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Existing car kept after BK but it's not helping rebuild credit...?

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  • Existing car kept after BK but it's not helping rebuild credit...?

    Here's my situation. My BK was discharged 12/09. I had an existing car loan from Citi Financial Auto (which I was never late on and always overpaid on). I wanted to keep the car and asked the judge to reaffirm. He denied the reaffirmation but told me I could keep the car as long as I just continued to make the payments. I was confused but felt rushed out of the courtroom. What I didn't realize then is that all the payments I would make on the car would not be reported to the credit bureaus because the car was listed in the bankruptcy. Which obviously means the payments would not help increase my credit score.

    Now fast forward to today. Apparently Citi Financial no longer does auto loans and has transferred all of their accounts to Santander USA. At first I thought it was just BK issues were transferred but apparently not. I still owe $5500 on the loan which has 2 more years on it. I asked Santander if I could refinance the loan and they said no since it was included in my bankruptcy.

    I have gotten credit cards (both secured and unsecured) and am building my score back up slowly but surely (currently close to 650). I would love to not pay on this car for 2 more years and have nothing to show for it! Not even a "paid as agreed" on my credit report. I just got a pre-approval letter from Cap One for a car up to 30K and since I do not need a new car, I went on their website to see about refinancing my car. It doesn't qualify because it has more than 70k miles on it and I owe less than 7500 anyways.

    Am I screwed or does anyone have any ideas?

    Thanks!

  • #2
    You have other tradelines so I wouldn't worry much about it. I have no new tradelines since BK, and I am doing just fine. You may ask the new company if they would report to the bureaus but you probably won't have the loan that much longer. You said you have 2 years left, and you can probably get it done faster than that. You are certainly not screwed, you don't need an auto loan to validate anything!
    New Orleans: Home to the World Champion Saints, the biggest enviromental disaster and the biggest natural disaster in the history of this nation. Proud to call it home!

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    • #3
      Originally posted by mark303 View Post
      Here's my situation. My BK was discharged 12/09. I had an existing car loan from Citi Financial Auto (which I was never late on and always overpaid on). I wanted to keep the car and asked the judge to reaffirm. He denied the reaffirmation but told me I could keep the car as long as I just continued to make the payments. I was confused but felt rushed out of the courtroom. What I didn't realize then is that all the payments I would make on the car would not be reported to the credit bureaus because the car was listed in the bankruptcy. Which obviously means the payments would not help increase my credit score.

      Now fast forward to today. Apparently Citi Financial no longer does auto loans and has transferred all of their accounts to Santander USA. At first I thought it was just BK issues were transferred but apparently not. I still owe $5500 on the loan which has 2 more years on it. I asked Santander if I could refinance the loan and they said no since it was included in my bankruptcy.

      I have gotten credit cards (both secured and unsecured) and am building my score back up slowly but surely (currently close to 650). I would love to not pay on this car for 2 more years and have nothing to show for it! Not even a "paid as agreed" on my credit report. I just got a pre-approval letter from Cap One for a car up to 30K and since I do not need a new car, I went on their website to see about refinancing my car. It doesn't qualify because it has more than 70k miles on it and I owe less than 7500 anyways.

      Am I screwed or does anyone have any ideas?

      Thanks!
      Are you under water on the car? Do you have equity in the car at this point? Trading in the car for a loan that will report will help you re-establish your credit, and would be a sound idea as long as you have equity in the car and are not rolling negative equity into your new loan. (which Capital One will not allow anyway).

      I just bought a car using my Capital One blank check and I am very happy with the way things went. The car is already reporting on my reports, and I got a very good interest rate.

      Showing the ability to handle larger credit lines is an important step to credit repair. If you have to pay on a car anyway, it would be better if that car was reporting on your reports.
      You can't take a picture of this. It's already gone. ~~Nate, Six Feet Under

      Comment


      • #4
        First, why are you chasing your credit score? The judge did you a HUGE favor by not allowing you to reaffirm that car. One should never ever reaffirm a debt just for a credit line or to "enhance" their credit report. A reaffirmation is a serious decision and I'm glad that most Judges deny 99.99% of them.

        I am also glad that Santandar USA refused to allow you to "back door" reaffirm and reopen the old $5,500 CitiFinancial installment loan as well. They are not allowed to do that anyhow, and I'm glad that they instructed you correctly. Try to avoid installment loans at ALL costs as they actually hurt your credit score! (This is when you have more than 2 non-mortgage installment loans. Car loans are installment loans and count in that "2" number.)

        If you're question about being screwed, solely because you're trying to play the "numbers" game with your FICO score, then yes... but you were from the time you filed bankruptcy. Time heals all wounds, and certainly heals issues created by bankruptcy. Your pre-bankruptcy handling of accounts is what keeps your score "lower" than it could be. Take the time to pay what you have on time and keep your account clear of any lates or collections.
        Chapter 7 (No Asset/Non-Consumer) Filed (Pro Se) 7/08 (converted from Chapter 13 - 2/10)
        Status: (Auto) Discharged and Closed! 5/10
        Visit My BKForum Blog: justbroke's Blog


        I am not an attorney. Any advice provided is not legal advice.

        Comment


        • #5
          Originally posted by justbroke View Post
          First, why are you chasing your credit score? The judge did you a HUGE favor by not allowing you to reaffirm that car. One should never ever reaffirm a debt just for a credit line or to "enhance" their credit report. A reaffirmation is a serious decision and I'm glad that most Judges deny 99.99% of them.

          I am also glad that Santandar USA refused to allow you to "back door" reaffirm and reopen the old $5,500 CitiFinancial installment loan as well. They are not allowed to do that anyhow, and I'm glad that they instructed you correctly. Try to avoid installment loans at ALL costs as they actually hurt your credit score! (This is when you have more than 2 non-mortgage installment loans. Car loans are installment loans and count in that "2" number.)

          If you're question about being screwed, solely because you're trying to play the "numbers" game with your FICO score, then yes... but you were from the time you filed bankruptcy. Time heals all wounds, and certainly heals issues created by bankruptcy. Your pre-bankruptcy handling of accounts is what keeps your score "lower" than it could be. Take the time to pay what you have on time and keep your account clear of any lates or collections.
          I agree with justbroke. Reaffirmation often means that you are reaffirming at high interest rates and with the car being under water. Reaffirmation should not be entered into lightly and should not be done to enhance credit. If you have equity in the car and could benefit from trading it in, then that is a separate consideration and should be decided on the merits of your current car versus any new car and car payment and not on the basis of fico score alone.
          You can't take a picture of this. It's already gone. ~~Nate, Six Feet Under

          Comment


          • #6
            Well my car is not underwater. It books at 2-4k more than I still owe on it. I also do like the car a lot so don't really want to trade it in for a new one. I just hate the idea of paying 4 years for a car and not having anything to show for it on my credit report.

            I am confused why a car loan "hurts" for your credit? It's my understanding that having a set amount paid (or overpaid) per month is better than credit cards which is an unset amount that is paid monthly. Can you explain that justbroke?

            Thanks!

            Comment


            • #7
              Originally posted by mark303 View Post
              Well my car is not underwater. It books at 2-4k more than I still owe on it. I also do like the car a lot so don't really want to trade it in for a new one. I just hate the idea of paying 4 years for a car and not having anything to show for it on my credit report.

              I am confused why a car loan "hurts" for your credit? It's my understanding that having a set amount paid (or overpaid) per month is better than credit cards which is an unset amount that is paid monthly. Can you explain that justbroke?

              Thanks!
              A car loan paid on time will help your credit not hurt it. It might affect your debt to income ratio, but fico modeling will put installment credit like cars in a separate category from credit cards. A credit portfolio should have both. If you don't want to trade in the car, then you should keep paying on it even though it is not reporting. If you really want to have it report, you could try refinancing with a credit union since the car does not meet Cap One's requirements for refinancing.
              You can't take a picture of this. It's already gone. ~~Nate, Six Feet Under

              Comment


              • #8
                Originally posted by mark303 View Post
                Well my car is not underwater. It books at 2-4k more than I still owe on it. I also do like the car a lot so don't really want to trade it in for a new one. I just hate the idea of paying 4 years for a car and not having anything to show for it on my credit report.

                I am confused why a car loan "hurts" for your credit? It's my understanding that having a set amount paid (or overpaid) per month is better than credit cards which is an unset amount that is paid monthly. Can you explain that justbroke?

                Thanks!
                A car loan paid on time will help your credit not hurt it. It might affect your debt to income ratio, but fico modeling will put installment credit like cars in a separate category from credit cards. A credit portfolio should have both. If you don't want to trade in the car, then you should keep paying on it even though it is not reporting. If you really want to have it report, you could try refinancing with a credit union since the car does not meet Cap One's requirements for refinancing.
                You can't take a picture of this. It's already gone. ~~Nate, Six Feet Under

                Comment


                • #9
                  Originally posted by mark303 View Post
                  I am confused why a car loan "hurts" for your credit? It's my understanding that having a set amount paid (or overpaid) per month is better than credit cards which is an unset amount that is paid monthly. Can you explain that justbroke?
                  It's installment loans that are bad. Additionally, some weight is given to how long you had a car loan as well. A car loan that is a couple of years old and paid on time, will yield a better score than one that is brand new (new trade line). In any event, a mix of credit is what's important. Having a car loan, a home loan, revolving credit and may one installment loan, is a good mix. If you have too many in different categories, that can actually start to hurt your score. I don't recommend chasing a score, but if you do everything right... keep balances low, only apply for credit when absolutely necessary, and pay on time... your score will be high.
                  Chapter 7 (No Asset/Non-Consumer) Filed (Pro Se) 7/08 (converted from Chapter 13 - 2/10)
                  Status: (Auto) Discharged and Closed! 5/10
                  Visit My BKForum Blog: justbroke's Blog


                  I am not an attorney. Any advice provided is not legal advice.

                  Comment


                  • #10
                    Thanks for your help guys. I did apply at my credit union to try to get them to finance the balance on the car. They declined me and my banker told me it was because the BK hadn't been discharged for over a year and to try back next year. So I guess I will just do that and see if they approve me then.

                    Comment


                    • #11
                      Originally posted by backtoschool View Post
                      I agree with justbroke. Reaffirmation often means that you are reaffirming at high interest rates and with the car being under water. Reaffirmation should not be entered into lightly and should not be done to enhance credit. If you have equity in the car and could benefit from trading it in, then that is a separate consideration and should be decided on the merits of your current car versus any new car and car payment and not on the basis of fico score alone.
                      Okay, I am planning to reaffirm my auto loan 30 of 60 months left, 2.9% interest, 08 Altima hybrid debt @= fmv. Also planning to reaffirm 1st mortgage 26 years left 3.5% fixed, debt again @= fmv. non-recourse state. I will also be exiting bk with a student loan. So I understand the general consensus is not to reaffirm but I think the potential benefits out weight the limited risk. One question though is should I also get credit cards after discharge?

                      Comment


                      • #12
                        Originally posted by msm859 View Post
                        Okay, I am planning to reaffirm my auto loan 30 of 60 months left, 2.9% interest, 08 Altima hybrid debt @= fmv. Also planning to reaffirm 1st mortgage 26 years left 3.5% fixed, debt again @= fmv. non-recourse state. I will also be exiting bk with a student loan. So I understand the general consensus is not to reaffirm but I think the potential benefits out weight the limited risk. One question though is should I also get credit cards after discharge?
                        Since those are excellent rates, it probably makes sense to reaffirm. I would also get one or two rebuilder credit cards and you should have a well balanced number of positive trade lines.
                        You can't take a picture of this. It's already gone. ~~Nate, Six Feet Under

                        Comment


                        • #13
                          Other than the car, I see no reason to reaffirm. I would only reaffirm if the State / Circuit in which you reside, requires a reaffirmation of a car in order to keep it.

                          I think I'm starting to think like some of the Judges. I hope that's not a bad thing.
                          Chapter 7 (No Asset/Non-Consumer) Filed (Pro Se) 7/08 (converted from Chapter 13 - 2/10)
                          Status: (Auto) Discharged and Closed! 5/10
                          Visit My BKForum Blog: justbroke's Blog


                          I am not an attorney. Any advice provided is not legal advice.

                          Comment


                          • #14
                            Originally posted by justbroke View Post
                            Other than the car, I see no reason to reaffirm. I would only reaffirm if the State / Circuit in which you reside, requires a reaffirmation of a car in order to keep it.

                            I think I'm starting to think like some of the Judges. I hope that's not a bad thing.
                            I think it's a great thing. But I thought that the car should be reaffirmed since the interest rate is low, and the positive reporting could be useful. With a low interest rate and a car that the poster is going to keep anyway, reaffirming is not really going to harm anything, and could give the extra value of helping with fico scores.
                            You can't take a picture of this. It's already gone. ~~Nate, Six Feet Under

                            Comment


                            • #15
                              Originally posted by backtoschool View Post
                              I think it's a great thing. But I thought that the car should be reaffirmed since the interest rate is low, and the positive reporting could be useful. With a low interest rate and a car that the poster is going to keep anyway, reaffirming is not really going to harm anything, and could give the extra value of helping with fico scores.
                              It's just that I've heard this story before . Everything was perfect, and then the debtor loses their job. Next thing, they are on here at BKForum... asking if the reaffirmation is valid and what can the creditor do to them. I understand exactly why some Judges refuse to sign any reaffirmation agreement when it is not legally necessary. While I don't advocate it, I do understand the desire by some to keep credit-lines (by reaffirming the debt) and chase their FICO score.

                              I just don't think it's necessary or prudent, in the grand scheme of things. The only reason to reaffirm a debt that is otherwise not a legal necessity, is if you're able to renegotiate the terms of the original agreement. In other words, if you are able to negotiate an interest even lower, or change the total contract value. I have seen some reaffirmation agreements where the creditor reduced the balance to the liquidation value, and reduced the interest rate, and, for the most part, treated it like a redemption "loan"! That is cool.

                              It's just my personal opinion, and I'd hate to have someone come back and post that they wish they never reaffirmed a debt that they didn't need to.
                              Chapter 7 (No Asset/Non-Consumer) Filed (Pro Se) 7/08 (converted from Chapter 13 - 2/10)
                              Status: (Auto) Discharged and Closed! 5/10
                              Visit My BKForum Blog: justbroke's Blog


                              I am not an attorney. Any advice provided is not legal advice.

                              Comment

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