Motorcycle financing denied despite 789 fico score...

[thebrandon]

Greetings all,

I am posting this because I am rather confused regarding how this credit rating works.  I went to purchase a motorcycle today, the total cost of the bike was 12k.  I was going to put down payment of 6k and finance the rest.  I filled out the paperwork and they submitted it.  I was then told that they could not finance me unless I could get someone to co sign the loan...  What is going on?  I asked the salesman what my fico score had been, as the last time I had gotten it officially pulled it had been 769 and that had been over a year before.  He informed me the score was 789, but that I would still be required to get a co-signer. 

I'm 29 years old, I work for myself and make 6-7k monthly, the only debt I have is around 12k left in student loan debt which I have never been late on.  I have 2 credit cards which I faithfully pay off monthly, and I also use paypal's bill me later feature which I always pay off within a month or 2.  I have purchased 2 cars and 2 previous motorcycles in my life, for which I have paid in full and not financed.

It would appear that I am being punished for being disciplined with my previous financial decision making... the salesman basically told me that since the only current payments I was making were student loans, and since I actually pay off my credit cards every month, that that is what was preventing me from being approved without a co-signer.  Does this sound right?  This is my first time attempting to finance something, so i'm not sure if this is normal or not... but it seems completely messed up if that is the system we have.

[LearningMoreAboutCredit]

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@thebrandon wrote:

Greetings all,

I am posting this because I am rather confused regarding how this credit rating works.  I went to purchase a motorcycle today, the total cost of the bike was 12k.  I was going to put down payment of 6k and finance the rest.  I filled out the paperwork and they submitted it.  I was then told that they could not finance me unless I could get someone to co sign the loan...  What is going on?  I asked the salesman what my fico score had been, as the last time I had gotten it officially pulled it had been 769 and that had been over a year before.  He informed me the score was 789, but that I would still be required to get a co-signer. 

I'm 29 years old, I work for myself and make 6-7k monthly, the only debt I have is around 12k left in student loan debt which I have never been late on.  I have 2 credit cards which I faithfully pay off monthly, and I also use paypal's bill me later feature which I always pay off within a month or 2.  I have purchased 2 cars and 2 previous motorcycles in my life, for which I have paid in full and not financed.

It would appear that I am being punished for being disciplined with my previous financial decision making... the salesman basically told me that since the only current payments I was making were student loans, and since I actually pay off my credit cards every month, that that is what was preventing me from being approved without a co-signer.  Does this sound right?  This is my first time attempting to finance something, so i'm not sure if this is normal or not... but it seems completely messed up if that is the system we have.

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Sorry for the denial. Try to get financing through your local bank or CU...sounds like you have a thin file and a misinformed salesman.  

[user5387]

You might look at the DTI angle, and see if there's anything there tripping you up.

Beyond that, I think I'd look for a different source of financing, perhaps by talking to some local CUs.

[thebrandon]

I'm not familiar with what DTI is, but I googled it and it said "debt to income ratio".  If that is correct I doubt it is that, as I make significantly more than my payment obligations every month.   I think I will just wait a couple months and just pay cash for it, but i'm concerned that if I do that I will have this same issue down the road when I want to finance something which I actually need.  Also, i've been told that if I have multiple credit score pulls that that will hurt my credit score... so if I went to credit unions and applied wouldn't that hurt my rating, or am I misinformed?

[LearningMoreAboutCredit]

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@thebrandon wrote:

I'm not familiar with what DTI is, but I googled it and it said "debt to income ratio".  If that is correct I doubt it is that, as I make significantly more than my payment obligations every month.   I think I will just wait a couple months and just pay cash for it, but i'm concerned that if I do that I will have this same issue down the road when I want to finance something which I actually need.  If you stay on that path, it could happen again.  Also, i've been told that if I have multiple credit score pulls that that will hurt my credit score... so if I went to credit unions and applied wouldn't that hurt my rating, or am I misinformed? To make an omelet, you have to break some eggs.  I would rather a CU pull my report once than a dealership go on a fishing expedition and pull multiple times.  You decide...

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You are in a very unique position compared to most...the ability to pay in cash.  However, as good as that is, you'll never establish a great credit profile.  Now I know that is what you're trying to do so my previous suggestion still stands...go to your local bank or (preferably) CU and establish membership.  Explain what you want to do and explore your options.  I prefer CU's as you normally get better terms.

I have learned that it is better to obtain credit when you don't need it.  This seems to be the situation you are in right now.  Also, having credit doesn't mean you have to be in debt.

[user5387]

DTI is a ratio, and there are thresholds for starting to run into trouble.

It's always useful to check your DTI, if you get turned down for a loan with high scores.

What you could do is take a copy of your report around to some local CUs, and show it to them, and ask them if you're in the ballpark.

Another angle would be Lending Club and Prosper.  I don't know what sort of an APR you'd get, but you could at least check into it.

[thebrandon]

Hmm, thanks for the info.  I think I will just go open an account at the local credit union, and down the road once I have some banking history with them I will ask them to finance the bike and see where it goes from there. 

[guiness56]

The fact that you do not let a small balance report on one card every month could hurt you in the long run.  FICO likes to see you make use of the credit you have.  It is also equally bad to let a balance report on all of your CC each month.  Lenders like to see you make use of the credit extended to you.  By paying in full, if it is done before they report to the CRAs, it looks like you don't use them.  It shows them you can handle credit responsibly.

Of the CC you have, let one report a balance of 9% or below and the others at 0.  Pay off the balance before the statement date so you don't pay interest.

[notfancy]

As for his concern about inquiries: Wouldn't this sort of fall under the "auto financing" rule for inquires? Sort of?

And you can apply for a loan the day you join a CU with no issues other than possibly being denied, and they'd be really  good and patient about explaining your options to you. Also, you can bring in a copy of your credit report and they might be able to go over it with you and let you know your chances of approval before they pull one of their own.