Can’t get an auto loan here in St. Louis? There may be something (or some things) on your credit report that make lenders think twice about giving you financing. Missed and/or late payments, foreclosures and bankruptcies are not the only credit report items that make lenders anxious. There are other minor items that may also make them concerned, and four of them are listed below.
Multiple credit report inquiries
With every auto loan application comes a credit report inquiry: whenever you apply for an auto loan, a lender will pull your credit report. The more times your report has been pulled, the less likely you will get approved. Why? Multiple inquiries suggest to lenders that you are a higher risk. Statistics show that those with six or more credit report inquiries are more likely to declare bankruptcy. It is therefore not surprising that lenders are not jumping at the chance to lend you money for your auto purchase.
Don’t let this information stop you from shopping around for auto loans, though. You should still shop around, but do it right: limit all loan applications within a two-week period so that the inquiries will be considered as one.
Many lines of credit
Opening a few new credit cards over a short period of time is a red flag for credit card issuers, and it can also be a bad sign for auto loan lenders. The act of opening several lines of credit and especially within a short period tells lenders that something may be wrong with your finances. If you had to multiply lines of credit, it implies you are struggling to get your finances in order. Otherwise, you wouldn’t need that many credit cards.
You may be allowed to pay just the minimum in your credit card, but this doesn’t mean you should. Carrying a balance can send the wrong message to potential auto loan lenders, and can cost you a much needed auto purchase. Note that making minimum payments once in a while is acceptable, but doing it every month is bound to raise questions. Lenders will wonder why you cannot pay off the balance in full each month. If you cannot settle your credit card balance in full each month, then they will think that you may not be able to make your car payments should you be approved an auto loan.
Another person’s debt
When you agree to be a co-signer, you don’t just agree to shoulder the debt should the other person fail to repay. You also agree to have the entire debt on your credit report. When you co-sign, the entire debt is reflected on your credit report. Co-signing may not be a big deal if the primary borrower is responsible and pays on time, but this will be a major problem if he or she misses a payment or stops paying altogether. The damage inflicted by the primary borrower on his or her report will also be found on yours, reducing your chances of getting auto financing.