Highlighted
Contributor

I purchased a car for my daughter two years ago with the agreement that she would make the monthly payments.  She missed a few payments and then paid to get caught back up.  She recently got married and I want to have the car taken out of my name and put in her name.  Would getting the car out of my name help improve my credit score/ rating?  I am now looking to purchase a new car for myself.

 

Thank you

6 REPLIES

Highlighted

I'm assuming by saying "put in her name" that you actually mean the auto loan and not just the car title.

 

To do that, your daughter will probably have to refinance the loan into her name only.  This of course would require her to have the credit to do so.  The other option is to pay off the loan all together.

 

The missed payments probably put a ding in your credit.  Having the loan refinanced out of your name, may not immediately effect your credit score (the history for the next 10 years will become part of what your score is based on), but it will help with your debt to income ratio which is normally looked at by lenders along with your credit history.

 

Hope that helps you.

Highlighted

Thank you so much for replying.  Yes, I want her and her husband to refinance the car in her (or his) name.  If they get a loan through their bank, wouldn't their bank provide a check to pay the bank I financed with? If so, isn't that the same as paying it off (to my bank)?

Highlighted

Yes, if they refinance it, then the new bank will pay off the old loan.  It will take a few weeks to a month to show up on your credit report as paid/closed.  It may or may not have an affect on your actual score (remember there really no one credit score) - especially if there were late payments recorded.  Like I said before, this will improve your debt to income ratio though (even though your daughter was making the payment, creditors still consider it a debt obligation you are paying when determining what you owe vs what you make).

 

Good luck

Highlighted

I would add that this should be taken as a lesson to NOT co-sign or otherwise take on debt for other people because if your name is on the lien, then you and your credit are ultimately at stake. If your daughter was unable to qualify for a car loan on her own then there likely was a good reason for that, and I think she has demonstrated that to be the case by being late with payments.

 

Best of luck improving your credit score.

Highlighted

Hi Helpful Dad!

 

Here is what an expert at USAA had to say about your situation:

 

If your daughter is able to qualify for a loan, she can refinance the vehicle into her name. This will remove you from her vehicle loan and eliminate future risk to your credit should she default or make late payments again. Unfortunately, it will not immediately wipe away the negative payment history that exists.  Negative marks remain on your credit for seven years; however, the impact will lessen over time assuming all other payments are made on or before the due date.  Removing yourself from the loan will help with your debt-to-income ratio, which is a factor that lenders look at in addition to your credit history.

 

Here are a few tips to help you and your daughter build good credit:

  • Visit annualcreditreport.com to review a copy of your credit reports, ensure there are no discrepancies, and understand your current credit standing.  You can obtain one free copy per year from each of the three credit reporting bureaus.
  • Make all payments on time. Payment history accounts for 35% of your overall credit score.
  • Limit the amount you borrow to what is necessary and pay off credit card balances in full each billing cycle, or at least within a relatively short time period.  The amount you owe versus what credit you have available accounts for 30% of your overall credit score.
  • Stick to a budget to help prevent overextending yourself.  You can use USAA’s My Budget tool to help track expenses each month.

 

Hope this helps and congratulations to your daughter on getting married! Thank you for posting!!

Highlighted

Hi Helpful Dad!

I have sent your question to an expert here at USAA and will update when I have an answer!