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 3 years ago '05        #105
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 Keith504 said
Bx, I just recently went to a used car dealer triying to get financing on a vehicle and it didn't work out as planned. A little about me: I'm in my early 20's with virtually no credit at all. I have one credit card with a $500 limit and it's completely maxed because i pay just the bare minimum monthly. Anyway, I went to the dealer and tried to get financing on a Honda Cr-V for 15k but I was denied for that and instead they tried to put me in a 2011 Rogue with 92k miles for $10k. However, I was hit with a 22% APR rate which was like $7,000 in interest. After much thought I opted out of it because it just didn't sound logical to close on it. So my question for the Bx fam is would my APR get better if I was to pay this CC off and come with a larger down payment? Or would I still be in the same situation since my credit limit isn't that much to begin with?
Is your credit card your only line of credit (open or closed)? If it is, then your credit score is unlikely to improve much even if you pay it off. Also, your credit score will take a while to make any significant improvements with just one credit line even if you keep it paid off every month. It is a good idea to pay it off, though. Most people I've heard from say that you shouldn't have any more than ~30% of your total credit used at any one time. Now that's not talking about using more than that and then paying it off before the interest kicks in because that's fine. What hurts you is keeping a balance month after month. That's where those interest charges come in. I don't know your financial situation, but if you can pay off your credit card before your due date each month then that's the best route to take. If you can't, pay as much as you can before your due date.

To answer your question, though, if you pay off your card and put down more for the down payment then, yes, the rate you get should be better, but don't expect a huge improvement. The more money you put down, though, the better your deal will be in the end. It also depends on what credit agency the dealership uses to check your credit worthiness. All 3 can show 3 different scores so I would check what one they use and then go get your score. You can get a free full credit check once per year to monitor any serious issues.

This is backed by the FTC. Check this link out for more information and if you want to get your score:

Although your credit limit does play a part in your credit score, that isn't the only factor, but in order to get a credit line increase you normally need to show whatever institution you're getting your card from that you deserve the increase (pay off your debt on time and in full, don't have too many credit inquiries, keep your credit lines open even if you don't use them because the longer they are open the more they will impact your score).

Now, I'm no expert, but these are just things I've picked up dealing with credit cards, school loans, car loans, and so on. Hopefully that was some sort of help and good luck with getting a vehicle. I just went through that a couple of years ago for my first one so I understand how it is.