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Creditors and Bankruptcy/Finance house or car first?

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Expert: Regan Shinski - 8/2/2010


Question
We are needing to purchase a house & car within the next month. I'm just not sure which we should buy first for it to not mess up our credit for the other purchase. Thanks for your advice!

Answer
Hi Heather:

There is a good chance your housing lender may pull your credit again just before closing.  Meaning if you apply today, you will get a pull for the house and then again in say 30-90 days when you actually close on the house.  There is a good chance the auto loan may show up on that latter credit report - certainly an auto credit application/credit pull would show, so I would be cautious at best.  An added car payment may disqualify you for your mortgage based on your debt-to-income scale but it depends on -- well, your debt and income!  You really should talk to a mortgage lender and find out if buying a car will mess up the closing of the house you want.

Auto lenders have similar requirements but there are still more loan programs for autos.  You can also put an additional amount down on an auto to close the deal regardless of other factors, this is not always as easy in the case of a house.  Additionally, auto lenders already know you are likely already paying rent, so switching to a mortgage doesn't necessarily chance your monthly obligations.  (Compared to buying a car which DOES change your monthly obligations in a mortgage company's eyes.)  Simply put, mortgage lending is more strict, there are more programs for auto lending, and it's easier to put another XX% down on a car than a house.

So, assuming you need and want both equally, I would try and secure and make sure the house goes through first and hold off on the car - even until after the formal closing on the house - if at all possible.

Good luck and congrats on both.

Regan

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Regan Shinski

Expertise

I can answer questions on collections, repossessions, bankruptcy, credit repair, credit counseling, FICO scores, credit planning, and the cause and effect of credit related decisions. I can also answer questions on collection settlements and preparing to sue your creditors for false debts and credit reporting.

Experience

Fifteen years ago I was financially devasted due to severe health issues. I filed bankruptcy, had a foreclosure, car repossession, tax lien, and ruined credit. I immersed myself in credit law. I settled dozens of accounts and had them removed to improve my credit. I personally sued four creditors and collection agencies and won cash settlements for their false reporting on my credit reports. Since then, I have completely recovered and have nearly $100,000 in revolving credit lines and perfect credit. I have owned a credit repair company for the past five years and have an additional three years of specific work in the collections and debt management industry. I am fully versed in the Fair Debt Collection Practices Acts (FDCPA), Fair Credit Reporting Act (FCRA), and have used them successfully in collection settlements and lawsuits for myself and others. I am also familiar with and abide by the Credit Repair Organizations Act (CROA). I have deleted or helped delete literally hundreds and hundreds of derogatory items from consumers' credit reports and helped negotiate many settlements with collection agencies and creditors. I have also advised people on bankruptcy at any stage. In the current credit market, I have successfully advised numerous people on how to obtain credit and how to negotiate for better terms.

Education/Credentials
BA - University of Minnesota

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(private)

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