Ralph

I'm drooling at the mouth, I want the new, fully loaded RX-8 upon its release in 6 months or so. I'm sure the rest of you are dying just as badly as I am, but one final question detours me from truly knowing if I will own this magnificent vehicle... My Credit.

I make over (and I'm not specifying how much over), but over 50K a year, I live in Florida and have never purchased a new car before. I have recently/new established credit, which is barely to the point of credit card offers in the mail, if you know what I mean (I have my credit score). I'm 22 and I'm worried that the very car I've been waiting for (for more than a year now), might not actually be within my grasp. I plan on putting $8,000 down or so. Can anyone offer me any feedback at all on this? Thanks!

DYT

If you are really making as much money as you claimed, I would think that any dealer or bank would jump at the opportunity to offer you a loan.

Ralph

I'm really glad to hear that, I welcome additional feedback as well!

DYT... I really do make that amount, but I could care less about that... I just didn't know how relavent that is if you're credit is brand new.

Kasmiur

Sadly no credit is almost worse than bad credit.

Good news is this. You have time. I would recommend taking out a personal loan for the amount of 2,000. If you have to open a checking account with the bank then do it. Stick the money in there plus 100-200$. Get it set to autowithdrawl for a few months. Then pay it off some. Should help your credit score some. Also will give the bank some history with you. Then when the Rx8 comes out go there and see if they will give you a loan for the amount. I would also recommend saving up another thousand or two for the car.

Also remember shop around. Dont let the dealer try to finciance you or hook you up with a bank. Sometimes dealers will try to get you setup with some company who will charge you 20% interst or something along those lines. I am not sure if they make commision off of the bank hookup but I wouldnt put it past them.

Also get your paperwork now all neat and stuff and perhaps ask parent if they would consider cosigning a loan as a just in case measure.

DYT

I'm really not a expert on this, but I know that they look at a lot of different things when giving you a loan, how new your credit is only one of them. Things they look at includes how much money you make, how much your rent/house payment is, how much your debt is, etc, to calculate how much of a "risk" it is to lend you that money. I think that $8000 downpayment would help too.

I assume you are a recent college grad? Mazda has some kind of college grad program and takes $500 off a new car, if you didn't know already.

BryanH

I'm interested in this credit stuff too, being 21 and wanting to purchase my first new car in a couple years. I've never taken out a loan but have had a credit card for, hmm, 3 or 4 years now. I get credit card offers in the mail all the time. Only forgot a payment once or twice. So I *think* I have pretty decent credit, but again it's only with a credit card. Do I need to take out a small loan first to establish myself in that arena? Was thinking about doing that anyway to get my MR2 fixed up real nice.

In case you couldn't tell I'm very new to managing finances. I suppose I should start a savings account (just have checking right now) too. And investing would be good...

I'd love to get payments as low as $300/month for an RX-8, but I have a feeling I'd have to pony up a substantial down payment to get that.

Hercules

I'm leasing the car, and I'm 22. The car obviously depends on my getting a job by April or early May and I think I should be able to land one, given that I have good prior experience. Hoping to make at least 55k+ a year.

However I do have a longstanding credit history that is good. My credit cards (Amex Blue and a Student Visa I started out with) now have limits at 10 grand and 8 grand respectively, without asking for one increase.. I was just granted increases over time from making timely payments.

Right now I do have about 2 grand in credit card debt but I'm making the minimum payments right now until I have enough to just knock them out entirely (which isn't too far off, as I have some money coming from a website I did).

I think I should qualify for good enough credit where I can put $1500 on a lease for the RX-8 (I'm not interested in buying as I know in 3 years I will be bored hehe), and keep my payments around 350-400 a month. More than likely though, I'll go through a secondary financing company because dealers don't give you as good deals as you can get online.

For those of you looking to finance (read: buy) the car, check out PeopleFirst.com. They will send you a check in the amount of the loan you request overnight, you hand that to the dealer and walk out with the car. Then you just start making your payments to PeopleFirst, which are SIGNIFIGANTLY lower than you'll get from the dealer (more than likely anyway). Call around first though, and make PeopleFirst your last call. They will generally beat or meet the lowest interest rate you can find, and given that they have great customer support you're better off going with them.

For those of you leasing, you can try LeaseByNet.com or BankOne.com.

Just some tidbits of info that I've found out

RotorMotor

I was recently looking into buying a house, so I learned a lot about credit really quickly. Like some of you guys, I'm in my early twenties (well, I guess 24 is getting close to mid-twenties :D ) and I'm pulling in a just over $50k a year as well. Here's what I learned:

BryanH, absolutely open a savings account. It's crucial that you show that you are able to not only pay your bills, but stash a little cash away for emergencies as well.

Ralph, you should definitely apply for a couple (2 or 3) credit cards and possibly a personal loan. Use all 2 or 3 cards, but pay the full balance off at the end of every month. 6 months worth of credit is a lot better than none!

In order to get your payments down to about $300/month, you'll definitely need a substantial down payment. If you were able to get the car out the door for $30k (tax and licensing included) and put $10k down, even a loan at 6% (very low interest rate) would require payments of about $385/month. On the other hand, putting a large sum of cash down on a car looks very good to lenders. If you put $1500 down on a car and default on your loan, you're only really out $1500 (well, and your credit goes to Hell), but by putting down 9 or 10k, you're showing that you genuinely have an interest in this car and that you're a little more likely to do what you need to in order to ensure that the car is not repo'ed. (My English teachers always told me I was a king at run-on sentences) :p

Buger

Hi BryanH,

I think new car loans usually have 3 - 5 year terms. If you can want to pay $300/month, you could borrow $18,000 for a 5 year loan at 0% (60 * 300). Higher interest rates or shorter terms would make the monthly payments higher.

Brian

Ralph

Thanks so much for your replys everyone...

I forgot to mention that I've been paying Student Loans from college for the past 8 months with a perfect record of payments so far. I just didn't include that before because it doesn't seem to make a difference on my credit. Is anyone familiar with a beaken score? Because I know mine... I was wondering if anyone knows what the general minimum beaken score (the credit score that ranges from 400 - 800 typically) is to by a car?

RotorMotor

Beaken or Beacon? I don't know actually, but I assume you're referring to the standard credit score. A score under 620 could possible make things a little difficult. Here's some info I found about what makes up your score:

Payment history: 35%
Amounts owed: 30%
Length of credit: 15%
New credit: 10%
Types of credit: 10%

That said, your credit score is only part of a lenders decision, beside factoring in your down payment, one of the biggest factors is your avaiable credit to debt ratio. Lenders want to see that you are using your credit by choice, not by necessity. For example, you're much more likely to get a loan if you have $20k worth of credit and are using 10% of it (a revolving balance of $2k or less) than if you have $40k worth of credit, but have revolving balances of $20k or 50% of your available credit.

Your student loans should definitely be factored into your credit score. If the loans aren't showing up on your credit report, you shoud write to the finance company and request that they update the 3 major credit bureaus (Experian, Equifax and TransUnion). They're required by law I believe to update the credit bureaus with your payment history within a month of receiving your request. You should do this ASAP though because it may take a few months to filter through the bureaus' systems and you want to be sure that your good payment history is on your report before you apply for the car loan....

Buger

Hi Ralph,

I know the credit scores as FICO scores but I just learned that the 3 different reporting agencies have different names for their scores. For Equifax, it is called the Beacon Score; For Experian, it is called the FICO Score; For Trans Union, it is called the Empirica Score.

Below is my general idea of the scores:

500-599 ok credit. Can get you loans but not at the best interest rates
600-699 good credit. Should be able to get good rates (possibe 0% deals >650?)
700-800 great credit. You can get pretty much whatever is offered.

Of course I'm no credit expert or anything so don't take my word as gospel.

Brian

Ralph

Great, I appreciate the feedback! And in all honesty, I dont mind telling you my score, its not like any of you know who I am. I have just a hair below 600, and I used the FICO score simulator and simulated where I will be in 6 months if all payments are made on time... it stated anywhere between 613 to 636. I'm hoping this will give me a decent chance. And yes, my Student loans do show on my credit as just fine, but do not add to my dept ratio reported by the credit companies. Basically I have quite a bit out in student loans, and only 2 grand on credit cards. But the only thing my reports show are the 2 grand, and discard the student loans. So from what everyone has stated, I think I stand a decent chance, the only question is, who do I ask for the money. It looks like I could get screwed if I go through the dealership.

RotorMotor

613 to 636 ought to do ya just fine. Where did you find the score simulator by the way? I'd love to take a look at that.... You should be able to get a decent interest rate which will help you get your payments down.

The best places that I've found for auto loans has been credit unions. There are a lot of different credit unions that have different membership requirements (for example, you have to live in a certain city, or be enlisted in the armef forces, etc. My work even has thier own). Pro: generally really low interest rates. Con: a little more difficult to get loans through than an typical auto lender....

Ralph

Man, I'm really happy with what I'm hearing. I appreciate everyones feedback. Also, here's a pic of that score simulator... You can register an account with equifax that can even hook you up to all three credit reporters from between $70 - $100 a year. And you can even check your new scores on a day by day basis if need be. Thanks again!

T-von

Hey Buger, you've pretty much got it right.


Hey Ralph, I will try to be straight up with you about this. Currently I'm a car salesman A beacon score is what lenders use to mainly decide what interest rate they will give you( the higher the beacon the better interest). However, having a high beacon doesn't gaurantee you can get financed for an auto. You have a much better chance of getting financed if you've had previous auto credit (which is what banks really look for). I will give you an example of one of my past experiances. A customer comes into my dealership to buy a vehicle. To make a long story short, this customer he had a beacon of 750 with good income :D . Only problem was he had very little credit but no auto credit (it is possible to have a high beacon with limited credit). Never the less I lost a sale Now the advice these guys are giving you is great but, at the very lease try to accuire some auto credit asap. Hope that help


Trey

RotorMotor

Ralph,

You got my thinking so I figured I'd make sure that I can get approved for the loan as well (never tried for a loan over $20k before and it'd suck to have the car all picked out and not be able to drive off with it!) I decided, what the hell, let's see what they'll offer me. I went to Lendingtree.com and filled out their application at about midnight last night. By 10AM this morning I had 3 offers for loans. The interest rates weren't that spectacular, but I figure another 6 months of massaging my FICO score will help that out. Just a thought. You may want to try it as well....

Ralph

Hows it going! So you applied and had a few offers huh? I suppose even if the interest rates aren't too great, at least you're offered something. It probably is a good idea to get things moving a little early, but just remember that applying means an inquiry is posted to your report, and 3 inquiries within 6 months look bad.
Do you mind If I ask how much you applied for and how old you are? Thanks!
- Ralph

RotorMotor

Sure. I'm 24. I signed up for that Equifax deal you mentioned too. Good resource.... I used the score simulator and hopefully I'll be able to boost my score another 40 points by buying time.

As for the loans, I applied for $20k since I'm hoping that if MSRP stays low I can put $9k down. I got one offer for $22k and another for up to $28k. I don't know why they offer more than you ask for.... Guess people fall for that and say "well, crap, I'll just finance it all". :o