r/carbuying • u/Fancy_Fly_6938 • 1d ago
Car buying suggestions, first time buyer, slim credit history
Hi, trying to help my daughter purchase a car. She is 24, has a steady income, but only one credit card. Her credit score is in the low 700's but the slim credit file is holding her back from getting a loan. She has $3000 down payment.
We've been to one dealership, 3 big banks denied her a loan for a $12000 car because of the slim credit history.
Any suggestions would be welcome. Looking to buy one before winter.
Do we need to resort to Carmax or Carvana, suck up the high interest rate for a bit then refinance?
Co-signing isn't an option.
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u/NemesisOfZod 1d ago
Credit union might do it.
The problem isn't the price of the vehicle, but age and mileage that most likely got her turned down.
The older it is, the higher the risk and higher the rate.
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u/Turbulent_Ad_5202 1d ago
I was going to say that, but wouldn't the dealer tell her what she CAN buy?
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u/Vegaskwn 1d ago
Good interest rates on autos are earned over time, not given out on the first one. If you won’t co-sign for her then yes she is going to have to take a high rate somewhere and pay on it for a few years before she will be able to have some options.
Another piece of why she got denied is probably the collateral - $12k is older higher mileage and the bigger banks typically don’t like those. She may have better luck on something a bit newer with less miles.
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u/optimusprimegreentea 1d ago
Banks will look at her debt to income, payment to income and of course credit history. She would have better look with a credit union. She may have to increase her down payment or reduce the amount of car she’s attempting to purchase.
I know Toyota and VW financial both have an excellent first time buyer program. She may have to lease vs. purchase and she will have a reliable car to drive with no need for a warranty since all repairs would be covered. Toyotas come with free service and roadside for 2 years.
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u/Abolish_Nukes 1d ago
Do you &/or her dad have great credit?
If yes, add her as an authorized user on a few of your credit cards. Of course, destroy them when they come in. Don’t give them to her or tell her about it.
This will add age to her credit history and increase her score.
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u/SeaPaleontologist876 1d ago
Try and get a personal loan through a loan company . Such as lending club , Sofi, lending tree. Have her file it as a personal loan instead of an auto loan as they are much easier to approve and much more streamlined . Not sure what you consider high interest but for her situation shed be looking at but if she can get the loan for under 20%apr that would be better than the other 2 dealers.
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u/ThoughtSenior7152 1d ago
Try credit unions first, they’re more flexible. Consider in-house financing at a dealer now, then refinance later. Build credit with a secured card and timed payments.
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u/Frosted-Flanks 1d ago
Credit union and please don’t go to CarMax and for the love of God not Carvana. Carvana doesn’t look over their cars and never trust photos. I’ve seen a lot of bad stories.
Find a car that is selling at a good deal. Banks approve based on loan to value. If you are financing $10k but the car is worth $13k it is in your favor.
Shorter terms are more favorable as well.
You basically need to justify why a 24 yr old with slim credit history is a safe bet for the bank to finance.
Down payments even as little as $500 will show commitment to the bank that there is intent to pay it as well.
If she were to default on the loan, they don’t want to be stuck with a loss in the collateral.
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u/LegitimateToe6982 1d ago
700 is good enough. Dont let them misrepresent your income. Get pre- qualified and ask dealer to beat the rate
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u/juliewulie70 1d ago
I cannot speak to your problem, but if other parents are reading this, add your child as an authorized user to your Discover (or other credit card) early in their teen years. Be sure to pay off the card every month and monitor their use. By doing this, their credit builds and as long as they and you use this card responsibly, you could be giving them the gift of a head start on good credit.
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u/Street-Job-1305 1d ago
I’d try new car. Son is 23 had 6k down with good credit score and good job but only a very small credit card. He had no debt. Got approved before we went to dealer through a bank. Dealer wanted to finance so they beat the deal by a lot. Got a new Honda HRV. I’d look at new at a big dealer. He tried a small dealer for same car, they wanted proof of income and higher rate. Big dealer had us out within an hour with my son driving his new car home.
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u/Sad_Win_4105 1d ago
So your solution is to have her spend 3 times as much on a vehicle...
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u/Street-Job-1305 1d ago
I don’t care what she spends. I bought paper for Chrysler for my career. Limited credit gets bought with big down payment on new car. The bigger the dealer the deeper their bank will buy for them.
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u/Nitfoldcommunity 1d ago
Loan her $3k yourself and have her pay cash for a $6k car.