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Apparently having good credit isn’t enough, unless you’ve already pledged loyalty to the debt system. (lemmy.world)

submitted 3 days ago* (last edited 3 days ago) by Camzing@lemmy.world to c/personalfinance@lemmy.ml

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Just went through a mess trying to finance a used car. I haven’t borrowed money since 2012, no debt, no credit cards, just living within my means. When I applied for a loan, I was told I was refused. Not because of bad credit, but because I hadn’t used credit recently enough.

The dealership advertises “no applications refused,” but apparently if you don’t have an active debt history, you’re too much of a mystery for the system.

Co-signer? Not allowed. Using my own bank account for payments? Denied. Their solution? Open a joint account with my dad just to satisfy a bank’s paperwork, pay hundreds in fees over 6 years just to make it work.

The credit system says you can't borrow money unless you've already been borrowing money, like somehow living within your means disqualifies you. It's not about good credit, it's about loyalty to the debt game. Screw you for standing on your own feet, I guess.

Just needed to get that off my chest. Anyone else run into this nonsense?

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[–] CircuitGuy@lemmy.world 1 points 22 hours ago

The dealership or whatever bank they partnered with turned you down for a loan. Another bank might say yes, especially a bank that you've been using for other services for a while and if you're making some down payment rather than borrowing the full price of the car.

I generally think car loans are a bad idea. If you have to drive a junky car while you save up money to upgrade, they may actually have done you a favor by saying no because you avoid interest payments and you avoid the risk of having to make payments during a situation where you lose you job or have some other unexpected expense.

[–] shortwavesurfer@lemmy.zip 2 points 1 day ago

This is common. How dare you free yourself from debt slavery?

[–] socsa@piefed.social 11 points 2 days ago

The dealership did you a favor by not giving you a loan. Go to a real bank or credit union and ask for a loan.

[–] Feyd@programming.dev 42 points 3 days ago (3 children)

It is stupid, but you can just get a credit card and always pay it off so you don't get charged interest

[–] curiousaur@reddthat.com 18 points 3 days ago

Yeah this is the answer. Because of the 1 - 3% cash back, sometimes even more for gas, you're also leaving money in the table if you aren't using a credit card.

[–] davel@lemmy.ml 15 points 3 days ago (2 children)

Last I checked, you don’t even need to use the credit cards, you just need to have them. IIRC, they only ding you for late payments and for having high balances.

[–] Nollij@sopuli.xyz 4 points 3 days ago

They need to be "active", and "paid as agreed", which doesn't mean a whole lot. You are perfectly fine to get a pack of gum each month, and pay the balance in full. Or put a monthly bill on your CC, or just use it for gas. Just so there's activity each month.

Obviously avoid any that have a fee, and pay it in full each month.

[–] Steve@communick.news 13 points 3 days ago (1 children)

It depends on the card. Most will drop you if you don't use it at all for a year or two.

[–] davel@lemmy.ml 5 points 3 days ago (1 children)

True. It’s easy to set up one recurring payment, for media streaming or whatever, and otherwise leave it be.

[–] AnarchistArtificer@slrpnk.net 2 points 3 days ago

I did this when I turned 18 and it's been super useful (one of the few areas that my mom was a role model for me was that she had excellent credit, despite being poor as shit).

This just underscores OP's general point for me though. Beyond the car dealership stuff, I have heard of plenty of examples in which having no credit history was worse than having bad history. It's one of those things that I think does make sense, in the wider picture, but is also pretty fucked up.

[–] Taco2112@lemmy.world 1 points 3 days ago (1 children)

Not always or maybe not a high enough limit depending on what you want to buy. I had the same problem as OP about 6 years ago, I tried to borrow $3000 from my Credit Union to take a class and advance my career. They wouldn’t give me the loan so the options I was presented with were: a secured loan where I paid the full amount I wanted to borrow up front as collateral and then when I paid off the loan I got the collateral back (I didn’t have $3,000, hence the loan); or, I could sign up for a credit card with a $1000 limit.

[–] Feyd@programming.dev 2 points 2 days ago (1 children)

To clarify, I just meant for establishing credit, not instead of a loan

[–] Taco2112@lemmy.world 1 points 2 days ago

Gotcha. Yeah, credit card helped me and then I was fortunate enough that a family member was able to loan me money for the class, I used that money to do the secured loan and further build my credit. I paid said family member back when I got the collateral back from my credit union.

[–] odelik@lemmy.today 27 points 3 days ago (1 children)

No credit IS bad credit.

You don't have to carry debt to have a credit history, but you do have to use credit to have a credit history. If you haven't used the system, they have no knowledge of your crdit worthiness.

I use credit cards as a tool to protect my finances and purchases (fraud protection is greater with CCs than a bank account/card, as well as being able to dispute transactions where service was failed to be delivered or inadequate). I also always pay off my statement balance in full every month.

I do my best to only buy things I can afford to pay in full, but a home and automobile can be exceptions to that (even though I bought my auto in full due to a financial windfall). But I still participate in the system to gain the benefits of the system

www.nerdwallet.com is a great resource on credit education and provides a wealth of tools for starting build your bad credit to good credit.

[–] Damage@feddit.it 2 points 3 days ago (1 children)

This is a very American thing. If I needed to finance a car, I'd just need to show a couple of paychecks.

That's not possible for people on fixed-term contracts unfortunately.

[–] socsa@piefed.social 1 points 2 days ago

You can get a loan like this in the US as well, just not from a car dealership. If you have a checking account, that bank will very likely give you an auto loan.

[–] djsoren19@lemmy.blahaj.zone 6 points 3 days ago

Yup, it's such absurd bullshit. I effectively am locked to using a credit card for all my expenses, and then paying it off each month, just so that I can prove that I have an income so that I can pretend one day I'll be able to finance a house.

[–] wampus@lemmy.ca 13 points 3 days ago (1 children)

Haven't run into that nonsense. I bank with a Credit Union, and they tend to treat me like a person.

[–] pinball_wizard@lemmy.zip 5 points 3 days ago* (last edited 3 days ago) (1 children)

That's a great point! Getting a car loan from a credit union where I have banked with for years has gone well for me, as well.

[–] wampus@lemmy.ca 2 points 2 days ago

Yeah -- I've literally been at the same CU for decades, got signed up as a kid by my parents. A small (like 5000-10000 members?) local community credit union. I'm an old grumpy guy now with a mortgage and all that crap. Didn't even bother with a mortgage broker, as the rates I was offered were pretty good based on sites like ratehub, and they were flexible on a few of the 'standard' requirements that I was sorta borderline on (like gds/tds and ltv). Almost have it paid off now, faster than anticipated in part because they were also pretty flexible on my repayment schedule. When its term renewed, I asked if I could just overpay a bit more regularly in addition to the once per year lump sum and they were cool with it. Even though my longer term GICs and whatnot are 'slightly' worse on rates than I imagine I could get if I went elsewhere, I'm totally fine with that if it lets em keep doin what they're doin for the next generation.

I am a little concerned they might not be around in 10 years though, cause Canada (where I'm at) is seeing smaller financial institutions disappear left right and centre -- mergers to try and get big to be able to pay for govt regs and payment industry stuff. As soon as the management is 'national', from what I've heard, they basically just turn into banks for customer service, and you become a number.

[–] EightBitBlood@lemmy.world 4 points 2 days ago

Dude. Even with good credit they will fuck with you. I've been with Wells Fargo since '84.

Started a business in 2014. Asked them for a business loan in 2023.

My credit score was over 700. I have multiple credit lines I pay on time and have been for years.

WF said I was pre-approved for a business loan of 100k.

After 6 weeks, they denied my application.

Simply because of one missed payment (by 15 days) on a credit card in 2020. (I incorrectly thought this card had a no payment forgiveness grace period due to the pandemic.)

Its a broken system that only works for those that already have capital. They will find a reason to deny you no matter what.

[–] veganbtw@lemmy.ml 12 points 3 days ago (2 children)

I was always told that if you go to buy a car and offer cash that it is like a magic bullet that ends puts all the cards in your hands, I learned that they can refuse a cash offer and only finance cars because they make all their money on the financing.

[–] octobob@lemmy.ml 8 points 3 days ago (1 children)

The "trick" is to only mention you're paying cash at the end. I went through this after hitting a deer and totalling my car last year after I received my settlement. They'll usually offer something small like a few hundred dollars off or whatever when you casually mention your price when test driving. He basically tried to walk it back at the end when we sat down to discuss financing when he found out I was paying cash, which was incredibly shitty, but he had to "go in his boss's office" or whatever to commit to what he said previously

It's all such a stupid song and dance that's pretty much on par with birds mating.

[–] veganbtw@lemmy.ml 5 points 3 days ago (1 children)

That is what I did and they were like sorry, we only finance and let me walk out.

[–] Laser@feddit.org 5 points 2 days ago

Haha so that means effectively you can't get a car for the advertised price?

[–] AlecSadler@lemmy.blahaj.zone 2 points 3 days ago (1 children)

As a (brief) former car salesperson, this is 100% true. Cash offers are actually less profitable, well, assuming the buyer is also negotiating down to the wire on margins.

[–] Doxatek@mander.xyz 1 points 2 days ago (2 children)

I'm someone who may want to buy a car cash how should I do it? Just wait until everything is set up then just pay? I don't want them to deny me

[–] AlecSadler@lemmy.blahaj.zone 2 points 2 days ago

This isn't an every case, but maybe just don't even bring it up until the end. Claim you want to get all the numbers settled, even if they're discussing payments and stuff, just keep an eye on the actual price of the vehicle (+ taxes, title, doc fees).

Then at the end you could just say, great, and say you'll be paying in cash. They might be miffed, that's their problem.

Some places still make you fill out a credit app for liability purposes, but I'm not entirely sure that's even necessary in actuality.

Now, that said, sometimes dealerships get kickbacks based on financing deals they acquire - so it may bake into the price they're offering. If that's the case we often just told people straight up and then gave them instructions on how to make principal-only payments. So you could feasibly do this to snag a great deal and then just pay it off immediately.

Another benefit for the latter is if it's 0% or close to, you could do it over 6-12 months that way if something insane happens you'd still have that cash just in case and your total interest outlay with the accelerated payments would be pretty negligible.

[–] Bronstein_Tardigrade@lemmygrad.ml 2 points 2 days ago

I pay cash for my used cars, but I only buy from individuals, never dealers. People selling cars seldom invest in covering up problems, and they are more than happy to receive cash. There can also be a bit of a difference between the official paperwork price and the amount that actually changes hands.

[–] jafffacakelemmy@mander.xyz 7 points 3 days ago (1 children)

Banks are experts at providing loans. Car dealerships should be expert at selling cars. Asking the car dealer to be a bank is like trying to buy a telescope from a hat shop.

[–] hyacin@lemmy.ml 2 points 2 days ago* (last edited 2 days ago)

This is, a yes and no imo.

Cars are financed so much, and making the sale so often depends on being able to get the customer financed, that a lot of sales people do get pretty well versed in the financing side of things. I've finally after many years found a used car guy I trust, and shortly after I had done a consumer proposal (couple steps below a bankruptcy for anyone unfamiliar), the second time I was buying a car from him, he was able to get me a rate that I couldn't BELIEVE, just by playing a couple banks against each other. He just wanted to make the sale, it's no skin off him if I'm paying 5% or 25%, but he's more likely to close the deal if he can get me a good rate and payments I like the size of.

Another angle is big companies that have their own financing wings. Mercedes-Benz Financial is a pretty good example. They're entire purpose is just to help people buy their cars - so I've seen them offer rates as low as like 0.9%!

Don't get me wrong, there are more scumbags than not out there, in car sales, used car sales, and loans - by FAR - but there are instances where things make sense and work out well.

On the main point though, yes, the entire credit system is a total scam. It was significantly worse ~20-30 years ago when they wouldn't even tell you why you had good or bad credit - it was all just black magic they kept secret. Still a horrible scam to this day though.

[–] AnotherMadHatter@lemmy.world 10 points 3 days ago (2 children)

I just happened to screenshot the metrics for the Trans Union "Vantage 8" score a while back. Hopefully this helps someone understand what is needed to improve their score. I am not a fan of the whole thing, but since I don't have a choice, I have to participate until it can be dismantled.

[–] octobob@lemmy.ml 3 points 3 days ago (1 children)

Man so how about I had to have a soft inquiry of a background / credit check just to get on an industrial site to do my job recently. Like how is that in my control at all lol. Thankfully that's not the norm, most of them just do a piss test, but like what if every time I traveled it was another credit check? Wouldn't that hurt my score if it was a frequent thing?

[–] AnarchistArtificer@slrpnk.net 2 points 3 days ago

Soft checks don't matter as much as hard checks do. A lot of places that will check your credit score hardly care about soft checks, if at all. I think I have heard that soft checks don't negatively impact one's score at all, but I'm not too confident on that. But even if it did negatively impact your overall score, it's important to remember that places that are checking your credit aren't just getting the score — that's mostly just an abstraction to help us to get an overview. Lots of hard checks on your credit do end up having a significant impact on your credit rating, but mostly because it paints a picture of someone who is desperate to get credit and is perhaps not managing money well. A potential lender will be able to see what the checks are for, and they can evaluate that in context.

[–] AlecSadler@lemmy.blahaj.zone 2 points 3 days ago (1 children)

Unfortunately, there are hundreds of different models so simply the consumer free Vantage 8 doesn't necessarily facilitate a ton.

I have terrible general credit, but my car financing credit is nearly perfect. Because they typically use specific models.

[–] AnotherMadHatter@lemmy.world 1 points 2 days ago

Yeah. I thought there were like 1 or 2 for each credit reporting agency, but noooope! They each have a bunch of them.

VantageScore 3.0 VantageScore 4.0 VantageScore 4Plus

FICO 10

C'non, enough...

[–] HidingUnderHats@lemmy.world 8 points 3 days ago

It is total fucking bullshit and I hate it so much.

[–] dhork@lemmy.world 9 points 3 days ago (1 children)

It may vary state to state, but I bet you can secure your own financing. Go to your local bank and ask. The rate may be a bit higher than some random bank the dealership uses, but at least it's something.

[–] Zachariah@lemmy.world 10 points 3 days ago (1 children)

Also check credit unions.

[–] litchralee@sh.itjust.works 2 points 3 days ago

This 100%. It behooves anyone that isn't interested in the credit "rat race" to keep and use credit union accounts regularly, because credit unions can and do lend based solely on long-standing financial relationships, even if that means just having a 4-year old checking account that receives consistent direct deposits every other week. This sort of relationship-centric model is something the big-name banks have all but abdicated.

The best time to open a credit union account was years ago. The next best time is Right Now.

[–] 0x01@lemmy.ml 9 points 3 days ago (2 children)

Unfortunately this is one of those cases that you have to have foresight to game the system intentionally. You can bring up your credit pretty quickly, but nothing beats some long running lines of credit.

The financial system benefits greatly from people taking out loans and being unable to pay off the whole thing. They don't get any benefit from a person who just pays their debt off right away. Profits over humanity every single time.

[–] scytale@lemmy.zip 4 points 3 days ago

They don't get any benefit from a person who just pays their debt off right away

Yep, paid off my car 2 years into a 4 year loan and my credit score went down. Having the money to pay for something in full early is proof of financial responsibility, but you get penalized instead because they get less interest from you.

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[–] CoyoteFacts@piefed.ca 7 points 3 days ago (1 children)

I'm speaking from an American POV on credit cards: getting a good credit score requires doing a lot of things that don't really make sense. I'd just make your peace with that and play the game. Opening as many credit cards as possible, never missing a payment, and sending a small payment through each one once a year to keep them active is an extremely good way to build a solid credit score. Before you read further, please note that opening credit cards temporarily dips your credit score due to hard inquiries, but all forms of credit score dings are removed after a specific amount of time based on their severity; generally you can expect hard inquiries to go away after ~12 months.

The system encourages you to have a lot of accounts, and it encourages you to have a long average account age. People who never use credit cards may have a poor credit score due to lack of history, and people who only have ~one long-running credit card will have a fragile credit score due to the average account age being prone to literally breaking in half as soon as they open any other credit account. Opening as many accounts as early as you can will temporarily dip your score, but it will come back much stronger. Sometimes you'll get rejected for a credit card and will still have to eat the hard inquiry, so it's a delicate game of trying to open accounts and also trying not to appear too desperate. Having a lot of income also helps credit card companies be more amenable to your thin history.

Also as a last note since you seem like someone who "takes money seriously" enough to not be in debt: at least in America, credit cards are great for your finances as long as you pay them off. Credit cards do not charge you any interest or fees as long as you pay your balance on time, and generally you shouldn't be applying for any credit cards that have an Annual Fee charge. It's not too hard to get an unconditional 2% cashback card, which means they will give you 2 cents back for every dollar you spend (this doesn't count as taxable income). You can further diversify to get specific 5% cards for your most-used categories like gas and utilities.

[–] dmention7@lemm.ee 3 points 3 days ago

People act like this is some kind of mysterious system, when it all boils down to one simple thing: If you want people to give you favorable terms when asking to borrow their money, then establish a history of being a reliable money-borrower! It's not rocket science!

Open a credit card or two. Make all your purchases on them (borrow money), and pay off the balance every month (pay back the money). You will never pay a penny in interest or fees, you will easily earn 1-2% cash back, and you have a small buffer in case of setbacks.

Being financially conservative--i.e., saving a lot and never borrowing/repaying money--may be a moral virtue, but it does nothing to establish you as someone who has a history of paying back borrowed money.

[–] TherapyGary@lemmy.blahaj.zone 5 points 3 days ago (3 children)

If you're added as an authorized user on someone else's credit card, the entire history of that card will be reflected on your credit report as if it's been yours all along

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[–] Rentlar@lemmy.ca 3 points 3 days ago

Can you get an auto loan with a certified cheque or bank draft kind of thing from your local bank?

The main thing with being pushed through pressure tactic sales is to be able to walk away, and have alternatives.

[–] pinball_wizard@lemmy.zip 2 points 3 days ago

That's rough. I'm sorry. I've been there.

I didn't deal with the credit thing.

I just regret choosing to shop at a car dealership. It was awful.

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