Ask HN: Building Credit | Hacker News Reader

Ask HN: Building Credit

7 pointstrickjarrett5 comments

So I have spent the past (nearly) 10 years controlling my credit and not committing major mistakes. I've kept my borrowed money low and currently have less than $5,000 in debt.

My car died a month ago and after careful research I decide go and try to lease a Honda Element. Lease because Honda is in theory making a Hybrid Element in the next two-three years and this provided the best plan for my budget according my research.

I didn't get approved because, well, my credit is too clean. I haven't shown them that I really, you know, borrow money. So the question is, how should I go about building credit? I thought having a Credit Card and such would have done this but apparently not well enough.

So fellow Hackers, tell me how to hack the system ;)

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>I didn't get approved because, well, my credit is too clean.

Are you sure about this? I remember when I was just getting started, it wasn't the fact that my credit was clean but more the fact that I didn't have enough of a history of borrowing money that hurt me. (Why this is the case is completely mind numbing in today's economy, but I digress)

Do you know what your FICO score is? You should find that out first. Second, everything I've seen seems to point to a "credit start" being achieved only after a co-signer is brought into the picture.

Suffice it to say, the alternatives are to wait a few years until you are older, buy a used, less valuable car, or take on a nearly criminal interest rate from one of those high risk lenders.

You can always do things the old fashioned way and save up for your car in cash too, but that won't help your credit any.

"too clean" typically means "you have the credit but you never used it". when people lend you money, they want to see that you, at least sometimes, will actually use that money to the end.

if you're the type of person who pays off a loan immediately or ASAP, that is lost money for the lending party. the time that the lenders' money is in the bank and not in someone's hands is interest not being earned. if you pay off your loans quickly, the lenders have to effectively pay for more overhead in finding another loan for that money you were "supposed" to hold on to for X years (but instead, paid it down much faster). lenders don't like to lose money, and therefore won't lend money to people that are effectively bad investments.

(0) Did the "too clean" explanation come from the dealer or the folks who actually make the decision? If you were turned down for credit reasons in the US, you are entitled to a copy of your credit report and a written explanation. Your credit report will say something about why your score is what it is. (1) Your decision to buy an Element in three years should not affect what car you buy/lease today. If you were getting by with something smaller, why not stay smaller for now? (2) I'd recheck the numbers. With a lease, you pay for estimated depreciation, which is quite significant over the first three years, with enough margin for the leasor to be wrong and still make a profit selling the car to someone else. I mention this because if you trade, you'll not only be paying the hybrid premium, you'll be restarting the depreciation clock.

You're planning to pay for at least $3k in depreciation and then pay the hybrid premium, which will probably be at least $3k.

If you're set on buying a hybrid in 3 years, buy a used car today. You'll pay less in interest on the loan and the depreciation should be less. You should be able to buy a car that will last three years for less than a new element will depreciate in that time.

Get a car for $2-3k and save the difference between those payments and your proposed lease payments for repairs and a bigger down payment in three years. And, if you can't save the difference, you just found out the easy way that you can't afford to buy a new hybrid. (A lot of Prius' will be coming off lease then.)

Your problem may also be dependent on the size of your allowable credit (credit limit on your card). If you have one major credit card, but your max credit line with that card is $5-10k you might have a problem. If you can get your credit card to raise your limit to 20k you might have an easier time with your lease. Alternatively you can open up another two credit cards each with a 10k limit to expand your available credit.

open up a few more credit cards with as big of a limit as they'll let you.. put $10-$20/month on them and pay them off when they're due. you'll boost your credit score in no time.

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