How long to wait before refinancing a high interest car loan, after improving credit history?
Between half a year and a year should be enough to improve your interest rates drastically on car loan refinance. Make sure that your new credit card has already been reported to the agencies, and that the credit/debt ratio is lower than 30% on your revolving (credit card) accounts. That also means that you shouldn't carry too much balance, even if the APR is 0%.
Ponder this. Suppose that a reputable company or government were to come out and say hey, we are going to issue some 10 year bonds at 6.4%. Anyone interested in buying some? Assume that the company or government is financially solid and there is zero chance that they will go bankrupt. Think those bonds would sell? Would you be interested in buying such a bond? Well, I would wager that these bonds would sell like hotcakes, despite the fact that the long term stock market return beats it by a half percent. Heck, vanguard's junk bond fund is hot right now. It only yields 4.9% and those are junk bonds, not rock solid companies (see vanguard high yield corporate bond fund) Every time you make an extra principal payment on your student loan, you are effectively purchasing a investment with a rock solid, guaranteed 6.4% return for 10 years (or whatever time you have left on the loan if make no extra payments). On top of that, paying off a loan early builds your credit reputation, improves your monthly cash flow once the loan is paid, may increase your purchasing power for a house or car, and if nothing else, it frees you from being a slave to that debt payment every month.  Edit Improved wording based on Ross's comment "I think everything in your case is just simply missing one important rule of how credit works. Essentially, your MIL cannot get a loan. You can. You are making her a large loan that she cannot get for herself. That is all. That is the essence of what this deal is. It is not without interest - she makes a financial contribution toward your son, you get the deal in 2 years assuming she doesn't default (she will), etc. Imagine it this way: you are sitting in the dealership with the dealer and your MIL. She wants a loan to pay for the car. The dealership says, ""you are way not credit worthy."" So your MIL says, ""why doesn't my son-in-law take out the loan instead?"" Now the dealership says, sure, that's fine. From the dealer's standpoint, every other part of your arrangement is irrelevant - boring, even. The only magic trick is in who takes the loan out, no other difference. You're letting your MIL pull a car out of her sleeve like a magician, and in taking the deal you're believing her.  This sentence: I am pretty sure that the ex-MIL will not let me down (I've loaned her large sums of money before and she always promptly repaid).  is everything. You're making a rather large bet that the things that can go wrong in two years - including any situation involving your wife's welfare - are rather miniscule. And furthermore, that the few times she's paid you back - that did NOT convince banks and dealer she is more creditworthy - justifies her good creditworthiness. Is the interest worth it? Do you really believe that your MIL needs to wring a car out of you before she would consider contributing to her grandson's well-being (which is, essentially, the interest)? But wait, it's NOT everything. Her daughter (my ex-wife) would drive it for 2 years and then turn the car over to our son. Even if your MIL is creditworthy, the woman you described as follows: Her daughter, though, is a loose cannon. Will be holding and returning the collateral in this deal. Things she can do include: So I'm arguing two points: Obviously my opinion on this is clear. I hope I did a decent job of explaining where the components of this deal (credit, interest, collateral) play out in the eyes of a dealer or bank, and get lost in the mechanics of the rules you worked out with your family." If you are now in a better position to pay your debts, the wise move for your long-term credit is to consolidate any high-interest debt that remains and pay it off as quickly as possible. This may not be possible depending on your situation, but one way to get such consolidation loans is to have a parent with good credit cosign as guarantor on the consolidation loan. The only way your credit will recover is if you establish a good history of payments over the next seven years. Frankly I wouldn't cosign a loan with a family member who made the same decisions you have made, because I wouldn't want to put my own credit at risk, but I might loan the money directly, which would ease the pain for that family member, but it wouldn't help their credit going forward. This may not be a popular opinion, but without any details, it's hard for me to agree that any of your creditors are being greedy when they threaten a judgment. They loaned you the money in good faith, and now you are attempting to negotiate a change of terms.  Are they greedy because the interest rates are too high? Maybe you were a bad risk when they loaned the money and the rates reflected the risk of losing some portion of the money. The fact that you are trying to discharge some portion of that debt vindicates any high rates charged. "Your total debt is equal to your total non-credit debt (student loans, car loans) + your total available credit.   This is the truth of the ""low balance"" fear from lenders that you had heard about. Your credit utilization is across all of your cards.   So if you have two cards, both with 15K limits and one is maxed out and one is empty, that is 50% utilization.   If you have both cards with 7.5K balances, that is also 50% utilization. For the 8 cards that are paid off and still open, after you buy a house, I'd close any cards you aren't using.  Not everyone will agree with this. If possible, I would close the 8 cards now and pay off the 15K balance before buying a house.  If it's hard to pay it off now, it will be harder when you have a mortgage and home maintenance costs. If you want to buy the house before you pay off all of your credit card debt, I'd still close the 8 cards that are already paid off and pay down your last card to 4K (or less) to get under 25% utilization. The credit rating bureaus do not publish exactly how a different utilization rate of credit will affect your score, but it is known that lower utilization will improve your score.  FICO calls this ""Proportion of credit lines used (proportion of balances to total credit limits on certain types of revolving accounts)"" Also, the longevity of your credit history is based on type of account (credit cards, car loans, etc.) so if you keep one credit card open, you still keep your long ""history"" with credit cards on your credit report.  FICO calls this ""Time since accounts opened, by specific type of account""" I have gotten a letter of credit from my credit union stating the maximum amount I can finance. Of course I don't show  the dealer the letter until after we have finalized the deal. I Then return in 3 business days with a cashiers check for the purchase price.  In one case since the letter was for an amount greater then the purchase price I was able drive the car off the lot without having to make a deposit. In another case they insisted on a $100 deposit before I drove the car off the lot. I have also had them insist on me applying for their in-house loan, which was cancelled when I returned with the cashiers check.  The procedure was similar regardless If I was getting a loan from the credit union, or paying for the car without the use of a loan. The letter didn't say how much was loan, and how much was my money.  Unless you know the exact amount, including all taxes and fees,in advance you can't get a check in advance. If you are using a loan the bank/credit Union will want the car title in their name. If you have no credit history but you have a job, buying an inexpensive used car should still be doable with only a marginally higher interest rate on the car. This can be offset with a cosigner, but it probably isn't that big of a deal if you purchase a car that you can pay off in under a year. The cost of insurance for a car is affected by your credit score in many locations, so regardless you should also consider selling your other car rather than maintaining and insuring it while it's not your primary mode of transportation. The main thing to consider is that the terms of the credit will not be advantageous, so you should pay the full balance on any credit cards each month to not incur high interest expenses. A credit card through a credit union is advantageous because you can often negotiate a lower rate after you've established the credit with them for a while (instead of closing the card and opening a new credit card account with a lower rate--this impacts your credit score negatively because the average age of open accounts is a significant part of the score. This advice is about the same except that it will take longer for negative marks like missed payments to be removed from your report, so expect 7 years to fully recover from the bad credit. Again, minimizing how long you have money borrowed for will be the biggest benefit. A note about cosigners: we discourage people from cosigning on other people's loans. It can turn out badly and hurt a relationship. If someone takes that risk and cosigns for you, make every payment on time and show them you appreciate what they have done for you. You could look into refinancing with a bank or credit union.  But to weed out options quickly, use a service like LendingTree, which can vet multiple options for you a whole lot more quickly than you could probably do yourself.  (I don't work for, or get any benefit from LendingTree.)  Whatever you do, try to do all the applying within a short span of time, as to not negatively affect your credit score (read here) by creating extraneous inquiries.   Then again, if your credit sucks, you might not qualify for a re-fi.  If you are turned down, make your payments on time for six months or so, and try again. These are the things to focus on... do not put yourself in debt with a car, there are other better solutions.  1) Get a credit card (Unless you already have one) -Research this and get the best cash back or points card you can get at the best rate.  - Start with buying gas and groceries every month do not run the balance up. - Pay the card off every single month. (THIS IS IMPORTANT) - Never carry a balance above 25% of your credit limit.  - Every 8 months or so call your credit card company and ask for a credit line increase. They should be able to do this WITHOUT pulling your credit you are only looking for the automatic increment that they can automatically approve. This will help increase your available credit and will help keep your credit utilization low. Only do this is you are successfully doing the other bullet points above.  2) Pay all of your bills on time, this includes everything from water, electricity, phone bill, etc. never be late. Setup automatic payments if you can.  3) Minimize the number of hard credit inquiries. -This is particularly important when you are looking for your mortgage lender. Do not let them pull your credit automatically. You should be able to provide them your credit score and other information and get quotes from those lenders. Do not let them tell you then can't do this... they can.  4)Strategically plan when you close a credit line, closing them will do two things, lower your credit limit often times increasing your credit utilization, and it may hurt your average age of credit. Open one credit card and keep it forever.  *Note: Credit Karma is a great tool, you should check your score monthly and see how your efforts are influencing your score. I also like Citi credit cards because they will provide you monthly with your FICO Score which Credit Karma will only provide TransUnion and Equifax.  This is educational information and you should consider talking to a banker/lender who can also give you more detailed instructions on how to get your credit improved so that they can approve you for a loan.  Many people can get their score above 720 in 1-2 years time going from no credit doing the steps described above. It does take time be patient and don't fall for gimmicks.