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Posted in Auto Loans
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newadult007

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How long should I wait for a new loan?
I totaled my car (after two months of having it) in a freak accident. My insurance company is paying off the old loan but it will take a while before the credit bureaus clear the old loan. Should I wait until it clears? I really need a new car. I'm fresh out of college and olny have about 2 years of credit history.

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Lenders will likely make you wait...

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Yes you should wait.  Unfortunately until it clears your credit most lenders won’t be able to give you 'credit' for it really being paid off anyways.

As everything in your report is typically calculated in your score, regardless of the scoring model the lender chooses to use, the scores are calculated at the credit bureaus.  And the score will not be able to be modified with a letter of explanation. (fyi.. letters of explanation are typically only allowed in HIGH dollar loans like mortgages anyways) Meaning the credit bureaus will still report a score calculated using that information. 

And remember that any loan rate or terms you are offered will ALWAYS consider that information since you will be considered as a risk with a higher debt to income ratio and another installment loan that may even be reporting as late by the time it clears your credit report.

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