Any Bankers or Loan Officers Here?

Eric Patterson

Eric Patterson

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Staff member
I would like some advice I can pass on to a 24-year-old hunting partner. The transmission went out in his old pick up and he is trying to buy a used truck, a very sensible one in my opinion, from an individual and not a dealer to replace the inoperable one. Problem is he has never used credit cards and pays for everything with cash or a debit card. He has no credit score and has been turned down by one or more banks for a used car loan since to them he doesn't exist.

He does not want family to co-sign and is trying to figure out how to get a loan. He rents and does not own. He has a long-term steady job and is of able mind and body. He's just a really good young man who has never borrowed money, avoided credit cards, and is running into issues getting a loan. It is putting him in a bad spot because he needs transportation to get to and from work and all the other places he needs to go. Other than showing a bank his work history and paystubs and a down payment what can he do to get a loan with a reasonable interest rate?
 
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Eric Patterson said:
I would like some advice I can pass on to a 24-year-old hunting partner. The transmission went out in his old pick up and he is trying to buy a used truck, a very sensible one in my opinion, from an individual and not a dealer to replace the inoperable one. Problem is he has never used credit cards and pays for everything with cash or a debit card. He has no credit score and has been turned down by one or more banks for a used car loan since to them he doesn't exist.

He does not want his mom to co-sign and is trying to figure out how to get a loan. He rents and does not own. He works in the hunting industry and has a long-term steady job and is of able mind and body. He's just a really good young man who has never borrowed money, avoided credit cards, and is running into issues getting a loan. It is putting him in a bad spot because he needs transportation to get to and from work and all the other places he needs to go. Other than showing a bank his work history and paystubs and a down payment what can he do to get a loan with a reasonable interest rate?
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Is he a good driver? I can loan him my backup vehicle until he figures something out.
 
Eric,

Has he pulled a copy of his credit report? Is the landlord reporting his monthly rental payment to the credit bureaus? Does he pay utility bills on his rental. All of the utilities should show on a credit report. He should have one credit card and pay off monthly to establish credit record.

Rick
 
Eric, I am no banker, but when I was in college and starting out I took out a vehicle loan from Lightstream. Application was all online and I had the money the next day. Interest rates get better the shorter the loan term is, but expect them to be steep with it being his first line of credit. Since he seems like a fellow with his head on his shoulders right, he should be able to pay the loan off much quicker than the loan term and avoid some of the interest.

I've had several friends also get loans from Lightstream even with little credit history. It's setup more like a personal loan. You have the title to the vehicle, they are just a mediator.

Good luck!
 
This is a tough situation. Back when local banks were actually local, knowing the bank staff could get you around this. It did for me. BUt times of have changed.
Any chance he is eligible for USAA membership, via parent or grandparent?

This is a good lesson in modern economics and credit scores/lending. Every kid should get a credit card on their parents account, in their name as soon as they turn 16. Then their own account at 18. Pay it off every month, they gotta be disciplined. Its the only way to build credit history.
 
Many years ago when I was younger than his age, and in a similar situation I had a family member co-sign for me. The deal was I NEVER miss a payment or my A$$ was grass and he was the lawnmower. It worked out just fine and no problems. If not, a loan would have cost me a arm and a leg from lending institutions.

These are different times. Bottom line is the sooner a person establishes Credit by having debt and paying it off properly the better off they are in the long run. Cash is King for certain things yet not for others. Ya strike a balance that works for you and ya sleep good at night.

I wish the young man all the best cuz ya Gotta Have Wheels.

my 2 cents
 
I'm a banker but don't do consumer loans. My advise for the short term is to keep trying. Go to a local small town bank and talk to a loan officer so he can explain it all to them. He should make out a financial statement and take a couple years worth of tax returns. If that doesn't work, look for a cosigner.

For the long term, Carl is right. Get 1-2 credit cards and use them! Best plan is to get a zero cost card with airline miles perks. Use it for everything, just have the willpower to not overspend, AND PAY IT OFF EVERY MONTH! It's more convenient than cash especially if you hook it up for auto pay with your bank. And as an added perk he will get a free flight to somewhere every so often!
 
I'm a non-practicing licensed mortgage loan officer. I had this same issue several years ago when I attempted to buy a home after a long hiatus from mortgages, credit cards, and loans. I had no credit score as I paid cash for everything. I was turned down by several lending institutions for no credit score. I finally found ONE lender who had a no score program. It was a miracle.

Here's my suggestion. Have him go to a finance company. We have One Main Financial here in Indiana. They may make him a loan secured by the truck title. The only other thing to do is to go to Kohl's and open a credit card with them to build his credit profile. I would also have him try Capital One for a credit card. He may have to open a secured credit card until he gets his credit profile established. Oftentimes they will have you deposit say $200 and give you a secured credit card. I would also suggest that he go to a local credit union and also do a secured loan. They will have him deposit $200-$500 in a savings account and make him a loan for the same amount. It is imperative that he not have any late payments while he's building his credit. I would set the credit cards and loans up on autopay.

This is the only way he's going to be able to build his credit profile. He's going to need a credit profile in order to generate a FICO score. Sadly, the days of debt free, pay cash for everything are over! When he goes to purchase a home the mortgage companies will deny him because he doesn't have a FICO score. This is just the way things are today. The FICO score, or lack thereof, will even affect his auto insurance rates.

I hope this helps.

Fred
 
I ran into this when I was like 20. Best thing I did was open a credit card, use it and pay it off every month. After about 6 months, i had a credit score. Despite it being paper thin and still getting push back, I had a leg up to negotiate when I financed my first truck. He sounds like a good kid. He needs to understand credit is liquid gold. Most dont like the idea of debt, but lots of games to get credit scores high, and one of those is maintaining a long term loan. It sounds stupid, but when I buy a boat, I always pay on it for 2-3 years, despite having the money to pay for it outright. Ive done it with 3 boats and a travel trailer now. Score is pushing 800. After about 4 years, the credit score peeps (whoever they are) like things paid off. If the young man can purchase a home, that really booms the score after about a year of consistent payments too.

He just needs to understand, at 24, its probably time to build credit. It will do him wonders in life.
 
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William Reinicke said:
I ran into this when I was like 20. Best thing I did was open a credit card, use it and pay it off every month. After about 6 months, i had a credit score. Despite it being paper thin and still getting push back, I had a leg up to negotiate when I financed my first truck. He sounds like a good kid. He needs to understand credit is liquid gold. Most dont like the idea of debt, but lots of games to get credit scores high, and one of those is maintaining a long term loan. It sounds stupid, but when I buy a boat, I always pay on it for 2-3 years, despite having the money to pay for it outright. Ive done it with 3 boats and a travel trailer now. Score is pushing 800. After about 4 years, the credit score peeps (whoever they are) like things paid off. If the young man can purchase a home, that really booms the score after about a year of consistent payments too.

He just needs to understand, at 24, its probably time to build credit. It will do him wonders in life.
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Yes, it is worth it to play the game to put yourself in the right position if you need it and you don't always know when you need it until you do.
 
Unfortunately with no credit, I think hes hosed to get a good credit score. Which is very sad, but just whats happened. Eric, if its at all possible, if he has a sizeable down payment, see if he can pay a large portion of the truck off. See if he can find someone to get him a loan. I will warn you, he is likely to get an absolute terrible interest rate. Something in the teens percentage wise. Hopefully if he has a large amount of it paid off, his monthly wont be too high. But people buy cars with 400 credit scores all the time and in my opinion this is worse than having no credit score. These are people who have a history of paying late or not paying at all. At least this young lad doesnt have any kind of history like that. So surely someone might be able to take a chance on giving him a loan, I would think? By even doing this, he will start to build credit as well.
 
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