I Signed A Credit Application And Told Her To Go For It

Category: Finance, Credit.

If you want to get approved at the best possible terms when buying a car, it s important you know a car lender s credit guidelines before you apply for credit. especially if you re bankrupt. Step 1 in making a lease or buy decision is to determine a lender s credit guidelines.

It will save you time and frustration- but more importantly, it will help you avoid credit inquiries that may lower your FICO credit scores up to 12 points per inquiry. You start by asking if they lend to people with a bankruptcy. That s right. If so, on what terms? You have to be upfront that you ve filed bankruptcy. We have to face the fact that some dealers just won t work with people who ve filed bankruptcy. Don t hide it.

So our job is to find the ones that do. Others will only offer purchase financing. Some lenders will only lease to people with a bankruptcy. Yet still others will only lend using a hybrid of the two- this is especially common in Texas. And here s a quick tip for you: if your bankruptcy doesn t appear on the credit report your lender pulls- then, in the eyes of the lender, you re not bankrupt. Ask the finance director at the dealership to direct you as to what structure the manufacturer prefers. The only lenders I would consider using are: - First choice: Captive lenders( car manufacturers) - Second choice: Banks( not finance companies) - Third choice: Credit unions.

Just one was leased by a bank. Ninety- nine percent of the cars I ve leased over the years have been with captive lenders. That particular deal came from a conversation I had with Amy, the finance manager at the local Land Rover dealership here in Indianapolis. I told her my current FICO scores. I told her I was open to her financing recommendations, but I preferred financing through the car manufacturer. She immediately said that with my scores she could do better through a local bank.

The next day I signed a lease agreement with that local bank. I signed a credit application and told her to go for it. Being open to her advice literally saved me hundreds of dollars a month on that car. It seems most car dealers call all of their funding sources banks. So be flexible. but be careful. When in reality some are banks, some are credit unions, and most are sub- prime finance companies. You want to pass on the sub- prime finance companies- unless you have exhausted all other options.

Here is a list of some of the most commonly used sub- prime auto finance companies: HSBC Automotive Capital One AmeriCredit WFS Financial. Sub- prime lenders should be your last resort. How do you find out if a credit union reports to all three credit reporting agencies? And only use credit unions if they report to all three national credit reporting agencies. Simple- you ask. And after you get the loan, check all three of your credit reports and make sure their trade line appears on each one.

Ask the branch manager at the credit union if they report. The three worst luxury captive lenders to lease or purchase from after bankruptcy are: BMW Mercedes Porsche. What makes these the worst? The three worst mainstream captive lenders are: Honda Kia/ Subaru Toyota. Once these lenders see that you ve filed bankruptcy, they are less likely to work with you. Now that I told you how bad the above six lenders are- there are times where they may offer you good deals. However, if they are willing to work with you, they ll want you to be at least several years from discharge and have perfect credit during that time.

For example, if one of the above happens to be the biggest dealer in your area, they may be able to offer you special deals that a smaller dealer can t. They change their credit guidelines on a whim to meet their own financial goals. Of course, things change all the time with captive auto lenders. So, it s always a good idea to at least research these dealerships- just don t get your hopes up too high. Step 2 in making a lease or buy decision is to purchase your FICO credit scores. OK, so you ve done your research and narrowed down your choice to one or two car manufacturers. It s important you have your most recent scores when you talk to car dealers( just like I did with Amy) .

When you enter a dealership with your FICO scores, the dealer will know you re a more informed consumer and cannot be taken advantage of. It puts you in charge. Just know that the FICO credit scores auto dealers use are a little different than what we see as consumers. The good news. these FICO scores may be higher than your normal FICO scores if you paid all previous auto loans as agreed. The scores the dealers review are called FICO Auto Industry Option Scores. Some car dealers have told me that if your FICO scores are higher than the scores the dealer reviews- they may even use your scores to get a better deal.

Step 3 is to interview the remaining car dealers on a deeper level. You can buy your scores from myFICO. com. Start by asking them these questions: - Which credit reporting agency do you use to make a lending decision? - What is your minimum credit score requirement to get approved? - What credit score is needed to get the best interest rate? - Do your lenders prefer offering lease or purchase financing to a bankrupt debtor? - What incentives are there to lease or purchase right now? Evaluate your options and incentives. At this point it s important to remain open to either leasing or purchasing. Remember, you re buying the financing. I personally view the lease versus buy decision in three ways: If you re recently recovering from bankruptcy, the only thing that matters is if you can get approved at an interest rate you can afford through a lender that reports to all three national credit reporting agencies.

In other words, the most important factor is the willingness of the lender to loan you money. So you should only consider lenders that are bankruptcy friendly. Obviously, you should choose the lender who uses your highest FICO credit score to make a lending decision. Once your credit scores begin to increase, you can start selecting cars based on which credit reporting agency the lender uses to determine if you qualify. When your scores are high enough. or two years have passed after your bankruptcy. or your bankruptcy doesn t appear on the credit report the lender uses, then you can choose almost any car you like. But make sure you still do your research and use your credit scores to help you compare interest rates, terms and incentives.

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