What impact of applying for a car loan have on your scores?

[NYCBrit]

I have a running topic here, https://creditboards.com/forums/index.php?showtopic=572322&do=findComment&comment=5519592, but I need advice on a particular question.

 

We need to buy a new SUV and know which one we will get, (2017 Subaru Forester). We been to two dealers and have their best price. We were going to wait until we can pay cash in full which it looks to be in about another month.

 

If I were to apply for financing, (Subaru Financing through Chase which uses Transunion), how bad would it be to add a hard inquiry? I just looked and I have 1 inquiry on TU, 3 on EX and 3 on EQ with one coming off Oct 4, 2016.

 

Also, if I were to get approved for financing, would it actually help my scores by showing on time payments and then paying it off in 6 months? We plan to pay our cc's off next month. (And use them but leave a very small balance.)

 

**(We will be applying to live in a new residential community within the next month. They do a credit check. Just a FYI.)**

 

We really want this new SUV!😀

Edited August 5, 2016 by NYCBrit

[asucks]

Any reason why you'd want to pay for it all in cash? Car loans are usually super low interest rates because it's secured by the vehicle. I just checked and my local Subaru dealer has 0% APR on all 2017 Forresters. That's free money. I'd rather take the loan and drop the money you were going to pay it off in cash in some index funds and watch them grow.

 

And someone can correct me if I'm wrong, but I don't think taking the loan and then paying it off early will improve your score. Months of on time payments will improve your score, but paying it off won't. In fact, I've read that some people see slight drops in scores once their car loan gets paid off (they lose a tradeline).

[Cactus Flower]

I'd shoot for the 0% financing and take your time paying it off.................

 

it will definitely help your scores ..

[NYCBrit]

I probably wouldn't be approved for 0% APR. That's for well qualified applicants.

 

Right now, my TU score from Credit Karma is just 571. I told the salesman I think I have around 600 score and he said the APR might be 5% - he didn't know.

 

So, I should apply and see if I am approved and at what % APR?

 

If it's at 5%, would that be ok? (My previous new car in 2004 I financed $13,800 at 5.4% and the payments were $253 a month. This was also from Chase.)

[Cactus Flower]

5% is not all that bad , and you can always try to refinance in a year or two down to a lower rate once you've got a history of on-time payments.

 

when my credit was not as great as it is today (2007/2008), I got a new car loan for 7.8% through Chase Auto .. then was able to refinance down to under 3.9% 18 months later with Capital One.

 

Toyota Financial gave me 3.49% in summer of 2014...

not sure what my scores were then - sorry - in the mid 700's if I remember right.

I did a trade-in last weekend, and my new loan through Toyota Financial is 0% ... but my scores are over 800 now.

 

FWIW -- the salesman can give you a good idea .. but the finance person is the one who will actually put the numbers together.

The upside is it's their job to sell you a car :-)

 

A good credit mix can do nothing but help you. It's just important to make those payments on time with everything, keep your cc utilization down, etc.

[cv91915]

It's hard to predict the impact of an installment loan on OP's credit since we don't know that much about the complete profile. For example, we don't know if there is already an installment loan reporting.

 

Assuming OP has no other installment loans, adding one could help with the scores, however s/he's indicated that it will be paid off in 1+ months, and at that point any positive impact will disappear.

 

Also, whatever is holding the fake score below 600 (actual FICO could be 450 or 700...) won't be counterbalanced much buy a fresh installment loan. And I'm not talking just about scores. Whatever negatives are there are still going to be there when the credit file gets reviewed by human eyes.

 

Further, these are impulses that will make you poor over time, along with carrying balances on credit cards:

 

We really want this new SUV!

Edited August 5, 2016 by cv91915

[ubercat]

 

It's hard to predict the impact of an installment loan on OP's credit since we don't know that much about the complete profile. For example, we don't know if there is already an installment loan reporting.

 

 

...and if there isn't an installment loan, the addition of a loan which is promptly paid down to 92 percent will give a large boost to OP's FICO scores for as long as the loan remains open.

 

For this reason, and for the scores I'm looking at, OP might want to consider the Alliant Share Savings gimmick. A FICO bump before apping for a car whould save money down the road.

 

OP: Any closed installment loans? Any open?

[mendelssohn]

Any reason why you'd want to pay for it all in cash?

To not have a payment.

 

We bought my wife's last SUV for cash and I enjoy knowing that it's paid off.

 

That is more important to me than the hypothetical math about investing that same amount of money while taking out a loan. First of all, we already invest a fair amount of money anyway. Second, I bet most of the people that use the "what if invest" logic don't actually follow through on it.

[cv91915]

 

Any reason why you'd want to pay for it all in cash?

To not have a payment.

 

We bought my wife's last SUV for cash and I enjoy knowing that it's paid off.

 

That is more important to me than the hypothetical math about investing that same amount of money while taking out a loan. First of all, we already invest a fair amount of money anyway. Second, I bet most of the people that use the "what if invest" logic don't actually follow through on it.

 

 

"Only $X a month" is also a terrible way to decide how much to pay for something.

[72rrogers]

the Alliant Share Savings gimmick?

Couldn't you do that same thing with the auto loan? Assuming it does not have a prepayment penalty.

Get your auto loan, then pay it down to a very low amount >9% UTIL and schedule tiny payments for the rest of the loan.

Will build a history of on time payments and the payments will be small and manageable.

I got an auto loan in June and it boosted my scores over 24 points. My only loan and only 2 CC.

[takeshi]

If I were to apply for financing, (Subaru Financing through Chase which uses Transunion), how bad would it be to add a hard inquiry?

The inquiry is a small factor. Bigger impacts come from the other factors.

Edited August 5, 2016 by takeshi

[ubercat]

the Alliant Share Savings gimmick?

Couldn't you do that same thing with the auto loan? Assuming it does not have a prepayment penalty.

Get your auto loan, then pay it down to a very low amount >9% UTIL and schedule tiny payments for the rest of the loan.

Will build a history of on time payments and the payments will be small and manageable.

I got an auto loan in June and it boosted my scores over 24 points. My only loan and only 2 CC.

 

That's essentially the gimmick in a nutshell.

[cv91915]

the Alliant Share Savings gimmick?

Couldn't you do that same thing with the auto loan? Assuming it does not have a prepayment penalty.

Get your auto loan, then pay it down to a very low amount >9% UTIL and schedule tiny payments for the rest of the loan.

Will build a history of on time payments and the payments will be small and manageable.

I got an auto loan in June and it boosted my scores over 24 points. My only loan and only 2 CC.

Your car payment stays the same regardless of your loan balance. So you can't just schedule tiny payments or you car will get repossessed.

[Zobelle]

If my score was 571 I wouldn't worry too much about what an inquiry or two will do to me.

 

At the rates you may qualify for though it may be better in fact to just pay cash/check for it and negotiate down to the bone.

[mendelssohn]

 

the Alliant Share Savings gimmick?

Couldn't you do that same thing with the auto loan? Assuming it does not have a prepayment penalty.

Get your auto loan, then pay it down to a very low amount >9% UTIL and schedule tiny payments for the rest of the loan.

Will build a history of on time payments and the payments will be small and manageable.

I got an auto loan in June and it boosted my scores over 24 points. My only loan and only 2 CC.

Your car payment stays the same regardless of your loan balance. So you can't just schedule tiny payments or you car will get repossessed.

NFCU moves the due date on auto loans if you pay in advance. I'm bot sure who else does.

[Zobelle]

 

 

the Alliant Share Savings gimmick?

Couldn't you do that same thing with the auto loan? Assuming it does not have a prepayment penalty.

Get your auto loan, then pay it down to a very low amount >9% UTIL and schedule tiny payments for the rest of the loan.

Will build a history of on time payments and the payments will be small and manageable.

I got an auto loan in June and it boosted my scores over 24 points. My only loan and only 2 CC.

Your car payment stays the same regardless of your loan balance. So you can't just schedule tiny payments or you car will get repossessed.

NFCU moves the due date on auto loans if you pay in advance. I'm bot sure who else does.

Penfed, Ally do as well.

 

I don't owe on my Penfed loan until February, Ally until March.

[cv91915]

 

 

 

the Alliant Share Savings gimmick?

Couldn't you do that same thing with the auto loan? Assuming it does not have a prepayment penalty.

Get your auto loan, then pay it down to a very low amount >9% UTIL and schedule tiny payments for the rest of the loan.

Will build a history of on time payments and the payments will be small and manageable.

I got an auto loan in June and it boosted my scores over 24 points. My only loan and only 2 CC.

Your car payment stays the same regardless of your loan balance. So you can't just schedule tiny payments or you car will get repossessed.

NFCU moves the due date on auto loans if you pay in advance. I'm bot sure who else does.

Penfed, Ally do as well.

I don't owe on my Penfed loan until February, Ally until March.

Weird. I don't think I've ever had a car loan like that.

 

Is interest accruing on the outstanding balance at all times?

[mendelssohn]

 

 

 

 

the Alliant Share Savings gimmick?

Couldn't you do that same thing with the auto loan? Assuming it does not have a prepayment penalty.

Get your auto loan, then pay it down to a very low amount >9% UTIL and schedule tiny payments for the rest of the loan.

Will build a history of on time payments and the payments will be small and manageable.

I got an auto loan in June and it boosted my scores over 24 points. My only loan and only 2 CC.

Your car payment stays the same regardless of your loan balance. So you can't just schedule tiny payments or you car will get repossessed.

NFCU moves the due date on auto loans if you pay in advance. I'm bot sure who else does.

Penfed, Ally do as well.

I don't owe on my Penfed loan until February, Ally until March.

Weird. I don't think I've ever had a car loan like that.

 

Is interest accruing on the outstanding balance at all times?

Yes, but paying off the principal faster still moves the payment date.

 

I ignored mine and kept paying.

[Zobelle]

 

 

 

 

the Alliant Share Savings gimmick?

Couldn't you do that same thing with the auto loan? Assuming it does not have a prepayment penalty.

Get your auto loan, then pay it down to a very low amount >9% UTIL and schedule tiny payments for the rest of the loan.

Will build a history of on time payments and the payments will be small and manageable.

I got an auto loan in June and it boosted my scores over 24 points. My only loan and only 2 CC.

Your car payment stays the same regardless of your loan balance. So you can't just schedule tiny payments or you car will get repossessed.

NFCU moves the due date on auto loans if you pay in advance. I'm bot sure who else does.

Penfed, Ally do as well.

I don't owe on my Penfed loan until February, Ally until March.

Weird. I don't think I've ever had a car loan like that.

 

Is interest accruing on the outstanding balance at all times?

Absolutely.

 

I just pay Penfed loan ahead of time out of habit, The Ally I pay in chunks every couple months using a service to help knock out spend bonuses.

[72rrogers]

Thanks for the info on auto loans. Just got it and was hoping to try the gimmick. Now I know it won't work. I'll have to try it with a personal loan if I do. Good luck on your loan. Hope you can get a decent rate you can live with.

[NYCBrit]

I'll post tomorrow my latest updates on my reports. I know some of you were wondering if I had any installment loans. Just a previous paid car loan that finished July 2009.

 

I do have a very small LOC that Cap One bank charged off on July 27th because they didn't post the payment of $200 I sent until July 29th. (I was a few months late in paying but I never received any warning letters.) I am disputing directly with them because I did a bill pay via Cap One 360 on Fri July 22nd and my bank confirmed they mailed the check on Mon July 25th. It should have went electronically and it would have been received in a day. (I paid Kohls this way and it posted on one day.)

 

I now argued this with the manager handling my new charged off account and also pointed out that perhaps their dept received the mail by the 27th but didn't post until the 29th. She is looking into this.

 

It's upsetting because I know that a charge off is bad. I intend to pay it. I only owe now $812. I don't have negative on my reports other than high UT and past late.

 

If Cap One doesn't bring this to a current status, should I do a dispute with the CAs?

[iLoveCali]

well having a small credit score number, the dealer will work with you, but forget about that 5% apr.. you will get a 20+% apr. the "dealer" will work with you to get a 400$ a month ...or something you like for monthly payment. the apr will be huge. and you may not qualify unless you put a big downpayment and have a good income.

 

my advise is to go to a credit union. they will work better than the dealer.

[cv91915]

I'll post tomorrow my latest updates on my reports. I know some of you were wondering if I had any installment loans. Just a previous paid car loan that finished July 2009.

 

I do have a very small LOC that Cap One bank charged off on July 27th because they didn't post the payment of $200 I sent until July 29th. (I was a few months late in paying but I never received any warning letters.) I am disputing directly with them because I did a bill pay via Cap One 360 on Fri July 22nd and my bank confirmed they mailed the check on Mon July 25th. It should have went electronically and it would have been received in a day. (I paid Kohls this way and it posted on one day.)

 

I now argued this with the manager handling my new charged off account and also pointed out that perhaps their dept received the mail by the 27th but didn't post until the 29th. She is looking into this.

 

It's upsetting because I know that a charge off is bad. I intend to pay it. I only owe now $812. I don't have negative on my reports other than high UT and past late.

 

If Cap One doesn't bring this to a current status, should I do a dispute with the CAs?

 

The brand-new charge-off is almost certainly already reporting in previous months as 30/60/90 late. You aren't going to like the APR on a car loan.

 

I would recommend taking a hard look at how you treat credit before you take on a big debt like a car loan. This isn't about whether or not you receive warning letters, or whether a payment on a small obligation that's already months behind takes 1 or 3 days to post.

[NYCBrit]

 

I'll post tomorrow my latest updates on my reports. I know some of you were wondering if I had any installment loans. Just a previous paid car loan that finished July 2009.

 

I do have a very small LOC that Cap One bank charged off on July 27th because they didn't post the payment of $200 I sent until July 29th. (I was a few months late in paying but I never received any warning letters.) I am disputing directly with them because I did a bill pay via Cap One 360 on Fri July 22nd and my bank confirmed they mailed the check on Mon July 25th. It should have went electronically and it would have been received in a day. (I paid Kohls this way and it posted on one day.)

 

I now argued this with the manager handling my new charged off account and also pointed out that perhaps their dept received the mail by the 27th but didn't post until the 29th. She is looking into this.

 

It's upsetting because I know that a charge off is bad. I intend to pay it. I only owe now $812. I don't have negative on my reports other than high UT and past late.

 

If Cap One doesn't bring this to a current status, should I do a dispute with the CAs?

The brand-new charge-off is almost certainly already reporting in previous months as 30/60/90 late. You aren't going to like the APR on a car loan.

 

I would recommend taking a hard look at how you treat credit before you take on a big debt like a car loan. This isn't about whether or not you receive warning letters, or whether a payment on a small obligation that's already months behind takes 1 or 3 days to post.

We fell on severe financial hardships for the last few months and that is why we are in this crazy mess. We were able to bring everything current now.

 

Within the next few weeks or a month maximum, I will receive a small inheritance from my late step dad. I will then be able to pay off all our credit cards and the very small mortgage in full. We would be able to purchase the SUV in cash.

 

We aren't young and foolish, (my husband and I are both mid 40's), and we know that we won't be going crazy with what we have. (I would give this check up in a heartbeat if I could have my stepdad here again and in better health than when he passed.)

 

We are both trying to get ahead and rebuild our credit so in a year or two we can get a mortgage and purchase our first home.

 

In a previous thread I started was about us applying to live in a nice residential community with the scores we have now. Since it will be a few weeks more before we get the check, we won't apply now.

 

And applying for a car loan wasn't something we were originally thinking about until the salesman gave us thoughts about it. (We are driving in a 12 year old car without AC and has a tendency to overheat if you are in stop and go traffic. Yes, it's time for a new one.)

Edited August 6, 2016 by NYCBrit

[cv91915]

 

 

I'll post tomorrow my latest updates on my reports. I know some of you were wondering if I had any installment loans. Just a previous paid car loan that finished July 2009.

 

I do have a very small LOC that Cap One bank charged off on July 27th because they didn't post the payment of $200 I sent until July 29th. (I was a few months late in paying but I never received any warning letters.) I am disputing directly with them because I did a bill pay via Cap One 360 on Fri July 22nd and my bank confirmed they mailed the check on Mon July 25th. It should have went electronically and it would have been received in a day. (I paid Kohls this way and it posted on one day.)

 

I now argued this with the manager handling my new charged off account and also pointed out that perhaps their dept received the mail by the 27th but didn't post until the 29th. She is looking into this.

 

It's upsetting because I know that a charge off is bad. I intend to pay it. I only owe now $812. I don't have negative on my reports other than high UT and past late.

 

If Cap One doesn't bring this to a current status, should I do a dispute with the CAs?

The brand-new charge-off is almost certainly already reporting in previous months as 30/60/90 late. You aren't going to like the APR on a car loan.

 

I would recommend taking a hard look at how you treat credit before you take on a big debt like a car loan. This isn't about whether or not you receive warning letters, or whether a payment on a small obligation that's already months behind takes 1 or 3 days to post.

We fell on severe financial hardships for the last few months and that is why we are in this crazy mess. We were able to bring everything current now.

 

Within the next few weeks or a month maximum, I will receive a small inheritance from my late step dad. I will then be able to pay off all our credit cards and the very small mortgage in full. We would be able to purchase the SUV in cash.

 

We aren't young and foolish, (my husband and I are both mid 40's), and we know that we won't be going crazy with what we have. (I would give this check up in a heartbeat if I could have my stepdad here again and in better health than when he passed.)

 

We are both trying to get ahead and rebuild our credit so in a year or two we can get a mortgage and purchase our first home.

 

In a previous thread I started was about us applying to live in a nice residential community with the scores we have now. Since it will be a few weeks more before we get the check, we won't apply now.

 

And applying for a car loan wasn't something we were originally thinking about until the salesman gave us thoughts about it. (We are driving in a 12 year old car without AC and has a tendency to overheat if you are in stop and go traffic. Yes, it's time for a new one.)

 

 

I wasn't judging you for being behind, I was trying to encourage to you look at your situation with a fresh pair of eyes.

 

I'm sure the SUV is fantastic, but consider buying a modest, reliable vehicle with cash and then stashing the rest of your money in savings. Having liquid savings is critical to weathering the downturns. An SUV is not.