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Ready for a car - denied loan. Help!

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Anonymous
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Ready for a car - denied loan. Help!

Hello, 

 

First time posting, so please forgive me if this subject has been touched before...

 

I am in a bit of a pickle and I am hoping to get some help here, as I have not been able to find any other up-to-date sources.

 

BACKGROUND:

 

I am a 23 year old female, who graduated college almost two years ago. I have had a Bank of America checking and savings account that has always been in good standing (have never overdrafted, always had money in both accounts). My name has never been on any bills or utilities at home, however during college, I lived in an off-campus apartment that I signed a year lease for, along with other roommates (also was in good standing).

 

During my junior year of college -- so 3 years ago, I applied for a Discover It card for students that got approved with a limit of $1500. That card has also been in good standing and actually went from $1500 to $3000 then to $8000 currently. Ever since Discover rolled out the free FICO credit score function, I have ranged anywhere from a 780 to a 720. I am currently at a 760. For those wondering, I have also pulled a credit report and there are no negatives on there. I have not applied to any other credit cards.

 

Six months after graduating, my student loan repayment started. I have been paying them off (actually a $1000 ahead of schedule) for approximately a year (in good standing).

 

I recently took a new job which raised my income about $10,000 and is higher than the national average for my position. It has been about 4 months now.

 

THE SITUATION:

 

I need a car. I have been driving my parents and it is time I get my own . All of my ducks were in a row -- I did my research, I test drove the cars and the down payment was set aside (about $5000). The last step before buying was applying for an auto loan. I went with Capital One Auto for $20,000 because two friends with similar credit situations (we all graduated with each other) recently had applied and got approved for .9% APR. Our credit situations are so eerily similar that I thought for sure I was going to get approved - they even make less money than I do! Mind you, I never received a pre-approval letter. I simply went on their website and filled out the form.

 

THE PROBLEM:

 

CapOne did not approve me! I was honestly really shocked. When the letter of explanation came back, it said "insufficient credit history."

 

QUESTIONS:

 

- Does insufficient credit history sometime mean/include too short of a work history?

- If it is work history, what do you recommend the wait time be before I try again? I have read 6 months atleast. (I have to return the car to my parents, so I believe a couple more months is the longest I can do)

- Given my credit background, do you think my credit history is too short? What should I do now to improve my credit history?

- How long will "improving my credit history" take?

 

Any and all recommendations welcome! I really need advice and 

Message 1 of 5
4 REPLIES 4
Anonymous
Not applicable

Re: Ready for a car - denied loan. Help!

I'd suggest looking into your area Credit Unions. Just 5 months post bankruptcy, lack of credit history and a credit score 100+ less than yours I was able to finance a vehicle. What I learned through this process is that Credit Unions are not all the same. The Credit Union I've been banking with for 1 1/2 years instantly denied me. The car dealer made a call to another local Credit Union (Community Wide Federal Credit Union) and they welcomed me as a borrower! I met with my new found Credit Union and was told that they tend to stick their neck out more than many other Credit Unions, hoping to create loyal new customers. It sure worked on me! I closed my other account and moved into my new savings place Smiley Happy If I was to do over, I'd make a list of all the area Credit Unions and research to find the LESS conservative ones. Wish you the best of luck!
Message 2 of 5
Anonymous
Not applicable

Re: Ready for a car - denied loan. Help!

I'm no expert, but I've been told here many, many times that the ideal credit profile has three revolving lines of credit, with one showing just a small balance each month. I have followed this formula and have seen improvement in scores from when I only had one credit card.

 

If you decide to add some revolving lines of credit, though, you'll suffer from shorter average age of account and new inquiries. So maybe consult with others on the board for more direction.

 

Also, it's easy to join Digital Credit Union (google them) and literally everyone I talk to on here has gotten approved by them for an auto loan-- could be worth a try. I agree with the other poster; credit unions are a good way to go for so many things.

 

Maybe someone else can chime in but what about applying at the dealer? Lots of inquiries, but perhaps more luck...

Message 3 of 5
StartingOver10
Moderator Emerita

Re: Ready for a car - denied loan. Help!

OP, agree with the others, try DCU and I bet you get approved (subject to your income and DTI).  I am assuming that you have enough income or Cap One would have mentioned DTI rather than insufficient credit. BTW, the poster that mentioned that every CU is different is spot on.  Each has their own underwriting guidelines so make sure to ask a few questions of the loan officer before you apply. 

Message 4 of 5
Anonymous
Not applicable

Re: Ready for a car - denied loan. Help!

Everybody here preaches the Gospel of Credit Unions. And credit unions are great, don't get me wrong. I'm a member of seven of them.

But when financing a car, you often get the best deal from the captive finance company of the car manufacturer. When I graduated college, I had a 640s credit score and absolutely zero payment history of any kind. My student loans had been opened for a few years, but were all deferred until 6 months after graduation. After graduation, I was self-employed. Within two months, I bought a brand new Ford from the dealer for 0% APR and with 0% down. No bank would take that kind of risk on a new graduate with no proof of income and no credit history. But Ford wants to sell cars, so their underwriting is lax. I suspect you'll get the same treatment with another of the captive finance companies.

Credit unions are great. But far from your only option.

Message 5 of 5
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