80%...will It Affect Me???

[TalkofDC]

I pulled all of three of my credit reports. Here is my story.

I have about 5 years worth of credit history and a mix of revolving and installment loan accounts. I have an 80% debt to credit available load between all of my accounts. I have NO late payments and NO negative marks on my credit record. I have more than a few inquires (4-5) from when I was working with a mortgage broker right out of college b/c I had this fantasy that I could possibly buy a condo/townhouse for the same price of renting a home in the D.C. Metro area. Most of those inquires are from 2006 and they will fall off Sept/Oct of 2008. I was not aware at the time how they affected your credit report/score at the time. Now I know. My last credit inquiry reports as of 1/08 and I was trying to get a $5K unsecured loan for a bike to avoid full coverage insurance. I was denied due to having a short credit history and high balances on my revolving accounts. I have since brought down my REVOLVING accounts drastically to about 50% debt to credit available and will be targeting 30% by the time I re-apply for a SECURED loan via my bank or credit union. I felt another reason I was denied for the unsecured loan was because it was just that...unsecured and my credit was not strong enough at the time for that type of loan. I did get approved for $2,500, but I needed $5K. My installment accounts (car loan and student loan) make up the largest portion of the 80% debt to credit available load that I am carrying.

What are the chances given my credit history (no late payments, paying more than the min. required, 5 years of history) that I will get approved for $5k to buy a bike? I am slightly nervous about my installment loan ratio, but I really can't lower it now as it takes time to pay these types of loans off and paying them early will not help. I always viewed installment loans as good credit b/c they give you an opportunity to carry a higher credit worthiness and as you pay it off it will help you debt to credit available ratio. My credit score lies between 660-675. Am I suffering from wishful thinking that I will get this loan? Is carrying a high INSTALLMENT loan debt to credit load that unfavorable in the lenders eyes or is it possible that they will cut me some slack seeing that I am never late? My income is slightly over $50k per year, and the two installment loans that I have are not unscrupulous (sp) as I needed a vehicle and I had to pay one year of college in 2005. The balance of those loans are not high given my income. They are not over $25K which is not even half of my income. I have given full details of my situation and this suspense is killing me. I have waited and been patient with my finances to make this happen.

Please spell me the buy a bike with cash argument. I know some people do it and some people don't. I just wanted a general opinion on what others think and will tell me straight up and not just to tell me what I want to hear like a friend or family member would do.

If I don't get this loan at the end of the month, I am going to be fighting myself hard as crap to NOT get a dealer loan, but I am already going to be approaching the end of the riding season her by waiting until Aug. to get my bike (which was apart of my plan...prices begin to drop). Any insight will be helpful as this is probably my LAST post on this subject (I have posted generic loan, credit, financing posts prior, but this is as juicy as it gets).

WHAT DO YOU THINK?

[LA.Rider]

if i get this right, you want to get a loan from the bank so you don't have to put full coverage on it versus getting a dealer loan and putting full coverage on it?

[LA.Rider]

it also sounds like best case scenario you will get 70% of the value of the bike at most on a new bike loan, probably closer to 50 on a used bike with your credit. I didn't catch the value of the bike you were trying to aquire.

And btw paying extra on payments doesn't make your credit any better, paying on time and never being late are the main things. Most agencies don't want you to pay extra, the more you pay the less they make, they just want their money consistently. After that it's your debt to income.

[Darksheer]

...Sounds like your trying to get just a wee bit in over your head...

[TalkofDC]

LA....not at all. I am getting a loan and paying full coverage. Initially in Jan, I tried to go the unsecured loan to beat full coverage route.

See my debt to income ratio is good to go...however my debt to credit ratio on INSTALLMENT loans is high. I mean frankly, I would be trying to finance a bike while I already am paying a car note and repaying student loans. Is that some impossible feat to accomplish? Surely there are some who have way more debt than I have and financed a bike?

The MAX amount I want to get is $5K just in case, but honestly I want to spend around $3500 for the bike. I could save up, but I know how life works...save for the bike and something else comes up and you spend a little prolonging the purchase of the bike b/c you have to save longer.

[LA.Rider]

I don't understand if the balance on your loans are 25k, and you make over 50k a year, what's your monthly debt / income? It sounds like you should be well enough off you could save 2k up in a couple months.

What's wrong with going with a dealer loan anyway? You are almost guaranteed to get a lower apr if you shop special deals. But I guess 3500 isn't going to buy you a new bike unless you're shopping for a 250. Regardless, a dealer loan on a 3500 bike for 3 years is not going to kill anyone in the pocket book who makes 50k plus.

a credit score of around 650 is probably going to get you 10% apr, give or take 1%

[RayOSV]

For credit scores:

all payments on time = good (necessary)
high balance to credit ratio = bad
high debt to income ratio = bad
paying more than the minimum = neutral although it will lower your balance
too many credit inquiries = bad as they think you're getting loans all over town

No one can tell you what will happen in a specific case for you. It all depends on how aggressively the lender wants to make the loan. Used (or even new) bike loans aren't on any lender's priority list. Loan principal is small and risk is high. Bike manufacturers use loans simply as a means of moving bikes.

A larger down payment (lower loan to value ratio) may help. A credit union or a bank that you've used for a long time may be your best hope.

[TalkofDC]

Originally Posted by LA.Rider

it also sounds like best case scenario you will get 70% of the value of the bike at most on a new bike loan, probably closer to 50 on a used bike with your credit. I didn't catch the value of the bike you were trying to aquire.

And btw paying extra on payments doesn't make your credit any better, paying on time and never being late are the main things. Most agencies don't want you to pay extra, the more you pay the less they make, they just want their money consistently. After that it's your debt to income.

I am not paying extra to increase my score...I am paying extra to reduce my debt to credit available ratio on my REVOLVING ACCOUNTS *only 2* as fast as possible. I know they like the minimum payments so they make money off interest, but I also know that it's not good to carry a high load on your credit card balance. I am aiming to get them down to 30% debt to credit available by the end of this month. I have been paying about $500-600 per paycheck to both cards collective to reduce the balance.

I mean c'mon guys....my insurance quote came in at $50 for 100/300/100 limits with the same for under/uninsured AND $2,000 med payments with a $500 deductible. At $5K loan, my monthly payment would be $100...so essentially I would only be adding $150 per month for bike and insurance which is VERY affordable to me, I just don't want to shoot early in applying for a loan when my revolving accounts still sit at about 50% debt to credit. SO I am waiting until the end of this month/beginning of next to apply....

I AM I REALLY OUT OF MY LEAGUE? I have a feeling I could apply for a bank loan NOW and get approved, but I am driving myself to the end of this month so that I can pay down my credit cards...which only helps in the long run. I don't want to pay off my credit cards...just keep them at a 30% load. My income is sufficient now to take care of the monthly payments, but a year and a half ago I had to use my credit card to extend my paycheck for parking fees at work, sometimes gas, and sometimes misc stuff...

[LA.Rider]

too many credit inquiries = bad as they think you're getting loans all over town

that's inaccurate, too many credit inquiries lowers your credit score because it gives the impression you're always looking to buy something, not that you are getting the loans

I think you meant that, i just wanted to clearify it

[TalkofDC]

Originally Posted by RayOSV

For credit scores:

all payments on time = good (necessary)
high balance to credit ratio = bad
high debt to income ratio = bad
paying more than the minimum = neutral although it will lower your balance
too many credit inquiries = bad as they think you're getting loans all over town

No one can tell you what will happen in a specific case for you. It all depends on how aggressively the lender wants to make the loan. Used (or even new) bike loans aren't on any lender's priority list. Loan principal is small and risk is high. Bike manufacturers use loans simply as a means of moving bikes.

A larger down payment (lower loan to value ratio) may help. A credit union or a bank that you've used for a long time may be your best hope.

Ray that was CRYSTAL CLEAR guy...

I'm looking okay in all categories EXCEPT I have a high debt to credit load on my INSTALLMENT loans...which naturally I can't just pay down right away (15K balance on car loan and 9K balance on student loan).

I do plan on going with USAA which I have home ins, car ins, car loan, checking/savings account, IRA, credit card products with them. IF that fails I will look at my local credit union...IF that fails, I am going to fight myself and "enlist others" to help me avoid financing at a dealer....1) b/c I dont want a new bike and 2) I can't find any used ones at any dealers in town. However according to the reasons for granting a loan the dealer has more incentive than my bank.

[LA.Rider]

Buddy I dont think 1 or 2 months is going to affect the bank's decision on your loan, you'd have to be out of the loans for 6 months for it to actually sway their decisions.

Besides when you get the loan you're not going to pay a payment for a month regardless. No one can tell you if you're in over your head, it does seem a little like you're cutting your budget closely if you have to ask.

If you're asking whether it is worth it to wait to have the bank run your credit. My oppinion is it would only benefit you APR wise to wait another 4-6 months. Getting approved or dissapproved won't be affected IMO if you apply tomorrow or a month from now.

[TalkofDC]

Originally Posted by LA.Rider

that's inaccurate, too many credit inquiries lowers your credit score because it gives the impression you're always looking to buy something, not that you are getting the loans

I think you meant that, i just wanted to clearify it

yeah you guys are right about that. I had a friend I went to HS with and when I got out of college he asked me if I wanted to buy a house...I just didn't know he was going to blast my credit report to secure a loan for me. I got approved, I just did not accept the loan at the time. So those inquires will fall off towards the end of this year as it was 2 years ago. I did have a few inquires earlier this year when I tried to get an unsecured loan. It has been 6 months since then however.

[LA.Rider]

I hate to be a post whore in this thread but debt to income is usually based on a montly basis, not your total debt.

People who have a 200k loan and pay 1200 a month (360 months) have the same liability to the bank as people who have a 40k loan and pay 1200 a month (36 months)


it's all based monthly for the most part

[Ordie]

go to creditboards.com

There is a guy over there that will take down your info and will tell you whether or not you will get approved..

I did it and he was right I got approved. Theres lots of others that did the same thing.. hes pretty right on the money.

[RayOSV]

Originally Posted by LA.Rider

I hate to be a post whore in this thread but debt to income is usually based on a montly basis, not your total debt.

People who have a 200k loan and pay 1200 a month (360 months) have the same liability to the bank as people who have a 40k loan and pay 1200 a month (36 months)


it's all based monthly for the most part

This is true. What they are looking for is the ability to make their new loan payment on top of all your other loan payments and expenses.