Will I be approved?

[GenesisVeight]

Hi , Im currently in the Market for a car, but Im concerned as to how my credit score if going to ruin my chances of getting a V8 Genesis. I live in Philadelphia and have $10,000 to place down on one and my credit score is 551. I have just recently paid in full my 45,000 Chase loan for my Buick that I purchased last year. Does anyone have any experience with whether you think I would get approved? Any info would be appreciated. Also are the dealerships willing to work with people that are in my situation?

 

[Mark_888]

I really don't know much about that subject. My scores were a little over 800 last time I checked about 2 years ago, and I paid cash for my Genesis.

But I did find this on the net: "FICO scores generally fall between 550 and 800."

551? Yikes!!

 

[LLT]

I suppose some of it will depend on what you did to get a credit score of 551. If there's a repo or foreclosure, there's a good chance you won't be approved, especially now. With over 20% down, that will certainly help.

Dealers can do some magical things when they're motivated. You're not going to end up with a terribly good interest rate with that score though. Again, having money down will help.

 

[MattG]

Something to keep in mind is that every lender goes by something known as "internal scoring" - in other words, they look at your history, and compute their own risk score for you. This score might be close to your FICO score, but it might be substantially higher or lower, depending on the factors that particular lender weighs more or less strongly.

There are several key factors that all lenders will take into account when deciding how risky you are, which will determine whether or not they will take the deal, and what sort of interest they will offer:

DTI/PTI
Lenders are really concerned about debt to income and payment to income ratios. As a rule of thumb, total monthly debt should be 50% (or less) of gross monthly income, and the total monthly car payments should be 20% (or less) of gross monthly income. The lower one's credit, however, the tighter those guidelines. With a score of 551, and not knowing why it is there, I would guess that most lenders that would potentially be interested in your deal would want to see something like 35-40% DTI and < 12% PTI.

LTV
Loan to value is another really big issue for lenders. Remember that car loans are an asset backed loan (in other words the value of the car collateralizes the loan). Unfortunately cars depreciate, and quickly, so in bad credit situations, lenders get pretty nervous. Also, keep in mind that most lenders will base their LTV calculations on the invoice price of the car. If you can close the deal with a total amount financed being $27,600 (a swipe at an 80% LTV on the 4.6 non tech) you will be much more attractive to a lender than if that number creeps higher.

Work History
Someone who has 2+ years at a current job for a third party employer looks a lot better to a lender than someone who is new on the job, or is self employed, or otherwise has trouble documenting their income.

Nature of Credit Blemishes
It is perverse, but some bad credit is better than other bad credit. For instance, if someone has a newly discharged bankruptcy, but no bad credit after it, they may actually look a lot better to a lender than someone who has never been bankrupt, but routinely pays bills late.

My advice would be to work with a local credit union first. You will get a much better idea of what your situation really looks like. Even if the CU can't work a finance package for you, a good dealership finance office might be able to find a lender, but be prepared for a high interest rate.

Also, keep in mind that once you actually get to the finance stage, most dealers will try to get you to buy a different car, so be prepared for a mental battle.

Good luck!

 

[Mark_888]

Also, keep in mind that once you actually get to the finance stage, most dealers will try to get you to buy a different car, so be prepared for a mental battle.

Do you mean a more expensive car, or a less expensive car. I think he wants the Genesis V8, so probably is not a more expensive car.

 

[MattG]

Do you mean a more expensive car, or a less expensive car. I think he wants the Genesis V8, so probably is not a more expensive car.

In this case a less expensive car. The dealer mentality (which is logical after a fashion in this case) is that if the person is trying to purchase a car that is just a bit "too much" (in other words hard to make the financing work), the answer is to try to push them into a less expensive car, where making the financing work will be easier.

Obviously there are some deals that just can't happen - if a kid fresh out of high school with a part time minimum wage job is trying to purchase a 50K ride, for instance, there is essentially no amount of finagling a dealer can do to put that deal together. In poor credit situations, however, where the rest of the deal points (down, income, etc.) work, the dealer might have to reduce the price of the car in order to make the LTV work for what the lender is comfortable with.

Dealers tend to have a lemons to lemonade outlook, though, and rather than take a near loss on an expensive car to make the deal work, they will often make a big show of trying to make that deal work (including asking the potential customer if they could make outrageous monthly payments), and then, when the customer is psychologically worn down, they spring a less expensive car on them, with a down payment and monthly payments that are much more comfortable. Of course, this substitution car will be put into the deal at full asking price. Far too often a weary car shopper goes ahead and takes the lesser car, and the dealer goes from selling an expensive car at break even, to selling a less expensive car at a few thousand dollars profit. For the salesman, it is the difference of going from a "mini" (minimum compensation) to a nice commission.

Obviously the OP knows exactly the car they want, so I don't mean to imply that they will wind up driving something else home, just shedding some light on what a dealer may do.

 

[Dimitry]

25% down payment is more then enough for a car loan. You may not receive it through Hyundai's financial services at their low APR, but you will probably get it through a bank no problem.

 

[GenesisVeight]

Yes my credit score may be only 551 , but as I said I just paid off my 45,000 loan with Chase bank. That has to count for something. Basically it boils down to the dealership making money or not. They will act like they cant help sometime when they know they wont make a big profit instead of making the customer happy. Thanks for all the comments and help. Credit is a pain in the a** especially where I come from. I have had some unfortunate setbacks within the last two years and I'm on the road to a full credit recovery.

 

[GenesisVeight]

I like when people judge others credit scores. You have no clue as to what situations have happened to put people at these rates. Yikes. I keep on my bills as others do, the market is horrible right now. Enough said.

 

[wallymn]

Yes my credit score may be only 551 , but as I said I just paid off my 45,000 loan with Chase bank. That has to count for something. Basically it boils down to the dealership making money or not. They will act like they cant help sometime when they know they wont make a big profit instead of making the customer happy. Thanks for all the comments and help. Credit is a pain in the a** especially where I come from. I have had some unfortunate setbacks within the last two years and I'm on the road to a full credit recovery.

At 551 expect to pay a higher interest rate if you can find financing. I don't work in the field but wasn't a big problem with the auto sales downturn related to "tougher" lending standards affecting dealers ability to get loans for those with under 650 FICO.

You said you just paid off a 45k loan, How long ago? It takes a few months to see your FICO reflect that. Your FICO may move up over the next few months as a result, if nothing else, that would reduce your expected interest rate.

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[moose66]

Have you at least tried to test the credit waters by applying for a loan online? Some place like E-LOAN.com? Might be a good idea to do that prior to going to the dealership. If everything is okay, you will always have that to fall back on regardless of what the dealer has to offer. If E-LOAN has issues, you will more than likely have the same issues at the dealership. As others have said, if you get credit, it will be at an extremely high rate.

 

[Dimitry]

I'm a relatively young guy so I had issues getting my loan as well - Took several calls and escalations from the dealership principal to the VP of funding in my area to get full approval. I would advise you to make an appointment with the business/finance manager of the dealership, and touch base with them about your concerns. Pull your credit score from fico so you are prepared when you get into the dealership.

As others have mentioned, debt to income ratio is important but for an auto loan they go off what you say. Make sure any credit cards are below a ~33% total utilization.

Happy hunting! Let us know how it goes.

 

[kingalef]

Im my opinion you should wait before you try to get a loan for a car with such a bad credit score. In the event they will approve you, you will get horrible APRs which mean you are going to be wasting a ton of money and end up paying your car 60k or more (at the end of the financing). If you fix your credit (and that might take some time, but not necessarily years) you will be much better off. A 6 months to a year of work with small credit cards paid off regularily to improve your score might make a difference of a couple of hundred dollars a month, when you get your financing.

Regards,
Alex

 

[wallymn]

I don't know what is driving your 551, past problems (charge offs etc) or high credit line use.....

if it is the later, use the 10k to pay down your credit lines...

last, What happened to the car that you just paid your loan on? Was that sold or trading or keeping?

 

[larrycohen28]

At 551 expect to pay a higher interest rate if you can find financing. I don't work in the field but wasn't a big problem with the auto sales downturn related to "tougher" lending standards affecting dealers ability to get loans for those with under 650 FICO.

You said you just paid off a 45k loan, How long ago? It takes a few months to see your FICO reflect that. Your FICO may move up over the next few months as a result, if nothing else, that would reduce your expected interest rate.

My experience has been the same. My credit score went up by about 80 points when I paid off my car loan, but it took a few months to reflect that. Also, the less debt you have the better, and the less available credit you have the better. With a 551, they will probably look closely at how much you could potentially charge on credit cards so you may want to close some accounts you have with no balance if you don't plan on using them again. Unfortunately that will also take a few months to be reflected on your credit score.

 

[GumbyN]

You could also check out CreditBoards.com. There is an automotive financing section there, and a process for asking an F&I person ("Marv") for his opinion. There is a form to fill out (a series of specific questions), and he will post a reply. He seems reasonably quick and matter of fact (doesn't pass judgment about your situation).

Best of luck, but I suspect you'll need some time for your scores to rebound unless you want to pay a sick amount of interest.

Regards,
Gumby

 

[crhbobby]

I work in the finance industry....as a credit union state examiner - (think auditor) Anyways....I think you should apply at a smaller credit union...(one you can be a member of) They typically do REAL underwriting of loans, instead of automated loan decisioning. If your debt ratio is low, and putting money down on the car, they are going to try to work with you. Don't expect a rate less than 9% though. You may get lucky, there are some credit unions out there that do not do risk based pricing, which means that everyone gets the same rate. I think a credit union is the way to go.

 

[MattG]

I work in the finance industry....as a credit union state examiner - (think auditor) Anyways....I think you should apply at a smaller credit union...(one you can be a member of) They typically do REAL underwriting of loans, instead of automated loan decisioning. If your debt ratio is low, and putting money down on the car, they are going to try to work with you. Don't expect a rate less than 9% though. You may get lucky, there are some credit unions out there that do not do risk based pricing, which means that everyone gets the same rate. I think a credit union is the way to go.

This is good advice.

If one can qualify for factory financing, it is often the best because the rates are subsidized. After that, a credit union will generally offer the best deal around.

If one cannot get financed through a credit union, there are lenders that may still take the deal, but, IMHO, they become increasingly predatory.

 

[Mark_888]

I would check with Suze Orman to see if you can really afford the car:

http://www.suzeorman.com/igsbase/igstemplate.cfm?SRC=SP&SRCN=bac_affordit&GnavID=42

 

[GAgenesis]

I really don't know much about that subject. My scores were a little over 800 last time I checked about 2 years ago, and I paid cash for my Genesis.

But I did find this on the net: "FICO scores generally fall between 550 and 800."

551? Yikes!!

Nobody asking your score.