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Hello! I want to thank you in advance for all input. I'll get right to the point. 

I had some issues in the past and have been rebuilding my credit. I'm currently at about a 590 score and wife has a 620, our history is overall good other than car payments being late. I am an authorized user on about 18k in credit cards that I just paid from 5k used down to about 3k used, and she has about 5k all just paid down to about 1k. Being an authorized user on all accounts, I think that it helps me just the same. Her credit is all her own accounts. 

Now the fun part. We have two vehicles. 14% on each loan, and about 2-3 years to go on each. I owe 11k on a Japanese car that is worth 6k trade in, and 13k on a European that just blew the engine, which will cost me about 5k to fix and is worth about 6k on trade in. The European is basically junk and it's my second European vehicle with problems and I really don't want to get into that story. The Japanese car has a ton of miles on it now and my mechanic is saying that it's going to have some major issues soon. (We both drive for work)

I just started a new job a few months back and will be driving even more, about 50k miles a year. I really need a new vehicle since I drive about 2.5 hours one way at times, and need some advice on what to do. I make about 60k per year. Wife just lost her job. So we have two car payments, and the Japanese car is getting ready to go, while my European car just went is is gonna be a huge chunk of change to fix. 

I have about 30k set aside and I think I'm going to be dipping into this quite a bit to fix our credit and vehicular situation. I need some advice please. 
Thanks. 

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the idea of having an emergency fund while paying 14 pct interest is absurd especially when you can put 25k towards the ... (more)

bxlefty23 (Dec. 24, 2016 @ 10:39p) |

I recommend Financial Peace University from Dave Ramsey.

catanpirate (Dec. 24, 2016 @ 10:53p) |

I'm sure you'll figure out something. One step at a time.

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joemosc said:   Hello! I want to thank you in advance for all input. I'll get right to the point. 

I had some issues in the past and have been rebuilding my credit. I'm currently at about a 590 score and wife has a 620, our history is overall good other than car payments being late. I am an authorized user on about 18k in credit cards that I just paid from 5k used down to about 3k used, and she has about 5k all just paid down to about 1k. Being an authorized user on all accounts, I think that it helps me just the same. Her credit is all her own accounts. 

Now the fun part. We have two vehicles. 14% on each loan, and about 2-3 years to go on each. I owe 11k on a Japanese car that is worth 6k trade in, and 13k on a European that just blew the engine, which will cost me about 5k to fix and is worth about 6k on trade in. The European is basically junk and it's my second European vehicle with problems and I really don't want to get into that story. The Japanese car has a ton of miles on it now and my mechanic is saying that it's going to have some major issues soon. (We both drive for work)

I just started a new job a few months back and will be driving even more, about 50k miles a year. I really need a new vehicle since I drive about 2.5 hours one way at times, and need some advice on what to do. I make about 60k per year. Wife just lost her job. So we have two car payments, and the Japanese car is getting ready to go, while my European car just went is is gonna be a huge chunk of change to fix. 

I have about 30k set aside and I think I'm going to be dipping into this quite a bit to fix our credit and vehicular situation. I need some advice please. 
Thanks. 

14% for a car loan is robbery; but given your credit scores and that they are way upside down, perhaps it is par for the course. Independent of everything else, make some serious cuts to your spending and pay it off asap. Are you going to get a tax refund --- file soon to get that in your hand pronto.

Under withhold for the first several months to quickly payoff the loans and make it up by increasing withholding later in the year.

Get a second job. Maybe a temporary job for spouse before she/he finds a permanent one.

Will you be driving 50k miles to work or *for* work? IOW, is any part of the 50k miles going to be reimbursed by your employer? If it is just daily commute to work, seriously consider if you moving closer is a better option.

You dont necessarily need a brand new car. Just a reliable car that has sufficient life left in it. Dont do what this guy did. Read meade18's response in particular.

Tell us more about the cars (make/model/year/miles/problem). Chances are, the Japanese car has enough life left in it (perhaps with good maintenance/service checks). Maybe the spouse can drive it. You can buy a good used car for under 10k and sell the European car.

Your credit history is not "overall good", it's poor / below average. 670-740 is considered "good."

The "trade in" value should not be your gauge for the value of your cars. You are too broke to trade in your cars -- you should sell them yourself to a private party (or maybe carmax). You'll probably get 1k-2k more per car.

Are you both driving hybrids? If not, why not?

Is your credit card debt at 0% APR or are you paying interest on the 4K you still owe?

Is the 30K you have set aside earning you anywhere near the 14% you are paying for car loans? Why do you even have those car loans? You're wasting a whole lot of money on interest.

Take that 30K, set aside an emergency fund for 6 months worth of living expenses and use the rest to pay down your highest interest rate debt as soon as possible. Stop buying new or expensive cars, because you obviously can't afford them.

joemosc said:   Wife just lost her job.

Did your wife apply for unemployment?

So what would be the best plan of action to rebuild credit as quick and easy as possible? I recently just started the process by paying thousands of credit cards off.

I can pay 5k to replace the engine, and then pay both cars completely off. That will leave me very little cash on hand, and almost a completely open line of credit which we've locked away. My monthly bills will equal roughly 2200 for rent, utilities, internet, phone, insurance. Add food and going out expenses 4-600 a month if we trim it down. And a take home salary of 3600 after taxes and health insurance. With my two car payments I have about $800 in payments and 25k left in the bank cash, but we won't be able to afford basic bills until wife starts a new job.

I need to get my credit score up so I can have lower overall payments and work towards saving to buy a house.
Would  completely paying everything off help our credit gain serious points or would it be a waste of cash? 
Would a cheap car financed and paid on time and then refinanced in 6 months be extremely unwise? I only say that because I need something reliable. 

And what would be the quickest way to get one or both of our credit scores to 'good' range?

OP: You can start by paying your bills on time, with the scores you and the misses have, doesn't seem like you have given that a try in the past. As to being quick, there is no way, you took quite a while screwing your scores up, and it will take a while to get them where they seem to have never been before - good.

joemosc said:   So what would be the best plan of action to rebuild credit as quick and easy as possible? I recently just started the process by paying thousands of credit cards off.

I can pay 5k to replace the engine, and then pay both cars completely off. That will leave me very little cash on hand, and almost a completely open line of credit which we've locked away. My monthly bills will equal roughly 2200 for rent, utilities, internet, phone, insurance. Add food and going out expenses 4-600 a month if we trim it down. And a take home salary of 3600 after taxes and health insurance. With my two car payments I have about $800 in payments and 25k left in the bank cash, but we won't be able to afford basic bills until wife starts a new job.

I need to get my credit score up so I can have lower overall payments and work towards saving to buy a house.
Would  completely paying everything off help our credit gain serious points or would it be a waste of cash? 
Would a cheap car financed and paid on time and then refinanced in 6 months be extremely unwise? I only say that because I need something reliable. 

And what would be the quickest way to get one or both of our credit scores to 'good' range?

  There isnt a quick fix to poor credit, particularly if you are starting ~600. One of the biggest factors is on-time payment and from your OP, you have not been 100% on time. Were you late by 30-days, 90-days or longer? How many in recent times? The effect of these can take a while to fade away. At the moment, you need to meticulously make all payments on time. It doesn't have to be the full [payment but at least the minimum payment by the due date (carrying a balance doe snot affect your credit directly but will incur finance charge).

Credit utilization is another important factor --- both on individual accounts as well as across all accounts. The effect of this is short-lived. IOW, if you make a significant payment to bring down your credit utilization, your score will automatically adjust as soon as the new balances are reported to the credit bureaus.

Do you have any derogatory marks in your credit report (collections, bankruptcy, foreclosure etc.)? This also has a significant negative effect and can take a while to fall off.
Some other factors are
 

If you plan to buy a house, you need to improve your credit scores to 740-760 to get the best mortgage rate.
It is very likely that paying down both car loans will improve your credit score, but it's impossible for us to know by how much. It would not be a waste of cash -- paying 14% interest is a waste of cash.

There's a thread on getting and keeping high credit scores here

Can you transfer your car loans to credit card 0% BT offers?

Argyll said:   Can you transfer your car loans to credit card 0% BT offers?
  With "590 score and wife has a 620" I doubt they will get any lucrative BT offer.

All of my late payments have been 30 days, and that's about 15-20 of them over our history. Less than half a dozen were 60 days. And that was due to negligence. Both working rigorous full time jobs, making 125k per year and blowing it on stupid s**t. We finally decided we really need to buckle down and pay on time, pay credit off because like someone else said, that money in the bank isn't getting us 14% like the cars are charging us. If bills were lower we could easily save up what we have again.

We pay our bills, yes not on time though. Zero bankruptcy, repo, or derogatory marks. Good utilization, accounts etc, just lazy ass pay our bills when we remember mentality .
The big shock came when the engine went and we realized our situation. I really need one new reliable car, and debating on what I should pay and how I should get a new one with the goal of fixing this mess quick and refi it soon. I can handle an overpriced car loan costing get me an extra $100 per month that for 6-8 months so that I can accomplish my job without breakdowns. As long as I can refi it.

The house is a 2+ year goal, so I think we will be fine there.

joemosc said:   Zero bankruptcy, repo, or derogatory marks. Good utilization, accounts etc,
  
You're delusional. A late payment IS derogatory. There was a statistic I saw years ago and doubt I can ever find again, but approx. 60% of those filing bankruptcy have NO blemishes on their credit, and that's why having even one late payment in the past two years is such a big deal and score killer.

"All of my late payments have been 30 days, and that's about 15-20 of them over our history. Less than half a dozen were 60 days."

Huh?  Less than half a dozen were 60 days late yet all have been 30 days?  

I think only the last 7 years count toward your credit score.

That's why you're paying 14%, those late payments are really costing you. I think even now Penfed offers used car loans in the 2-2.5% range for those with good credit. So being late cost you 11.5-12% more. Banks love deadbeats because they're too embarrassed to shop around for better rates so they can really screw them. Sign up for auto bill pay so you're never late on the credit cards again.

So some advice would be to shop around for a cheaper price on replacing the engine. Use car-parts.com to find a used engine. Call some local independent garages and see what they charge to replace an engine, it's typically around 1k. Check the car forum for your particular European car and either post messages asking for help or see if they recommend a local garage who may be able to fix it for less than 5k. Have the wife do some research as it sounds like she has time. See if you can refinance the cars into a lower rate. You might not get 2.5%, but maybe something between that and 14%.

I'm calling troll. How on earth do you have;

30k in cash
multiple late payments
14% car loans

Now I'll feed the troll.

You think you can make 14% interest on that 30k you have sitting there or in investments? NO you say? WOW, because you can... YOU CAN, THAT'S RIGHT!! Pay off those shit 14% loans and BAM, you just made 14% returns. Don't thank me, I'm but a mere humble servant.

Also, your wife should apply for unemployment ASAP. Fix the blown engine and that's YOUR NEW CAR!!! Heck it'll get you from A to B and back again for atleast a few years with a nice new engine in it right? Your wife can have your car and looky there, thats a solution. Now you have a reliable vehicle with a brand new engine and she has transportation that is now payed off ALSO


Another option, assuming you couldn't care about your credit.. and lets face it you shouldn't.  You won't be buying a house anytime soon (EDIT: Shit.. You are attempting to buy a house in the next 2 years.  OK OK, FORGET ABOUT THAT, aim for 5 years and fix your horrible financial habits)  and hopefully you learned a lesson about financing cars you can't afford with credit you haven't grown. Default on the blown engine car and let the bank have it.  They'll probably come after you and you can hopefully settle with them for pennies on the dollar.  Or you can go bankrupt.. Your choice.  And have you shopped around the engine replacement or are you just looking for this forum to fan the flames of your bad decisions and tell you you're doing the right thing buying a new car? 

Ma171aC said:   I'm calling troll. How on earth do you have;

30k in cash
multiple late payments
14% car loans

Now I'll feed the troll.

You think you can make 14% interest on that 30k you have sitting there or in investments? NO you say? WOW, because you can... YOU CAN, THAT'S RIGHT!! Pay off those shit 14% loans and BAM, you just made 14% returns. Don't thank me, I'm but a mere humble servant.

Also, your wife should apply for unemployment ASAP. Fix the blown engine and that's YOUR NEW CAR!!! Heck it'll get you from A to B and back again for atleast a few years with a nice new engine in it right? Your wife can have your car and looky there, thats a solution. Now you have a reliable vehicle with a brand new engine and she has transportation that is now payed off ALSO


Another option, assuming you couldn't care about your credit.. and lets face it you shouldn't.  You won't be buying a house anytime soon (EDIT: Shit.. You are attempting to buy a house in the next 2 years.  OK OK, FORGET ABOUT THAT, aim for 5 years and fix your horrible financial habits)  and hopefully you learned a lesson about financing cars you can't afford with credit you haven't grown. Default on the blown engine car and let the bank have it.  They'll probably come after you and you can hopefully settle with them for pennies on the dollar.  Or you can go bankrupt.. Your choice.  And have you shopped around the engine replacement or are you just looking for this forum to fan the flames of your bad decisions and tell you you're doing the right thing buying a new car? 


Yeah I've shopped the price on the engine. A used one with 60k miles is about 4K and install is 1k. Everyone is the same price.

So if I paid that 5k, took the remaining 25k and paid off the cars, and all of our credit cards were paid off (which we could do with some other toys I have to sell) about what would we be looking at with our scores increasing and lenders being more willing to work with us? 6 month? One year? Or should I refi the two working vehicles we have and pay them on time?

I can have zero debt right now by paying it off. But my understanding is that having zero debt does not really help you. Then we would have to be disciplined to save the extra money we now have to spare, plus my additional bonus every month which is 1-2.5k. In a year if we stopped vacations and buying toys we would have saved up again 20-30k. I'm thinking it might be better for me to refi our cars to a lower payment, same time frame, and leave the cash for an emergency while we continue to save what we have left over after the vehicle payments.

My goal is yes to buy a new vehicle. One payment with a rate that is not absurd we can more than handle.

Wife's credit score is 650, not 620 btw. Slightly better than I thought.

joemosc said:   But my understanding is that having zero debt does not really help you.

Where are you getting this? From the time I got my first credit card until the arbitrage opportunities created by 0% BTs and no BT fees, I never carried any "debt" just the card. I have very good credit. It's not the amount you owe or that you have a payment, it's just having the account report month after month that does most of the work.

For people like you, having a payment is a score killer because it sounds like you have the money but you're too lazy to make the payment. That's like the worst way to have bad credit.

If you paid off the debt and never used your cards, your scores would rise over time if you never borrowed another dime right up until your accounts started getting closed for inactivity, and that can take anywhere from a year or longer.
  

joemosc said:   So what would be the best plan of action to rebuild credit as quick and easy as possible? I recently just started the process by paying thousands of credit cards off.

I can pay 5k to replace the engine, and then pay both cars completely off. That will leave me very little cash on hand, and almost a completely open line of credit which we've locked away. My monthly bills will equal roughly 2200 for rent, utilities, internet, phone, insurance. Add food and going out expenses 4-600 a month if we trim it down. And a take home salary of 3600 after taxes and health insurance. With my two car payments I have about $800 in payments and 25k left in the bank cash, but we won't be able to afford basic bills until wife starts a new job.

I need to get my credit score up so I can have lower overall payments and work towards saving to buy a house.
Would  completely paying everything off help our credit gain serious points or would it be a waste of cash? 
Would a cheap car financed and paid on time and then refinanced in 6 months be extremely unwise? I only say that because I need something reliable. 

And what would be the quickest way to get one or both of our credit scores to 'good' range?

  
It seems like you're more concerned about your credit score than paying 14% interest.  You need to change this mindset, getting rid of the high interest loan is your priority.  Your monthly expenses are ~$2,600 so keep $15.6k in the bank as an emergency fund and use the remaining $14.4k to pay down your loans.  That will wipe out the Euro car loan and pay down your car loan a little.

Sign up for credit karma.  You can input all sorts of scenarios and see how that impacts your credit score. 

henry33 said:   That's why you're paying 14%, those late payments are really costing you. I think even now Penfed offers used car loans in the 2-2.5% range for those with good credit. So being late cost you 11.5-12% more. Banks love deadbeats because they're too embarrassed to shop around for better rates so they can really screw them. Sign up for auto bill pay so you're never late on the credit cards again.

So some advice would be to shop around for a cheaper price on replacing the engine. Use car-parts.com to find a used engine. Call some local independent garages and see what they charge to replace an engine, it's typically around 1k. Check the car forum for your particular European car and either post messages asking for help or see if they recommend a local garage who may be able to fix it for less than 5k. Have the wife do some research as it sounds like she has time. See if you can refinance the cars into a lower rate. You might not get 2.5%, but maybe something between that and 14%.



Sign up for auto bill pay asap. How do you miss paying that many bills when you have the cash to do it but just forgot to make the payment??

S197 said:     It seems like you're more concerned about your credit score than paying 14% interest.  You need to change this mindset, getting rid of the high interest loan is your priority. 
 

  Exactly! Good credit scores are not an end in itself but a means to an end. The ultimate objective is to be able to get credit on favorable terms (high credit lines, low/0% interest rates, BT offers, sign-up bonus, high-end/sought after credit cards etc.). Good credit scores help you get that.

You do not have to have a car payment to build credit!  I would wager that most folks here with 700+ credit scores do not pay interest on any credit other than a mortgage.  Pay off the cars and credit cards and do NOT fall back into the trap of carrying a balance on your credits cards - throw all but two away and pay them off every month and your credit in one year will be better off - if you try other games to improve your credit by doing some nonesense of paying interest because you think that makes your credit better your finances will continue to be a mess.  Paying interestand late fees to car loans and credit cards makes you a great customer but does NOT make your credit score higher - again most of the folks here with 700+ credit scores are not paying interest and most definitely are not paying late fees.

Got it. And yes I'm lazy because I never really saw the need for credit, paid my bills when I did we were happy and 'saving money' in the bank. Not really realizing that until a loss of job and a major car breakdown made us see that money was being wasted and I can't get money if I needed to.

So I think I'll keep 15k in the bank for an emergency.
Refinance one car and pay the other off. I'll lower ~400 by getting rid of one payment and another 50-100 hopefully by refi the other one for a better rate. My score is better than it was before when I got the cars believe it or not.
Then when funds allow I can pay off the second one.
I have lots of toys I don't use I've been selling off to erase our credit cards completely, and once these payments post we will be completely free of credit card debt.

It's nice not having any debt, other than the cars. Although they're pretty bad. And one won't even start.
Any ideas what type of refi rate I could get on one of those suckers with my financials the way they are?

(By the way, a couple years ago a dealer somehow made us walk out with two vehicles in one day, and that's been a huge inconvenience every month when it's time to pay the bills)

joemosc said:   But my understanding is that having zero debt does not really help you.Your understanding is incorrect. The amount you owe on credit cards does have a negative effect on your score. The more you owe as a percentage of the credit line, the lower the score. The amounts owed on mortgages or student loans have no effect on the score, but they do limit the total amount of money you can borrow (which is determined by your income). I don't think auto loans have any effect on the score either.
joemosc said:   Then we would have to be disciplined to save the extra money we now have to spare, plus my additional bonus every month which is 1-2.5k. In a year if we stopped vacations and buying toys we would have saved up again 20-30k.Yes, that's the trick. Pay yourself first. If you want to own a house one day, you need to be more responsible. The way you think about money needs to change -- it's not about whether you can "handle" a payment, it should be about what it'll actually cost you. About how much time you have to work to afford something. You are working hard and paying the bank, instead of paying yourself, setting yourself up for early retirement, etc.
joemosc said:   I'm thinking it might be better for me to refi our cars to a lower payment, same time frame, and leave the cash for an emergency while we continue to save what we have left over after the vehicle payments.Yes, if you can lower your rate to something more reasonable (I'd say under 5%), then you should refinance and probably keep more cash for emergencies. But if you can't get a low rate, just pay it off.

joemosc said:   So I think I'll keep 15k in the bank for an emergency.
Refinance one car and pay the other off. I'll lower ~400 by getting rid of one payment

  
I'm anti emergency fund. I think they tie up huge amounts of money that can be put to better use. If you want to get technical, I think paying 14% is your emergency.

Just zero out the loans and eliminate as many monthly payments as possible (less chance to make a mistake when you get lazy and go back to your old ways). With the monthly payment savings you should have a boatload of money going back into the bank replenishing your funds.

You should really just pay off all your debts and avoid paying the interest. You don't need to carry loan debt to increase your credit score as others have already pointed out. Building credit score and buying a house is not your priority right now. Pay off your debt first, build up some cash and then worry about a house later.

How is your employer reimbursing you for the 50k miles you'll be driving?

Chyvan said:   joemosc said:   So I think I'll keep 15k in the bank for an emergency.
Refinance one car and pay the other off. I'll lower ~400 by getting rid of one payment

  
I'm anti emergency fund. I think they tie up huge amounts of money that can be put to better use. If you want to get technical, I think paying 14% is your emergency.

Just zero out the loans and eliminate as many monthly payments as possible (less chance to make a mistake when you get lazy and go back to your old ways). With the monthly payment savings you should have a boatload of money going back into the bank replenishing your funds.

Im anti emergency funds too, if you have credit to tap into when required. Doesn't sound like OP has that nor the ability to obtain that.

Chyvan said:   
joemosc said:   So I think I'll keep 15k in the bank for an emergency.
Refinance one car and pay the other off. I'll lower ~400 by getting rid of one payment

  
I'm anti emergency fund. I think they tie up huge amounts of money that can be put to better use. If you want to get technical, I think paying 14% is your emergency.

Just zero out the loans and eliminate as many monthly payments as possible (less chance to make a mistake when you get lazy and go back to your old ways). With the monthly payment savings you should have a boatload of money going back into the bank replenishing your funds.


 

  
Anti emergency funds, yet when I have those boatloads going back to the bank what do I do with it? That would basically an emergency fund sitting around unless that money is doing something for you. 
my employer gives me a certain amount of reimbursement in exchange for using a personal vehicle. 

 

the idea of having an emergency fund while paying 14 pct interest is absurd especially when you can put 25k towards the credit cards and use them again in the event of an emergency

I recommend Financial Peace University from Dave Ramsey.

joemosc said:   when I have those boatloads going back to the bank what do I do with it?

I'm sure you'll figure out something. One step at a time.



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