it's been a phenomenal car, never had any problems with it.

[kevinm440]

I can definitely pay off all 4 cards, before hand. All four total about $1,700 together.

[encoder]

Gotta agree man. You are currently not a good risk. I'm not sure your LO at the Credit Union would see it that way, but he should.

 

First, if you have savings, pay down your credit card balance(s). You've gotta be throwing away a lot of money in interest payments.

 

Second, unless you're well off, IMO, you're killing yourself financially by buying a new car every few years. You are thinking too much about monthly payments and not about net worth. You are volunteering to pay the insanely steep asset depreciation of your new car, then do it all over again 3-4 years later. A new car every 4 years isn't an awful idea IMO if you have the money but you don't make a lot of money.

 

Nothing will stop you from doing what you want. But this behavior is how people end up here cleaning up their bad credit. Seems you're running awful close to red-line. A few bad cards dealt your way and you're defaulting on your loans and getting sued.

[encoder]

 

I don't mean to be snooty, but is the 2014 Kia really keeping you awake at night?

No, it's not. My 2010 already has 58,000 miles on it and I'd like something with less mileage because I drive pretty far to work during the week. Don't get me wrong, it's been a phenomenal car, never had any problems with it.

 

But it has a 100k mile warranty, right?

Anyway, I don't mean to preach at you. I'm done now.

[kevinm440]

 

 

I don't mean to be snooty, but is the 2014 Kia really keeping you awake at night?

No, it's not. My 2010 already has 58,000 miles on it and I'd like something with less mileage because I drive pretty far to work during the week. Don't get me wrong, it's been a phenomenal car, never had any problems with it.

 

But it has a 100k mile warranty, right?

Anyway, I don't mean to preach at you. I'm done now.

It sure does and it's never been used. I'm very happy with the car, I'm just asking for advise. So far, it's all been good

[Omnipotent]

 

I don't mean to be snooty, but is the 2014 Kia really keeping you awake at night?

No, it's not. My 2010 already has 58,000 miles on it and I'd like something with less mileage because I drive pretty far to work during the week. Don't get me wrong, it's been a phenomenal car, never had any problems with it.

 

I would say to just keep the car and as long as you keep maintenance, you have another 100k to go. I have debated on a new car considering my current one is at 150k but all I ever do to it is normal maintenance. Why not just ride it out until I truly need another car instead of ponying up the cash right now?

[moosetracks]

The best thing you could do for yourself credit wise right now is to pay off all of those credit cards and then keep the usage below 15% to maximize your score. I have to agree with others on the board that you should keep the car for now at least until the warranty runs out. I dont buy new cars due to the steep depreciation the moment you drive it off the lot, if it were me I would look for a used one 2-3 yrs old with low mileage when the time comes.

[mk_378]

I agree with the others. Use your raise to pay down those cards. The least expensive way to own a car is to keep it until it is worn out (which hopefully occurs some time after it is paid off).

[saintdesy]

I couldn't imagine the loan officer would be any nicer about it than the people on this board. Only if you have no housing / insurance expenses would it be close to reasonable to do this. Even then the funds that you would've used to make up the difference between the sale of the old Kia and the payoff amount would be better used to pay off your cards. It is sort of dumb to have both savings and credit card debt if you think about it. Why not just save yourself a bunch of unnecessary interest charges and boost your credit score? Even if something happens and you need the money back you could just max the credit line back out to where it was and you're no worse off than where you started.

[hrguy]

Good thought

[kevinm440]

I couldn't imagine the loan officer would be any nicer about it than the people on this board. Only if you have no housing / insurance expenses would it be close to reasonable to do this. Even then the funds that you would've used to make up the difference between the sale of the old Kia and the payoff amount would be better used to pay off your cards. It is sort of dumb to have both savings and credit card debt if you think about it. Why not just save yourself a bunch of unnecessary interest charges and boost your credit score? Even if something happens and you need the money back you could just max the credit line back out to where it was and you're no worse off than where you started.

I appreciate your advise, but I do not appreciate you telling me that my financial status (debt and savings) is dumb. But yes, I'm planning to pay down my cards (combined $1,703) with my tax refund. I don't have any housing expenses (live with my parents). I am, however, a student, using funds from my other/separate savings accounts. So I feel that I'm doing pretty well. This is my first car and I've never been through the process of trade-ins, etc.

[kevinm440]

From the looks of everything, I will just keep my car. I really appreciate you guys' advise. I know my car is still new, and I love my car. I was just interested in the 2014.

[Guest]

From the looks of everything, I will just keep my car. I really appreciate you guys' advise. I know my car is still new, and I love my car. I was just interested in the 2014.

[saintdesy]

 

I couldn't imagine the loan officer would be any nicer about it than the people on this board. Only if you have no housing / insurance expenses would it be close to reasonable to do this. Even then the funds that you would've used to make up the difference between the sale of the old Kia and the payoff amount would be better used to pay off your cards. It is sort of dumb to have both savings and credit card debt if you think about it. Why not just save yourself a bunch of unnecessary interest charges and boost your credit score? Even if something happens and you need the money back you could just max the credit line back out to where it was and you're no worse off than where you started.

I appreciate your advise, but I do not appreciate you telling me that my financial status (debt and savings) is dumb. But yes, I'm planning to pay down my cards (combined $1,703) with my tax refund. I don't have any housing expenses (live with my parents). I am, however, a student, using funds from my other/separate savings accounts. So I feel that I'm doing pretty well. This is my first car and I've never been through the process of trade-ins, etc.

 

I didn't mean to imply that you personally were stupid, I am just saying that to have both savings and credit card debt at the same time is essentially paying interest just for the benefits of seeing a positive balance in your savings account. What does that really help?

 

Now that you've explained your situation a little better I'll actually digress from the rest of the people that responded. Since you aren't actually needing your income to live this isn't as horrible of an idea as many people here suggest. I certainly assumed that you were supporting yourself entirely off the $2200 as I'm sure other's did; just from the amount of time you have worked at the same place would not have led me to think you were in the student / living at home age range, In your case I would probably pay off the cards like you plan to and see where your score is afterward and then see about getting the loan for the new car. You will be wasting some money, that's for sure but it is certainly OK for you do to that if you want if it isn't a choice between taking your kid to the doctor or having a slightly newer car.

[BobWang]

Keep in mind that housing is the largest expense for most people.

 

Someday, you'll have to provide that yourself.

[hrguy]

Keep in mind that housing is the largest expense for most people.

 

Someday, you'll have to provide that yourself.

Agreed, within the 5 years of that new loan being in effect, you may not want to be living at home - think about the future plans during the estimated length of the loan before you take it on (apartment, mortgage).

[kevinm440]

Thanks again guys. I have savings and I'm putting money into a retirement account, I don't have kids either. So, maybe I should just do this while I can, after I pay off my credit cards, of course . I still have another 3 years of school and my credit union offers me very low interest all the time, my auto loan is 2.99%. It's still up in the air. *sigh*

 

Sorry I wasn't too clear at the beginning.

[hrguy]

If it is not going to cost you a dime by adding negative equity to the new loan or paying a balance when you sell, and you get the same or lower rate - I don't see what is wrong with it.