JJ asked:


Right now my Fico score is at 568. On my credit report the reasons stated for my low score is because of a severely late payment 8 months ago from a student loan. The reason for this is that for some reason the lender didn’t update my account as being deferred and when I found out about it, I paid it up to current and have made all other payments on time (before and after this with them). I tried contacting them about this but they are not willing to help with the late payment reporting. I also have a large amount of inquires because I’ve been applied for loans with the “bad credit” dealerships only to be told I can get a used $10000 car for like $500 a month payments (not a very good deal in my eyes because most of the vehicles have 100k miles). Now with what fico has released as the scoring for late payments my interpretation of that would be that my score would be in the 650′s if my student loan had reported correctly. If I were to go to a bank or credit union and explained my situation with that would it help me get into a vehicle or just hurt me with another inquiry? I do have some old collections from a divorce that I have been paying off and having them removed that were from about 4-5 years ago, but now I need a new vehicle and all my excess cash went to old bills so I am limited on a down payment. Currently I have 2 credit cards with a total of $500, 20% utilized just to keep a good reporting. I have been at my employer and address for 18 months and my AGI approx 40k.

I am hoping to get some professional opinions whether it would be possible to get an auto loan through a CU or Bank. Would going to a large dealership be the best bet? Any guess on the probability to get a loan would be great.
I understand I would have a higher interest rate but I am willing to accept that. I am just trying to get into a new or slightly used vehicle and bring my score up by April 2010 to purchase a home.
People come on here for answers, not snide comments. Also, I’m asking for professional experience or people who have been able to do so in similar situations. Please, if you do not know then don’t post just to get a point.

Brent

Scott Stanko asked:




When your credit score gets below a certain point you may have to turn to sub prime lenders for your auto financing needs. As you apply for these types of loans you will notice that their interest rates are considerably higher than your traditional lending sources you have used in the past. Although it may feel like it, sub prime lenders do not charge higher rates just because they think you are a bad person, or to punish you for your current financial situation. There are some very real and calculated reasons that the rates are higher on these types of loans.

1) Higher Risk Of Loss- Sub prime lenders have much larger default rates as a percentage than regular prime banks do. When a lender has high default rates they have to charge a higher rate of interest on all their loans to help off set the losses they incur on the defaults. Banks are in the business of making money and charging higher rates allows them to collect more money in interest up front and hopefully remain profitable after the losses they incur. If they were to charge low rates on all their loans and still incurred the same amount of losses they would go out of business because the losses would exceed the income that their loans generate.

2) Higher Collection Costs- When a lender has higher default rates they also incur higher collections expenses. Repossession, legal, title, and staff expenses all increase when you have large amounts of loans that default. All these expenses affect the lenders bottom line.

3) Verifications- Sub prime lenders have very strict guidelines that they have to follow. Before any sub prime lender will disperse funds on a loan they will verify all the information you provide on your application. Staff is needed to contact employers, landlords, mortgage companies, and insurance companies. This can be a long and tedious process that takes time and hourly employees.

As you can see there are some very real expenses that sub prime lenders incur as cost of doing business. The best plan is to make timely payments on this loan and as your credit score starts to rise look to refinance through a prime lender at a lower rate in the future.

Juan

kayla8599 asked:


When we got divorced we both agreed to give the car back to the bank as a voluntary repossession since neither one of us could make the payment. My ex husband took the car and said he’d trade it in or sell it to put toward the balance owed, I got calls from the bank stating they have since sent the account repossessions. He refuses to tell me anything. He was the co-signer on the vehicle because my credit was so new. I’m 23 and would like to pay this off as quickly as possible. Problem was I was paying 475 a month for 2 years and only 2000 came off the total amount due! I don’t know what the interest rate is but (stupid I know, I learned my lesson believe me)is that factored into collections when they send it off or is it the total amount due? I’m so confused please help!
who will be held liable first? Will they go after us both for a split amount?
I’m not trying to “get off the hook” I’m just frustrated he’s taken the car and probably sold it, then kept the money for himself without letting me use it for the car.

I have a 4 year old he doesn’t pay for either!

Megan