what's good comrades. tl;dr i didn't learn to drive until i was 27. i'm 31 now. in those 4 years, i've had two cars i bought cheap outright with cash, so i have never financed a more expensive car. these were 800 bucks each.
i only got a credit card at the beginning of 2024, i was terrified of debt my whole life so i never even wanted to get one. but i figure, i need credit to exist in amerikkka so the time has come. my score is 650 on one site and 697 on another. so let's assume it's like 670 actually.
i've applied for two auto loans but was turned down due to 'limited credit' but i see teenagers who work at wendy's driving nicer/newer cars they were able to finance, and i'm not even trying to get anything like that. i'm only looking to get a loan of like 4-6k, to buy cheap reliable used car from like 2005-2013. i see lots of options. i'm trying to avoid the dealer financing tho due to the dude telling me they typically charge like 25% interest through dealership financing.
how exactly does this work? is my only choice to get ripped off with dealer financing? i can't join a credit union, i've tried- limited credit. i don't get at all how credit works. i don't even want this shit. but currently i drive a 1995 toyota avalon that's falling apart and it's not safe to drive so i gotta figure something out
I suspect that the teenagers you’re seeing have had someone co-sign on the loan.
I presume you’re at the “getting pre-approval” stage and haven’t actually picked out a car yet? I’m not sure if I have any advice there, but banks often have limits on how little you can borrow and how old the car can be once you do select something.
You need to use a credit card for a year before companies will give you a loan.
There's no deep reason, it's just the arbitrary line they're looking for on your credit report.
Use your credit card normally (don't carry a balance, pay the whole amount every month). Open an account at a credit union and use them for your daily banking.
After a few months of paying the credit card bill they should approve you for a 5k loan. For a used car it may actually be easier to get it as a personal loan than an auto loan, although you'll pay a little more in interest. They don't like to finance cheap used cars all that much IME.
The issue for you here is time, unfortunately. A word of caution to others: get a credit card at 18, never ever carry a balance. Your credit will be excellent and ready to go when you need it later.
Also, go to CarMax and talk with them about financing options. If they can get you into something that meets your budget, go with that and pay it down as soon as you can afford. Most of their stock is gonna top out your price range, but you won't be getting fucked over in multiple directions, CarMax is generally pretty straight up.
never carry a balance
There’s some more nuance here that took me a while to understand.
- NEVER carry a balance you’re required to pay off in a statement period. This is the last month’s statement.
- If you’re responsible, you may want to keep some sort of balance at the end of each statement period so your creditors will see that you’ve utilized your card.
Example: if you have a total of $600 in balance, but this statement period you’re required to pay $200 in full, you pay off just $200 and you have paid off everything that you owe, and creditors will see you used $400 (only what’s left of your balance is reported as used)
Next month, assuming you buy $10, you will owe $400, and after you pay $400 the creditors will see that you’ve used $10 in credit.
The statement’s balance is the TRUE “minimum” amount owed. Paying this without paying your entire balance will keep you in the green because that’s the amount the creditors demand fully from you.
Ironically, also don't utilize TOO much of the line of credit, either, because that can hurt your credit score.
This is one thing I think a lot of people misunderstand. I mean maybe I misunderstand too but based on capitalone credit wise's rubrik it seems like you really want to have the lowest statement balance possible while still making some purchases on occasion. (Ie the goal being to have a credit history where the credit usage is very low, or the mantra of "use your credit to build credit" probably should be "use it regularly not heavily").
I just stuck my 5 or so credit cards in a box and take them out every couple of months to buy a bag of chips, then double check the auto pay. My credit is like 816 from doing this for like 10 years.
It also seemed to help that my parents added me as an authorized user on one of their high limit cards when I was like a teen - I'm not sure how that can affect my credit but on credit reports it seemed to include their massive 30K credit limit into the calculation which appeared to help a ton, and I rarely or never used that card. By now that account is closed but I've managed to get increases on most of my cards so that my own credit limit is high enough to replace it.
It also seemed to help that my parents added me as an authorized user on one of their high limit cards when I was like a teen - I'm not sure how that can affect my credit but on credit reports it seemed to include their massive 30K credit limit into the calculation which appeared to help a ton, and I rarely or never used that card.
Honestly, that helped you way more than your box and chips method.
Well, they help with different things. Having my name as authorized on that card added a large credit line but didn't contribute to a credit payment history (I still had a "thin file" for quite a while and still had to co-sign my first apartment) nor does it help with a low credit utilization. In fact it hurt that aspect some because my parents would occasionally have a large balance and I would see my credit dip temporarily.
Regardless it's important to work on all the contributing factors of the credit score and available credit is just one of them.
More credit = lower overall utilization. Using $50 out of $100 total credit is 50% utilization which is very bad. Using $50 out of $1000 is 5%. There are other factors, but not all of them are important. For example, on time payments is probably the most important.
I mean yeah that's true - I'm not disputing the importance of having high available credit, but if it was such a shortcut as suggested then it wouldn't have taken me years on top of that credit line to not have a thin file and a decade of buying monthly chips on multiple cards to get the score I have now. So I don't think it's exactly the cheat code that anarchoilluminati suggests it is.
What I'm getting at is that this credit line definitely helped a ton, but it didn't get me there on its own. It gave me a perfect score in credit availability but it took years for the rest of my credit score factors to fill in from my own small purchases on my own cards.
on time payments is probably the most important.
This also supports what I'm saying - that getting added as an authorized user on a high limit card helped in the available credit and utilization metrics, but that you still need to do other things to round out the score, which I don't think can just be brushed away by claiming that getting added to an existing card did most of the work.
Edit: also the problem with getting added to someone else's card for utilization is that their utilization shows up as yours too - so if my parents carry a balance of 15k on their 30k card then my utilization would have been better off if I only had $100 of credit and only used $5. While my available credit went down when that card closed my utilization actually improved because I don't carry balances so in my case being in their card only helped my total credit. Luckily by the time they closed that card my own credit line about matched what that card had so I didn't take a hit on available credit.
Correct, pay the statement balance, just set it to auto pay every month from your bank account (imo).
You will not be charged a cent of interest by doing this, there's no catch. You do not need to pay interest to increase your credit score.
Where do you live? In Chicago you can buy a mid-2000s car for $2-3k via Craigslist or Facebook marketplace. Maybe you could scrape up the cash, esp if you're able to get anything for the Avalon. Dealer premium vs private party is significant at this price range.
It's hard to finance a car that old, although you'll probably have trouble financing anything right now with limited credit. A buy here pay here lot will get you into a car, but you really don't want that.
Only thing you can do is try to build credit. Make a credit karma account, it gives you instant credit reports updated every day, and they have a tool to suggest credit cards you qualify for. Then use them each month and pay them off when the statement comes, it doesn't have to be a lot, just enough that it shows up on your credit report. You can get a pretty good score jump in a few months.
Also, you can absolutely lie about your income to credit card companies, they don't check anything. Just don't lie to any other lenders, because they will check.
i've applied for two auto loans but was turned down due to 'limited credit' but i see teenagers who work at wendy's driving nicer/newer cars they were able to finance
This is how the 2007-2009 housing crises began - greedy bankers lending out to people they know will not be able to pay back. These are predatory loans (I mean, all are, but some are more than others).
Some car makers will offer 0% APR loans, though these typically only apply to newer models. It might be worth it if you can deal with a multi year loan.
Another option is taking a look at 0% APR BNPL introduction offers from credit cards. https://www.nerdwallet.com/article/credit-cards/buy-now-pay-later-is-already-standard-on-some-credit-cards. Chase and Amex have good options - 12-24 months of free loans (the cards aren’t too bad either, both having sign up bonuses, and you can get $900 with chase if you have enough money to park in their bank accounts). I have used both and put several purchases on these 0% APR BNPL plans so I can leave more money in my HYSA. Depending on your credit worthiness, you may get over $10k in credit for each card which you can probably split your car purchase. I was kind of dumb and decided to sign up for these to fund my hobbies and tuition. If I was a little smarter, I would wait until I had more responsibilities and take advantage of the free loans for things like rent and bills.
Sometimes if your credit sucks ass you can have someone cosign, put something up as collateral, or put a bigger down payment since these things represent a reduction in the risk the lender takes on. It really do be a shitass system though where you need credit to get credit.
Worst case scenario, get a cheapo Nissan, they will finance anyone.
unless you absolutely need it the loan may not be worth the effort. like others have said, you need more of a history of on time payments to get into bigger loans vs starter credit cards, like a year. plus with a loan you'll be required to get full coverage insurance and such which will cost more
With credit scores that low... so long as you have steady income you could try leasing a car. Might do some research to see if paying the "rent" on a car lease counts towards your credit score.
Got anybody who you trust and trusts you that can co-sign a loan with you? Or... if everybody is really REALLY cool with each other, somebody who can take out a loan from a bank and you just pay them back in reasonable installments?
Maybe a dumb question, but if you are planning on buying the car at the end anyway is there a downside to leasing for a few years rather than just outright buying?
