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I paid off 30k of student loans and a 26k car (which I no longer own) years ago, and I had two credit cards at one point, but I foolishly decided I didn't need them and closed both credit cards several years ago. I was pretty good about making payments on everything, I may have missed one or two but that's it.

Now when I applied for a 16k auto loan with my credit union, I got the worst rate which was listed for "Poor/No Score".

As far as I read, I probably don't have a credit score right now because I don't have any lines of credit?

Should I try to request a better financing rate from a dealer right now? Or would I get a better rate if I get a new credit card and build up credit for a few months? I could also consider asking my mom to co-sign but I'm wondering if I could avoid it and still get a reasonable rate.

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    First thing you should do is check your credit report and make sure it's accurate. – glibdud May 30 '20 at 22:22
  • Your closed credit cards should still show up on your credit report. Not sure how they factor into your FICO (or equivalent score). Not having any credit cards can be a negative as one of the things that goes into your FICO score is the percentage of available credit that you're using. No credit cards = no credit limit, so your usage may be looked on as 100%. – SteveSh May 31 '20 at 0:20
  • My credit report is accurate and all closed accounts show up. It's just that I closed my last account back in 2015 so I don't have any history since then. – Andy May 31 '20 at 1:21
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    What rate did you get? I am surprised that your credit Union wasn't able to get a decent rate. One of my kids got decent rate while in college and before he had even applied for a credit card. – mhoran_psprep May 31 '20 at 11:35
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    At the rate I'm saving money from the lockdown though, I'll probably have enough to buy a car in another half a year, so maybe I should just tough it out (and start rebuilding credit anyway). – Andy Jun 1 '20 at 0:23
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Get a copy of your credit report to double check, but it sounds like you are correct: if you have no tradelines, there is less evidence of willingness to repay (credit score is a measure of willingness to repay). Your recently closed student loans and credit cards should still show and should still be contributing to your credit score unless it was too long ago. Get a copy of your credit report to see.

So what are the alternatives in the short term? In absence of a recent credit history you have what is called "nontraditional credit", and some lenders will underwrite using evidence of consistent on-time bill pay of utilities and so forth. A second alternative some lenders may accept is evidence from your ACH activity, for example UltraFICO. A third option is Boost by Experian where you consent to sharing your history of utility/telecom/etc. bill payment which then goes into an expanded credit file.

In the medium and longer term it would be a good idea to have two zero-balance tradelines (with your car loan being a third tradeline having a non-zero balance). Having three tradelines makes it easier to get a home loan later as lenders often require three tradelines. A simple way to do this would be to get two credit cards, use them for transactions, and pay the full balance each month (card companies call such clients "transactors", as opposed to "revolvers" that carry a balance). Establishing a history of paying your bills each month and having available line both increase your credit score.

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  • I've occasionally been late paying my rent out of mere forgetfulness, and because the autopay system at my apartment sucks -- it can only charge a fixed amount each month, so it can't always cover the variable water and drainage charges, sigh. Do you think that would make a difference? My payment history on my credit report is solid at least. – Andy Jun 1 '20 at 0:22
  • As long as not 30 days late (i.e., not delinquent) it is not an automatic showstopper. – C8H10N4O2 Jun 1 '20 at 0:56
  • So as far as UltraFICO, would I have to obtain my UltraFICO score and present it to lenders? – Andy Jun 1 '20 at 1:31
  • No, for UltraFICO specifically only certain lenders are using it, so the way it would work is you would consent to having it used on an application it if that lender is using it. However, similar "Boost" scoring by Experian is one where you do opt-in prior to doing an application. I will add links to the answer. – C8H10N4O2 Jun 1 '20 at 15:23
  • Interesting, okay thanks! – Andy Jun 2 '20 at 5:19

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