The credit game is truly a science...

[Maya12]

New here, still gathering info and reading post.

Please help me to understand this...quick scenerio.

My best friend: Stable job - had one credit card for 2-3 yrs ran up to about 5K....One card only.

Excellent credit score 775-788 during the life of that card.

Pays every penny off, never late, no derogs, no collections.

Paid off and Cancels card.

2 years later applies for car loan...told she has no credit? and previous credit score had dropped.

Does a favorable credit history not count once card is cancelled?

Thanks

[Anonymous]

Yes, the history on the previous card does continue to count towards her score.  If that is her only account, it is not a surprise that her score dropped when she closed it.  FICO wants to see one or more open revolving accounts (like a credit card).  All else equal, she will get a higher score by having available credit and using a very small portion of it than she will by having no available credit at all, regardless of her history.

The lender could have told her she had no credit as in "no open credit accounts in good standing," which would be true.

[Anonymous]

Yep-

Revolving credit is very important to FICO-

If she has NONE- expect a huge hit.

While the closed accounts will/should stay on for 10 years-

Her payment history should be great- 

She needs to re-establish a revolving account-

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Maya12 wrote:

New here, still gathering info and reading post.

Please help me to understand this...quick scenerio.

My best friend: Stable job - had one credit card for 2-3 yrs ran up to about 5K....One card only.

Excellent credit score 775-788 during the life of that card.

Pays every penny off, never late, no derogs, no collections.

Paid off and Cancels card.

2 years later applies for car loan...told she has no credit? and previous credit score had dropped.

Does a favorable credit history not count once card is cancelled?

Thanks

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[Anonymous]

What Timothy said.

[Anonymous]

When applying for an auto loan, the most important single thing is comparable auto. Some lenders have a first time buyer programs (Toyota, VW), but with repossessions and volentary surrenders at all time highs lenders are "different" than they used to be!

[Anonymous]

It may actually be what it appears to be, BUT...

Your friend needs to check her scores herself and not take the salesman's word for it. Some of them like to tell you that you have bad credit to shake you down for a higher interest rate and/or purchase price, when in fact your credit might be fine.