I understand how they have it set up . My question is who in the hell come up with it and what was they thinking? It's plum crazy !
The reasoning behind it is crazy at best
The reasoning behind it is crazy at best
Credit score
- Thread starter roadtrasheer
- Start date
Tried to buy a new vehicle in 2018. The previous vehicle gave me a good 16 year run but it was time. Salesmen came back and said we can't finance you. Seems the fact I hadn't had a car loan or any long term credit card debt for 12 years had killed my credit score and they wouldn't extend a loan. Totally makes sense right?
The best way to describe it is like your work history. Even if you had 20 years doing something, if you haven't worked in a while and suddenly apply for a job requiring experience, the employer is going to be skeptical hiring you given that you haven't worked in a while.
Creditors look at your risk the same way. It's all based on your most recent history (7 years)...if you pay on time or not at all? Do you have a steady income to support the amount you're borrowing? Do you have enough collateral or assets they can access if you default? Were you in bankruptcy? Do you have any repossessions? Your credit scores represent your credit worthiness based on your history of these things and your current verified income.
We (my Dealership's financing dept) have been declining folks with FICO scores in some cases above 720 because of marginal incomes or poor DTI ratios (debt-to-income). Some folks trying to purchase a 65K vehicle with an AGI (adjusted gross income) in the mid 40's simply don't qualify! It's nothing personal, but lender banks have been burned so badly recently by defaults that unless a credit score is well above 760 with almost perfect repayment history, no charge offs or repos, and DTIs well below 43%....those credit apps are coming back rejected.
It's even worse for potential homebuyers. Almost no one qualifies for conventional loans anymore with 20% down. So lenders have created all sorts of programs and sponsor financial assistance alternatives designed to get folks funded. Even still, very few 1st time applicants qualify unless they have fabulous incomes or reliable co-signers. It's very sad.
I get the repay history, what baffling to me is if I don't keep the loan to term my credit history is erased. Example.... I paid my mortgage off bought a new home and my credit history started over .I have never had a loan to term and my DTI is better than most . I just paid my camper off and my credit score dropped 30 pts so if I want a new camper and fiance it my interest is higher.
I raised my kids to pay extra on debt and to pay it off as fast as possible and only use credit cards if you can pay it off within the month. My son paid his car off 4 years early and his credit score took a beating. That's bullshit.
I do understand dti and it needing to be at least 50% .
The way its set up if your not in debt you can't get good interest rates . And why in the name of God does the insurance company check your credit report and can charge you more for bad credit ? Some more bullshit.
they most likely have data if you have bad credit, you are higher insurance risk.
I used to work for FICO. These companies buy and analyze a TON of data.
And your credit history does not take start over when you pay something off early. It just dips when you no longer have a monthly traditional loan debt being repaid. Whether you pay off early or on time. My score dipped when i paid off my car loan. Borrowers/ models like seeing that you have loans and are paying them off on time. No monthly loans, lower the score. The risk of the unknown I guess
I get it. The problem is lenders want to see a long credit "history" which tells them how you handle your debts. Sometimes folks get lump sum payments, judgements, or other remuneration that allows them to fulfill obligations but are not necessarily indicative of how they handle "credit". I get it you prefer to pay off your debts sooner, but that strategy doesn't necessarily tell lenders how you handle your obligations.
A better strategy if you're able to pay off your debts sooner is to pay down the principle first then make interest only payments on the cost of borrowing the money. That keeps the loan on the books longer which builds your credit history and let's the lender know you're not only a low risk but a good customer.
Most loans are structured to collect the interest first, then the principle is paid off on the loan over time. You simply reverse that formula, paying the principle up front which then limits the additional amount you have to pay in interest. It keeps the account open which is what lenders want to see to judge your creditworthiness and reliability making repayments.
It's all about protecting their risk if you total the vehicle. If your credit is limited, they'll lose money if they have to pay off your lienholder in the event you crash and it's not repairable. The additional amount they charge on premiums covers their expense if they have to total the vehicle before you pay it off.
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I have a very good credit report.
I can pay my obligations with only 40 hrs . My son is the one having issues and not so much issues as he was furious over his credit score dropping. So I started looking at mine and started getting pissed at what makes it drop .
Yeah. It's not set up to protect good customers, only lenders. In reality there are very few folks like you who pay their obligations ahead of time let alone if at all! It's the deadbeats who make it tougher on everybody else.
