Car Purchase / Credit History Snag

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lesko
Posts: 15
Joined: Thu Apr 20, 2017 7:13 pm

Car Purchase / Credit History Snag

Post by lesko »

Curious if anyone can help me navigate a frustrating car purchasing experience re: credit and car loans... obviously lots that I would do differently in retrospect, even given what I've learned in the past day or so...


- All of our accounts are in good standing, 0 late payments, and credit score in the 780s

- Wife and I ordered a car last September, was originally told to expect 8 weeks until delivery.

- We were told delivery was on-track in November, and applied for a loan with a bank in November and was approved with good terms.

- Told on Dec. 1 an unexpected supply chain issue with vehicle delivery, told to now expect January delivery.

- As the original loan had expired, reapplied this week for loan with same provider, terms, etc. and was denied, with adverse action letter stating "limited credit history"... obviously very surprising as we'd been approved by the same provider 2 months earlier.

- After much digging, endless inquiries with the lender, learned that this was due to a credit card I stopped using in good standing back in 2011 "falling off" my credit report just a week ago as it was now 10 years past closing date... meaning I now had "thin credit" due to showing 2 open accounts and 1 closed account.

- Vehicle is now about to finally show up, and am concerned about how/if/where to apply for any loan to be approved, if other providers will see similar limited credit accounts.


Beyond my frustration at the general absurdity of this situation... Is my best approach here to generate an additional "account" to generate on a credit bureau report ASAP? Would that take to long to actually show up on a credit check? Thoughts about the fastest way to do this?

Again, lots that I've learned, lots I would do differently - just trying to make sure I can smoothly finalize the purchase for something ordered last September.
exodusNH
Posts: 10344
Joined: Wed Jan 06, 2021 7:21 pm

Re: Car Purchase / Credit History Snag

Post by exodusNH »

lesko wrote: Wed Jan 19, 2022 12:20 pm Curious if anyone can help me navigate a frustrating car purchasing experience re: credit and car loans... obviously lots that I would do differently in retrospect, even given what I've learned in the past day or so...


- All of our accounts are in good standing, 0 late payments, and credit score in the 780s

- Wife and I ordered a car last September, was originally told to expect 8 weeks until delivery.

- We were told delivery was on-track in November, and applied for a loan with a bank in November and was approved with good terms.

- Told on Dec. 1 an unexpected supply chain issue with vehicle delivery, told to now expect January delivery.

- As the original loan had expired, reapplied this week for loan with same provider, terms, etc. and was denied, with adverse action letter stating "limited credit history"... obviously very surprising as we'd been approved by the same provider 2 months earlier.

- After much digging, endless inquiries with the lender, learned that this was due to a credit card I stopped using in good standing back in 2011 "falling off" my credit report just a week ago as it was now 10 years past closing date... meaning I now had "thin credit" due to showing 2 open accounts and 1 closed account.

- Vehicle is now about to finally show up, and am concerned about how/if/where to apply for any loan to be approved, if other providers will see similar limited credit accounts.


Beyond my frustration at the general absurdity of this situation... Is my best approach here to generate an additional "account" to generate on a credit bureau report ASAP? Would that take to long to actually show up on a credit check? Thoughts about the fastest way to do this?

Again, lots that I've learned, lots I would do differently - just trying to make sure I can smoothly finalize the purchase for something ordered last September.
A new account is probably going to be worse since that will trigger a credit inquiry and lower the average age of your accounts.

They a local, smaller credit union. You probably won't get the best rates, but depending on amount and term, it might not be all that much money.

You could also look to dealer financing. Sometimes you can get 0.9 or 1.9 as long as your credit score and debt-to-income is good enough. I'm not sure anyone is doing 0% right now.
Mike Scott
Posts: 3579
Joined: Fri Jul 19, 2013 2:45 pm

Re: Car Purchase / Credit History Snag

Post by Mike Scott »

Don't open a new account which will make it worse. Make a larger down payment. Try dealer financing or wherever you already bank. The dealer may have some alternatives if you ask. If you don't get the best terms you can pay it off or refinance later. You can also let it go and have a do over with a different car later. The good news is that if you get the car loan established with a good payment history, your credit file will not be so thin.
stoptothink
Posts: 15368
Joined: Fri Dec 31, 2010 8:53 am

Re: Car Purchase / Credit History Snag

Post by stoptothink »

exodusNH wrote: Wed Jan 19, 2022 1:32 pm
lesko wrote: Wed Jan 19, 2022 12:20 pm Curious if anyone can help me navigate a frustrating car purchasing experience re: credit and car loans... obviously lots that I would do differently in retrospect, even given what I've learned in the past day or so...


- All of our accounts are in good standing, 0 late payments, and credit score in the 780s

- Wife and I ordered a car last September, was originally told to expect 8 weeks until delivery.

- We were told delivery was on-track in November, and applied for a loan with a bank in November and was approved with good terms.

- Told on Dec. 1 an unexpected supply chain issue with vehicle delivery, told to now expect January delivery.

- As the original loan had expired, reapplied this week for loan with same provider, terms, etc. and was denied, with adverse action letter stating "limited credit history"... obviously very surprising as we'd been approved by the same provider 2 months earlier.

- After much digging, endless inquiries with the lender, learned that this was due to a credit card I stopped using in good standing back in 2011 "falling off" my credit report just a week ago as it was now 10 years past closing date... meaning I now had "thin credit" due to showing 2 open accounts and 1 closed account.

- Vehicle is now about to finally show up, and am concerned about how/if/where to apply for any loan to be approved, if other providers will see similar limited credit accounts.


Beyond my frustration at the general absurdity of this situation... Is my best approach here to generate an additional "account" to generate on a credit bureau report ASAP? Would that take to long to actually show up on a credit check? Thoughts about the fastest way to do this?

Again, lots that I've learned, lots I would do differently - just trying to make sure I can smoothly finalize the purchase for something ordered last September.
A new account is probably going to be worse since that will trigger a credit inquiry and lower the average age of your accounts.

They a local, smaller credit union. You probably won't get the best rates, but depending on amount and term, it might not be all that much money.

You could also look to dealer financing. Sometimes you can get 0.9 or 1.9 as long as your credit score and debt-to-income is good enough. I'm not sure anyone is doing 0% right now.
Ford is doing 0% for 36 months.
dboeger1
Posts: 1411
Joined: Fri Jan 13, 2017 6:32 pm

Re: Car Purchase / Credit History Snag

Post by dboeger1 »

exodusNH wrote: Wed Jan 19, 2022 1:32 pm A new account is probably going to be worse since that will trigger a credit inquiry and lower the average age of your accounts.
^This

The credit rating system is absolutely absurd, but it does have huge implications on one's personal finances. Even if one never intends to borrow money, credit scores are often used for things like apartment leases and job applications. Therefore, it's worth learning how it works, even for those who avoid debt.

Perhaps counter-intuitively, the system prefers a long history of properly managing many accounts (even though you'd think having many credit accounts would be a bad sign). It doesn't really care how much or little credit you have, so long as you pay it off. If you log into any credit-tracking web site like Credit Karma, you'll see that the highest tier for account numbers is 21+ accounts, which is an insane number. This is why in the credit card rewards community, it's generally recommended to have a base of older cards without annual fees just to establish a long credit history with many accounts; this makes it significantly easier to qualify for new cards with big bonuses and annual fees, which can subsequently be cancelled with minimal impact to credit history. A lot of people occasionally run small transactions through older cards just to keep them alive.

Unfortunately, I'm not aware of any way to instantly boost your score. It doesn't take very long to improve one's score, but it generally involves opening more accounts and regularly paying them off, which unfortunately tends to result in a short-term drop in score. The good news is that your score is so good, there's really no reason you should have trouble qualifying for car loans. As someone else mentioned, I suspect it's your specific lender who has strict criteria. You may want to try a major bank that specializes in car loans.

Dealer financing can often be a good alternative if they are offering incentive rates, particularly 0%. In my admittedly limited experience, the dealer actually has room to negotiate with the finance department to get people approved who are on the fence. When I bought my first new car, I applied for 0% financing, was rejected because I was just shy of the required credit score because of minimal credit history, but my sales associate was able to appeal and get me approved based on my income, so I ended up getting it. I'm not sure how common that is, but it's worth a shot.
HomeStretch
Posts: 11415
Joined: Thu Dec 27, 2018 2:06 pm

Re: Car Purchase / Credit History Snag

Post by HomeStretch »

Are you in a position to pay cash for the vehicle?
Topic Author
lesko
Posts: 15
Joined: Thu Apr 20, 2017 7:13 pm

Re: Car Purchase / Credit History Snag

Post by lesko »

Thanks all - a few options I'm considering...

- Reapplying with a smaller credit union for a smaller loan amount (originally at applied for 20k while putting around 10k down - so perhaps applying for 15k?). Again, our overall credit scores are more that sufficient for a loan, believe we were just denied due to the number of currently open accounts/history.

- Inquiring about dealer financing - if needed, could have my wife apply alone given that her credit, although a bit lower than mine, would have a great volume of account history - which seems to be the barrier.

- I agree with others that even if we obtained a less than ideal APR, we can address that later and refinance.

- We are in a position and prepared to pay cash for the vehicle that we ordered as a last resort, however, this would not be ideal given that we're also accumulating cash for our house down payment within the next year or so - the other undisclosed sense of urgency from original post that adds to the frustration of this resolving somewhat cleanly - wife is also 6 months pregnant :shock:
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grabiner
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Re: Car Purchase / Credit History Snag

Post by grabiner »

dboeger1 wrote: Wed Jan 19, 2022 1:49 pm Perhaps counter-intuitively, the system prefers a long history of properly managing many accounts (even though you'd think having many credit accounts would be a bad sign). It doesn't really care how much or little credit you have, so long as you pay it off. If you log into any credit-tracking web site like Credit Karma, you'll see that the highest tier for account numbers is 21+ accounts, which is an insane number.
Credit Karma oversimplifies the criteria by distilling each of the credit factors into a number. While the number of accounts on your report is a factor, so is the type of account, and whether they are open or closed. Similarly for other factors: the fraction of payments which are late is the number Credit Karma uses, but how recent the late payments were and how seriously late are more important.

I used to get a proper credit score from my mortgage lender with reason codes, and even though I had only five accounts (three open credit cards, one open mortgage, and one closed credit card), I never saw the factor "too few accounts" or "too few open accounts" as one of the reasons. (What I did see was "too many revolving accounts with balances" when all three credit cards had a balance, but not when only two had a balance, and "length of time accounts have been established" until the newest account was five years old.)
Wiki David Grabiner
mhalley
Posts: 10432
Joined: Tue Nov 20, 2007 5:02 am

Re: Car Purchase / Credit History Snag

Post by mhalley »

The only 2 things I can come up with are
1. Have a relative with an excellent credit rating make you an authorized user without giving you access to the card.
2. The bane of Dave Ramsey, have the trusted relative co-sign the loan. We all know how bad this could go, but sometimes it is a reasonable solution.
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