Need to vent - wtf?

[am_vanquish]

In the last 24 hours I've been denied for 3 auto loan applications. I make 60k, the car is 20k, I'm putting down oer 25%, and I have no other debt. I have about 4-5 years of credit history covering 4 accounts and I've never made a payment late. Further, I have never paid a penny of interest (all balances paid in full monthly or during 0% promotional period). The last time I checked my FICO score it was in the range of 740-760.

WTF???

I'm becoming quite angry about this because we've been shopping/saving diligently throughout the year for this purchase. We do most everything by the book: 6 month EF, maxed employer 401k match, over 15% total to retirement, over 20% of salary to savings. We have a budget that allows us to keep these savings and buy the car, and the last thing we thought we'd have a problem with is financing!!! Meanwhile, I know 3 friends/family members who have more debt than me and earn less who have purchased cars with 0%-5% downpayment in the last 6 months, on a whim without saving/shopping/planning/whatever.

Sorry - had to get that off my chest but I'm at work. Thanks SA, I feel better for now.

[jIM_Ohio]

Originally Posted by am_vanquish

In the last 24 hours I've been denied for 3 auto loan applications. I make 60k, the car is 20k, I'm putting down oer 25%, and I have no other debt. I have about 4-5 years of credit history covering 4 accounts and I've never made a payment late. Further, I have never paid a penny of interest (all balances paid in full monthly or during 0% promotional period). The last time I checked my FICO score it was in the range of 740-760.

WTF???

I'm becoming quite angry about this because we've been shopping/saving diligently throughout the year for this purchase. We do most everything by the book: 6 month EF, maxed employer 401k match, over 15% total to retirement, over 20% of salary to savings. We have a budget that allows us to keep these savings and buy the car, and the last thing we thought we'd have a problem with is financing!!! Meanwhile, I know 3 friends/family members who have more debt than me and earn less who have purchased cars with 0%-5% downpayment in the last 6 months, on a whim without saving/shopping/planning/whatever.

Sorry - had to get that off my chest but I'm at work. Thanks SA, I feel better for now.

Did you ask WHY you were denied the loans with such a good credit score?

[am_vanquish]

I did most of them on-line thinking it would give me a quick view of what interest rates I'd have available. I didn't think it would be this big of a deal and get under my skin so badly.

I made an appointment for my lunch break with a loan officer at the bank where we do the most banking to talk about why I was denied. Depending on how that goes, I'll probably follow-up with the other apps also.

[snshijuptr]

You need to check your credit report. Make sure everything is correct. Now that you were denied, you get a free FICO score, so go get it.

[jpg7n16]

So I realize this isn't what you were posting about, but do you really need a $20k car? Could you get one for $10k instead?

Maybe this whole credit fiasco can save you some serious dough.

[disneysteve]

Originally Posted by snshijuptr

You need to check your credit report.

I agree. If you were denied, they need to give you a reason and you are entitled to a free credit report even if you've already gotten one in the past year. There could be an error on your report that caused the denial.

[thekid]

Originally Posted by jpg7n16

So I realize this isn't what you were posting about, but do you really need a $20k car? Could you get one for $10k instead?

Why is there always somebody there to say something like this?

Why 10k$ and not 5k$? Is the fact that he is entitled to make purchases he can afford as he sees fit as per his own priorities pertinent?

A pet peeve of mine, but people often don't realise that purchase price is not the determinant factor in figuring out how much a car will cost you. Price per years of use is. Or more acturately, [Purchase price + Maintenance costs - Resale Price]/Years of use.

Cars don't depreciae in a linear fashion. If he's buying a reliable make that's 2-3 years old for 20k$, it may end up costing him about the same per year of use than an older 10k$ car with higher maintenance fees.

[ActYourWage]

Originally Posted by jpg7n16

So I realize this isn't what you were posting about, but do you really need a $20k car? Could you get one for $10k instead?

Maybe this whole credit fiasco can save you some serious dough.

I agree. Plus you would only need to finance 5k for a 10k vehicle, since you mentioned you have saved up for a 25% down payment on the 20K vehicle. You probably don't want to hear that, but this could be a blessing in disguise.

[ActYourWage]

Originally Posted by thekid

Why 10k$ and not 5k$?

If the purchase was 5k then they could pay cash! (OP has over 5k saved for his potential purchase)

[disneysteve]

Originally Posted by thekid

people often don't realise that purchase price is not the determinant factor in figuring out how much a car will cost you.

That's true, but there is still an affordability issue to take into account. Can OP afford a $20,000 car? I have no idea. I'd need a lot more info to answer that. Certainly, a great many people buy cars that they can't afford. They look only at the monthly payment and if they can manage that. But if you need to take a 5 or 6 or 7 year loan, I'd suggest that you are probably spending too much even if you can afford the monthly payment. None of this may apply to the OP - just making a separate point.

You are correct that a more expensive car might be a better value in the long run, but that is only relevant if you can actually afford the more expensive car.

[am_vanquish]

1. I was denied by 2 more applications since this morning. Submitted 5 applications this weekend online, and ALL have been denied.

2. I checked the credit report with all 3 bureaus before applying. All of my accounts were listed and were in good standing. It shows 4 accounts spanning 4.5 years, all paid on time and in good standing.

3. I don't need a car at all. But, I've saved, researched, shopped, and found one that I really like that I can afford that will give me some additional happiness. Also, I will soon be moving 400 miles from my wife for a new job and will need to commute back and forth a few times a month for conjugal visits. I am willing to put a premium on comfort and reliability during this time rather than wondering if my 1999 Protege with 150,000 miles can make another 12 hour round-trip without stranding me in Podunk, Alabama (Keep paddling, I hear banjo's!!!) I'll still be saving over 20% of salary, so I feel comfortable (but thanks for keeping me accountable!)

4. I talked to my banker and discovered my credit report was "too thin." I told him I have 4 accounts spanning 4-5 years. Even though it's "thin", I expected to receive an elevated interest rate (already priced into our budget) rather than being denied completely. Turns out only 1 of my accounts is being counted because it's the only one with a balance. My other 2 current accounts aren't being counted in the credit scoring system because I pay them in full every month. The fourth account has been paid off for about 3 months, so it also is not being counted.

I had a pretty lengthy conversation with the banker about "the system." He agreed that it's odd that I'm being punished for doing what most people don't, but he also can't change the system. At one point he "joked" that I go buy a tv on credit at BestBuy and then come see him again (I didn't laugh). His best suggestion was to make it a joint loan with DW so we can count the 1-2 accounts that have a balance in her name. He also suggested letting the dealer work some magic with their banks because they might be able to pull strings he can't.

DW and I are going to apply jointly tonight and then let the dealer try their banks. Luckily, the dealer agreed to pull the car off the market for right now until we can get something worked out. I tempted to raid the EF and pay CASH just to avoid the dirty looks I get when people here I was DENIED!!!

[thekid]

Originally Posted by ActYourWage

If the purchase was 5k then they could pay cash! (OP has over 5k saved for his potential purchase)

Agreed, but I still think further analysis is needed. Added financing fees vs added maintenace costs on a 5k$ car just have to be taken into consideration.

Originally Posted by disneysteve

That's true, but there is still an affordability issue to take into account. Can OP afford a $20,000 car? I have no idea. I'd need a lot more info to answer that. Certainly, a great many people buy cars that they can't afford. They look only at the monthly payment and if they can manage that. But if you need to take a 5 or 6 or 7 year loan, I'd suggest that you are probably spending too much even if you can afford the monthly payment. None of this may apply to the OP - just making a separate point.

You are correct that a more expensive car might be a better value in the long run, but that is only relevant if you can actually afford the more expensive car.

Totally agreed. In the end, a newer car almost always comes out more expensive than an older car. But if it's a reliable make and the first few years of heavier yearly depreciation have been absorbed by someone else, the difference can be quite small (small enough to justify driving a newer car over an older one).

Of course, this has to be looked at with the general canveat that any purchase (no matter the value) has to first be affordable to the buyer.

[thekid]

I'm from Podunk, Alabama.



Sorry, I kid.

If it makes you feel better, I know a multimillionaire that was refused a credit card because he never carries any credit (til he called his bank manager).

[am_vanquish]

My wife was PISSED when we got denied the first time and I used Dave Ramsey's line: "A credit score is just an I-Love-Debt score"

As for the price of the car, we really want something that isn't going to need ANYTHING for the next 12 months while we're living in separate cities. I know you can't guarantee nothing will go wrong, but we're willing to pay the premium for reducing the possibility of replacing/repairing ANYTHING.

With a 4-year loan, we will still save 20% of monthly income (before DW graduates nursing school next May. After she graduates, we'll probably reach 40%-50% savings of gross monthly earnings). My research/shopping included adjustments for insurance, maintenance, repairs, and considerations for depreciation for 5 years. I'm comfortable with the car choice, I'm just annoyed by the financing process. We'll probably have the car paid off in 3 years anyway.

[jIM_Ohio]

I agree a car with 150k miles making a 400 mile commute one way is not right... you want a low milage car.

We just purchased a NEW car and I had a hard time justifying buying used when 150k miles will probably be put on car within 7-8 years- if I were to get a car with 50k miles, it would only last us about 5 years.

My advice is similar to Banks- go to the dealer and focus on their financing.

There are probably 2-3 things going against you on the credit report-

if you paid off 2-3 debts, those accounts are not current (they are just accounts in good standing with a 0 balance), part of credit score is to have current accounts.

Here is a better suggestion-
next time you go out clothes shopping and they ask you if you want to open a store credit line, say yes (usually you get 10% off purchase when you do this). Have the cash on hand, open the account up, then pay it in full at the register (JC Penny lets you do this, I assume others will too). Leave those accounts sit open and unused.

The key word there is OPEN- it needs to be a credit card, not a loan.

do that 2-3 times and see if situation improves over time.

[am_vanquish]

3 of my 4 accounts are open & current, but 2 of those 3 just don't have a balance. Only the 4th was actually closed after paying it off. The one we closed was a computer I purchased in college and we closed it because we had some problems with the retailer and didn't want to give them any more of our business.

The two accounts that don't make sense are (1) an American Express card we use for fuel and always pay BEFORE getting the bill, so our statement is always $0, even though we spend about $200 a month on it and (2) a furniture account where we just paid off our couch. The account is still open, and my credit report says so. However, because the balance is $0, it isn't being counted by the system. We plan to buy a dining set in about 6 months on this card. Both of these accounts were started to take advantage of interest-free opportunities and kept to a minimum after that. When I look at my credit report, they both show as active/open and in good standing.

By adding DW, we will pick up a BestBuy account she started to buy a computer for nursing school (and we plan to use to buy appliances at some point) and a card she uses to make purchases for her parents' business. BestBuy is 0% interest and has a balance, and her parents pay the interest on the company card, so it should work out okay.

[Joi]

I'm truly amazed at your story and am also sorry to hear what the banks are putting you through. This must really be a sign of the times.

I applied for my first credit card a couple months ago with a 740 credit score and was denied also for having a limited history. I have a few authorized user accounts that are 30+ years old, a car loan just a few years old, and a utility account). After the rejection I applied for a platinum card with a bank I already had a personal account with and was approved with a high credit limit.

Anyway, I hope everything works out for you in the end as it did with me. I really learned a lot from your story and will definitely be changing my strategy for how I use my new credit card. I never realized that you need a balance on your statement to look good to future lenders.

[jIM_Ohio]

Originally Posted by am_vanquish

3 of my 4 accounts are open & current, but 2 of those 3 just don't have a balance. Only the 4th was actually closed after paying it off. The one we closed was a computer I purchased in college and we closed it because we had some problems with the retailer and didn't want to give them any more of our business.

The two accounts that don't make sense are (1) an American Express card we use for fuel and always pay BEFORE getting the bill, so our statement is always $0, even though we spend about $200 a month on it and (2) a furniture account where we just paid off our couch. The account is still open, and my credit report says so. However, because the balance is $0, it isn't being counted by the system. We plan to buy a dining set in about 6 months on this card. Both of these accounts were started to take advantage of interest-free opportunities and kept to a minimum after that. When I look at my credit report, they both show as active/open and in good standing.

By adding DW, we will pick up a BestBuy account she started to buy a computer for nursing school (and we plan to use to buy appliances at some point) and a card she uses to make purchases for her parents' business. BestBuy is 0% interest and has a balance, and her parents pay the interest on the company card, so it should work out okay.

When loans or financing of a vehicle or appliance end, its possible those show an account balance of zero (and not a credit limit). Credit scores favor accounts with credit limits- the best buy account has a credit limit, but the furniture account did not- focus on getting accounts with credit limits, not a balance which is paid to zero.

[jpg7n16]

Originally Posted by thekid

Why is there always somebody there to say something like this?

Because it's a financially smart question to ask.

Why 10k$ and not 5k$? Is the fact that he is entitled to make purchases he can afford as he sees fit as per his own priorities pertinent?

Because a $20k car is clearly a comfort purchase. There are very comfortable $10k cars that require no maintenance for the first 3-4 years at least.

So OP could still achieve thier goal of a comfort car, and save loads of interest/depreciation in the process.

A $5k car is not a comfort car, but a low price car. It's more prone to maintenance needs, which is a hassle, which is what OP is likely trying to avoid.

A pet peeve of mine, but people often don't realise that purchase price is not the determinant factor in figuring out how much a car will cost you. Price per years of use is. Or more acturately, [Purchase price + Maintenance costs - Resale Price]/Years of use.

Cars don't depreciae in a linear fashion. If he's buying a reliable make that's 2-3 years old for 20k$, it may end up costing him about the same per year of use than an older 10k$ car with higher maintenance fees.

Since a $20k car will likely be around $12k in 4 years, and a $10k car around $6k (and neither would need much if any maintenance), then the $20k car would charge more interest on a higher loan balance, and also lose $1000/year extra on depreciated value. ($10k extra loan @ 5% = $500 in interest/year)

The $10k car will not average anywhere near $1500/year in repairs.




So while I realize it wasn't directly related to the rant, maybe he can benefit from these loan denials after all.

Don't people come here looking for intelligent advice? So, how could we pass up an opportunity to advise someone to acheive the same goal for a much lower cost??

[thekid]

Originally Posted by jpg7n16

Because it's a financially smart question to ask.

Fair enough. My beef was that I've seen a number of car purchase discussions here going solely on purchse price with many posters simply balking at it, whereas I think a more detailled analysis is warranted to conclude on, objectively, value of purchase and, subjectively, affordability to a particular buyer (one being fully justified to pay more for something he likes if affordable to him).

Originally Posted by jpg7n16

Because a $20k car is clearly a comfort purchase. There are very comfortable $10k cars that require no maintenance for the first 3-4 years at least.

To make a fair comparison, I believe you have to look at the same make's depreciation throughout its life and compare average depreciation during say years 2 through 6 and 6 through 10.

I don't believe average maintenance costs will be at all the same for years 2-6 as for years 6-10.

Originally Posted by jpg7n16

Since a $20k car will likely be around $12k in 4 years, and a $10k car around $6k (and neither would need much if any maintenance), then the $20k car would charge more interest on a higher loan balance, and also lose $1000/year extra on depreciated value. ($10k extra loan @ 5% = $500 in interest/year)

If you are comparing the same make, I don't think you can assume 1k$ of greater depreciation during years 2-6 than years 6-10. Granted the first 2-3 years will bear the heaviest deprecicion. After that, the curve is much more linear.

Just checked Kelley's Blue Book on a Camry for example. Assuming 12 000 miles per year, a Camry SE will depreciate on average 1575$ per year in years 2-6 and 1221$ in years 6-10. That's a dif. of 354$ per year. Easily made up on lower maintnance costs.

Financing will be on top of that (if purchaser needs financing -if not it's a clear win fo the newer, more expensive car in this case). In the OP's case and assuming a 5% loan, that's an extra 500$ for the first year. He still may well come out on top with the newer car.

That's also not takin into account sales taxes saved, if applicable, as you would possibly keep the 2008 car longer.

All in all, if affordable to the particular buyer, the newer car seems to be pretty good value (either actually saving the purchaser money or being a small amount to pay to drive a 4 year newer make).

Originally Posted by jpg7n16

Don't people come here looking for intelligent advice?

Sure, sorry for the tone of my first sentence in my initial post.