Self Employed - wondering about approval process

[MrProsperity]

Hi Everyone - My wife and I own a business, which we started about a year ago. We make about 70k/year. Her credit is awful (low 500's), rebuilding - mine is better EQ 608, TU 629, no lates for 2 years, one bk that is going to drop next year. Most of our credit is separate - my cards are maxed out but have low limits ($1200 total) and I can pay off within the next month or so.

I'd like to get a loan between 25 and 30 k within the next 4-6 months and can do 20% down - last time I applied for a loan I had an employer - not sure of the process if I'm self employed. We belong to a credit union but am wondering if they will accept an application from me only. Any advice would be appreciated very much.

[Anonymous]

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@MrProsperity wrote:

Hi Everyone - My wife and I own a business, which we started about a year ago. We make about 70k/year. Her credit is awful (low 500's), rebuilding - mine is better EQ 608, TU 629, no lates for 2 years, one bk that is going to drop next year. Most of our credit is separate - my cards are maxed out but have low limits ($1200 total) and I can pay off within the next month or so.

I'd like to get a loan between 25 and 30 k within the next 4-6 months and can do 20% down - last time I applied for a loan I had an employer - not sure of the process if I'm self employed. We belong to a credit union but am wondering if they will accept an application from me only. Any advice would be appreciated very much.

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You are going to have some serious issues in getting financed.

If this vehicle need is work related you may have been better served by waiting until the BK had dropped off, your overall credit had improved before trying for self employment.

1- your wife's credit score is non viable in todays economy if she was employed.

2- your score is questionable, again if you were employed.

3- A car loan is a long term loan where there is the expectation you will be able to pay your obligations-for the term of the loan.

Self Employed individuals have to prove that they can bring the money in for the sustained period of the loan. Since you have not been in business for any length of time you are going to have a hard time proving you are financially viable.

You may be better served if you at least wait until you file your taxes and have those type of records to back up your loan foundation.

In most Self Employed loans for cars, we asked for at least the last 2 years of records. (much like expecting an employed customer to have a year on the job.) More years showing income made you a better candidate.

You may need to wait until you have both a tax year and those records behind you, and need to have a significant percentage (40%+) down.

BTW: bringing in bank statements to "prove" you have $45K in the bank does not hold much weight at all- the bank extending you the loan is not sure that was a snapshot taken the day before $63K in checks wen tto clear.

And outside advice: a self employed individual's credit score guarantees the business loans- you might want to start re-evaluating how you are using and servicing your debt and try to get both you and the wife's score up.

[MrProsperity]

Okay, thanks for the advice.  We found a car today that is $10k and we might talk to the credit union about something like that - and waiting a few years.  We can definitely wait until after we file our returns. I have been self employed for a few years but the wife's self employment makes way more money. 

[Anonymous]

if you can I would try for the 10K car, talk to your credit union, you may have the self employment time to get it. Also th edealership may be able to get you done, 10K is NOT 25K.

Sometimes if yo ufind the right deal its best to try for it and see, otherwise who knows what tomorrow will bring.

But please, start taking more active participation in these forums you and your wife need to start improving your scores. 

[Anonymous]

I was approved by a CU recently, and they said they normally ask self employed people for the last two years of tax returns. Your CU may request something different, but they should be willing to work with you. The low credit score and bk would be your bigger obstacle.

[MrProsperity]

Okay, thanks again for the advice. I am sure we can do some work to improve both of our scores.

[Mark_in_Pasadena]

I've been self-employed (through my s-corporation) for 11 years.  I also have 802+ FICO scores, and can tell you that once you get your score to that level, you just get to state your income, as far as credit cards and car loans are concerned.  Of course, stated income loans are no longer available for home loans, but for everything else, I've never had to do anything other than state my occupation, length of employment, income, and sign on the dotted line to get approved, thanks to my FICO scores.

I certainly agree with the sound advice that USMC gave you that you need to improve your credit scores.  Once you do so, you won't have to cough up any tax returns for a car loan anymore, even if you're self-employed.  8 days ago I stated my income & walked away with a 2.9% 38k loan for a 2007 CPO BMW X5.

[MattH]

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@Mark_in_Pasadena wrote:

I've been self-employed (through my s-corporation) for 11 years.  I also have 802+ FICO scores, and can tell you that once you get your score to that level, you just get to state your income, as far as credit cards and car loans are concerned.  Of course, stated income loans are no longer available for home loans, but for everything else, I've never had to do anything other than state my occupation, length of employment, income, and sign on the dotted line to get approved, thanks to my FICO scores.

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I've never been self-employed, but my experience has been the same with respect to loans: my wife and I of course documented our income and assets for our mortgage, but for everything else (autos, credit cards, and a few other things over the years) we've always just filled out a form and got immediate approval.