Need to vent - wtf?

[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]

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]

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]

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).

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.

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).

Don't people come here looking for intelligent advice?

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

[Debt Vigilante]

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.

I was thinking the exact same thing...Who cares how much car he wants to buy. If you have the money, be smart, but enjoy it.

[disneysteve]

I was thinking the exact same thing...Who cares how much car he wants to buy.

Sorry. This is a personal finance board. If you post a question here about a major purchase you are thinking of making, you need to be prepared to answer questions about that purchase, like if you really need it and if you can really afford it, even if that isn't the purpose of your post.

There was a thread last week by someone who was asking about taking out a home equity loan in part to buy a brand new $25,000 car. http://www.savingadvice.com/forums/p...oc-way-go.html Several of us questioned the need to get a new car or to spend that much when the person clearly can't afford it. That wasn't the question, but it would be irresponsible for us to answer the question while ignoring the big picture.

[maat55]

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!!!

And many wonder why the country is in an financial mess, they give loans to them who cannot pay and none to those who can. We pay people to sit around with the earnings of those who work, etc. etc..

I'd get mad and just save a while longer and start paying cash.

[jpg7n16]

I was thinking the exact same thing...Who cares how much car he wants to buy. If you have the money, be smart, but enjoy it.

If you have to borrow, you don't have the money.


Like DS was sayin, many times people come asking one thing, when what they need to hear is something different.

So it's pretty normal in my mind to see someone asking about debt consolidation, and my answer be to "sell your car and/or move to a cheaper place." They came here thinking debt consolidation was the answer to their cash flow problem, when a much better solution is found in reducing car/home expense (in many cases I've seen).


thekid- I'm noticing that I come across more argumentative than I mean to be at times

Sometimes I mean it. This was not one of those times.

My intelligent questions line was my thought process, not an accusation or anything.

Even still - I'll go with your numbers. Say $354 of extra depreciation. But you forgot the extra finance charges of interest, so there's still roughly an $854/year gap that the $20k car (with 15k financed) is going to cost over the $10k car (with $5k financed). And I don't think maintenance expenses for $10k cars run anywhere close to $350/year - let alone $850.

My car was an '06 Accord bought in summer 08 for $13k cash. I've had to replace the brake pads, and that's it. So over 2 years, I'm a long way from $700.

[am_vanquish]

Got approved by a credit union at 3.45%. It was very helpful to sit down and talk with a "small bank" person rather than going through "the system". She admtted their lending standards were more flexible because they wanted to win our "long-term brand loyalty". They'll definitely start gettin more business from us.

We talked about paying cash, but we really wanted to use a car loan to boost our credit scores before shopping for a home loan in a few years. I know no one should justify taking out a loan tobuild credit, but in our case we have clearly saved for it and can afford it. We will pay minimal interest by paying ot off early.

Without a car loan on our history, we believe it would be tough to get approved for a home loan. If we could get approved, I doubt the interest rate would be as good as if we had an auto loan. In the long term, I expect that this car loan will save us a LOT of money on mortgage interest by helping us get a better rate due to a more complete credit report.

As for the new vs used discussion and how much $ we're spending: DW and I decided that we don't want to apply a broad rule of thumb to this decision. We can afford it, we're happy with the decision (especially now that it looks like it will go through), but we wouldn't recommend others do the same thing without a thorough look at their situation and resources.

[ktmarvels]

I never realized that you need a balance on your statement to look good to future lenders.

This could be interpreted a couple of different ways. DH and I always have a 'balance' on our credit card because we use it frequently and when the statement comes we pay the statement balance in full, not the entire balance. We never pay interest on that card, because we pay it off each month. I assume this is the better way to carry a balance on a card. However, I could see people interpreting the above statement to mean, I don't have to pay this CC month so I have a balance (and pay interest).

[cschin4]

I don't know why you would "be angry". I don't see anything to get angry over. I would just go investigate and ask the lenders why you didn't qualify. If you have a bad credit score due to some mistake, then it is a good thing you found out so you can correct it.

[am_vanquish]

I don't know why you would "be angry". I don't see anything to get angry over. I would just go investigate and ask the lenders why you didn't qualify. If you have a bad credit score due to some mistake, then it is a good thing you found out so you can correct it.

I'm actually surprised that it got to me so bad also. The frustrating part is that we were actually being denied BECAUSE we paid everything off. It was very aggrivating to talk to bankers who were suggesting I shouldn't have paid off my couch before the promotional rate expireed or that I should go buy a television I don't need at BestBuy.

This will probably exacerbate the discussion on how much $ we're spending, but an online listing for the car is here. Not sure how long it will last though, we're probably going to sign paperwork today. The point I wanted to make was that DW & I feel like we're getting a lot of value for the 20k we're spending. Sure, we could get by on much less, but this is a personal reward for a LOT of very hard work, very long hours, and diligent saving over the last 2-5 years.

[am_vanquish]

This could be interpreted a couple of different ways. DH and I always have a 'balance' on our credit card because we use it frequently and when the statement comes we pay the statement balance in full, not the entire balance. We never pay interest on that card, because we pay it off each month. I assume this is the better way to carry a balance on a card. However, I could see people interpreting the above statement to mean, I don't have to pay this CC month so I have a balance (and pay interest).

KTmarvels is correct. This is how we pay the one card (Citi) that is being counted. But our AmEx card we use less often, so I pay the full balance every time I use it to prevent missing a due date. If we paid the AmEx the same way as we pay the Citi card, it probably would have been counted in the system.

However, if you haven't used the card AT ALL in the last month or two, and it has a balance, then it will not be counted.

[disneysteve]

Got approved by a credit union at 3.45%.

We talked about paying cash, but we really wanted to use a car loan to boost our credit scores before shopping for a home loan in a few years. I know no one should justify taking out a loan tobuild credit, but in our case we have clearly saved for it and can afford it. We will pay minimal interest by paying ot off early.

Without a car loan on our history, we believe it would be tough to get approved for a home loan.

Congrats on getting approved and finding a lender that looked beyond the numbers. Dave Ramsey talks about this all the time. It is called manual underwriting - actually sitting down with the loan applicants and determining if they can afford the loan. Imagine that. Most lenders today focus purely on the FICO score and income figures. FICO really does nothing to show how well a person is managing his money.

I agree that you shouldn't go into debt in order to raise your FICO. When you are ready to buy a home, you would just need to use a lender who does manual underwriting, the same way you just did for the car. That's the way it always used to be done in the past. If you wanted to borrow money, you had to sit down with a loan officer and document that you had the means to repay the loan.

DH and I always have a 'balance' on our credit card because we use it frequently and when the statement comes we pay the statement balance in full, not the entire balance.

Same here. Our credit reports always show a balance because we use our credit cards nearly every day. We pay our bills in full every month but by the time we pay our bill, we are about 3 weeks into the next billing period so new charges have occurred.