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Back in March, I elected to increase my existing line of credit limit up to $2,000, which came with a reduction in interest (from 12.5% to 8.5%). Now, I'm in line to buy a car that I really want, but I require a rather sizable loan - let's ballpark in the range of $45,000.

Of my payment history:

  • I'm 100% on time and not delinquent in any payments
  • I've maintained good credit practices (i.e. paying off the credit card every month at a minimum)
  • I work in an industry that allows me to make car loan payments handily with some cash left over to save

The timing of the car suddenly being available for me to put a purchase towards threw a wrench into my plans, as I was planning for that to happen sometime in August, but instead it happened in April.

I'd like to maximize the possibility of my loan being very, very good, but a recent self-pull of my credit score showed less than 650 when it was in the neighborhood of 750 for the bump in credit limit.

Roughly how long should I wait after that credit limit increase to apply for the car loan?

  • If you have a credit card with only a $2000 limit, and that too very recently raised from $1000 (or maybe $1500), some lenders might be leery about lending you $45,000 for a new car regardless of your credit score. – Dilip Sarwate May 13 '18 at 4:04
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    I think you need to clarify this a bit: when you say "line of credit", you do mean a credit card, right? If so, I'm puzzled. If the credit card issuer will only give you a $2K credit limit (and that's your only card), then how do you expect to qualify for a $45K auto loan? – jamesqf May 13 '18 at 5:02
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First of all, let's clear up a couple of misconceptions. When you increase a credit line, your score generally should go up rather than down. There are only two reasons your credit score would decrease after increasing a line:

  1. Your bank may have done a hard pull of your credit score to approve the increase. This generally should only affect your score 5-10 points and probably only for 2-3 months.
  2. If you immediately spent more on your increased line your score could decrease, but as soon as you pay it off your score will shoot back up within 30 days.

So, if you didn't spend a lot of your new CC limit, then either something else caused your score to decrease, or it wasn't previously as high as you thought it was. (There's no way a line increase would drop your score 100 points.)

I would recommend some information gathering. Knowing the following things would be helpful:

  1. What factors are actually bringing down your credit score?
  2. What would your interest rate be if you financed the car today? You could contact a bank and the car manufacturer to see what they offer.
  3. Assuming your credit score is being brought down by factors you could fix quickly (e.g. high utilization is an easy one to fix), then what would your interest rate be if your score were higher? You could ask the banks you contact to run some what-if scenarios for you.

Does the car happen to be a Tesla M3? If yes, based on the outcome of the info gathering, the only scenario where I would recommend even considering purchasing the car right now is if the interest rate would be low right now (let's say less than 4%) and you aren't going to be able to get it much lower in the near future. In the absence of that I would pass and keep your reservation for the future. That would give you time to build up a down payment and possibly increase your credit score to achieve a lower interest rate down the road.

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    Well...I'm not surprised you could tell that this was for a M3; I left enough hints in. I can get a reasonable interest rate (less than 3.5%), but only if I hit certain credit score qualifiers, and if I go through my credit union. I consider it confusing that the credit would drop that low since when I got the limit increase, I could've sworn I saw a number near 750 on the credit report my credit union handed to me. Anyway, this gives me a lot of context into what I need to do next, and I will definitely be in touch with those representatives. Thank you very much! – Makoto May 13 '18 at 3:35
  • Was your "self-pull" from the same Credit Rating Agency as the Credit Union used? From what I've picked-up on here, the three use different scoring methods, and are not directly comparable. – TripeHound May 14 '18 at 9:27

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