building credit

Ten years ago I applied for a Sears card to elp build my credit and they turned me down. Not because I had bad credit, but because I had no credit. I even asked if they could offer a secured credit card where I gave then $200 cash and they gave me a credit line of $200, but they refused. Now, after owning a home for 10 years, I have great credit and I get pre-approved offers from then in the mail for $20,000, but they can kiss my shiny metal ass.

While Home Depot, and Lowes, have cards they charge 21%. So unless you are one of those who will definitely pay it off monthly you need to stay away from them.

carguy123 wrote: So where do you live until you save enough to pay cash for the home. You need the credit to get into the loop in the first place

Wrong, how did people buy a house before credit cards existed? It was called the banks actually doing real work instead of looking up some number on a computer. They look at your employment history talk to your landlord etc and decide on their own whether they want to take the risk of loaning you their money. A major part of the current financial crisis we are in is because of banks blindly lending money based on a FICO score, and not doing their homework.

SupraWes wrote: Wrong, how did people buy a house before credit cards existed? It was called the banks actually doing real work instead of looking up some number on a computer. They look at your employment history talk to your landlord etc and decide on their own whether they want to take the risk of loaning you their money. A major part of the current financial crisis we are in is because of banks blindly lending money based on a FICO score, and not doing their homework.

That's how Jimmy Stewart did it in It's A Wonderful Life but that was a long time ago. Carguy123 is basically correct - there are a few rather small credit unions that will still do a home loan based soley on the character of the borrower, but just about everybody else is going to insist upon some sort of traditional credit report, which in today's world includes a credit score.

A few lenders might consider 'non-traditional credit' mortgage loans through the FHA program, wherein credit is established by documenting payment history for utility bills, insurance and so forth.

SupraWes wrote:

carguy123 wrote: So where do you live until you save enough to pay cash for the home. You need the credit to get into the loop in the first place

Wrong, how did people buy a house before credit cards existed? It was called the banks actually doing real work instead of looking up some number on a computer. They look at your employment history talk to your landlord etc and decide on their own whether they want to take the risk of loaning you their money. A major part of the current financial crisis we are in is because of banks blindly lending money based on a FICO score, and not doing their homework.

Before credit cards existed they had a completely different system. A system that kept running out of money and required you to "know someone" to be able to get a good loan. Do you remember the old Maverick TV series? He would ride into town and you'd see signs on the buildings that read like this. Johnson Livery Stable, Johnson General Store, Johnson National Bank, etc., etc. In those old towns the town drunk had a better chance of getting a loan than did a stranger.

"It's a Wonderful Life" shows another major shift in lending. This was checking people out to see if they qualified for the loan and credit was a major component of that qualification process. In theory the stranger had as much chance of getting a loan as the town drunk.

In case you haven't noticed times have changed. Banking regulations don't allow Banks to make loans to you without "adequate collateral". A major portion of that collateral is your credit history. FICO scores are simply credit grades just like you got in school.

While I don't agree with all of the formula for deriving the FICO scores I do like the aspect that I no longer have to try to get written verifications from a customer's creditors before I can make a loan. That's streamlined the loan process by weeks. And I'm glad I no longer have to file criminal charges against the customer and their previous creditors when they got together and and agreed to give me a phony pay history. All of the procedures you see in place today come from previous people "working the system".

I own a mortgage company so I know of what I speak. I just hung up from one of my Bank customers and the VP of the Bank is coming to me for a loan. He can't do his own loan at the Bank because his credit scores aren't good enough. I can. And to top it all off, even if he could have done his own loan I'd still have been able to give him a 1/2% lower interest rate.

Banks are good for car loans, credit card loans, short term home improvement loans, etc. Banking regs prohibit them from doing many home loans. Home loans tie up too much of their depositors money. We no longer have Savings and Loans whose main job was home lending.

Oh, and as far as the real work your talking about, have you seen a mortgage credit file? Most of mine are over 1" thick & just chock full of documentation. Credit scores are only ONE aspect of a loan approval process. Granted it is many times the first step. If you don't have a certain credit score (this varies by loan type) then there is no need for us to go further as you can't qualify for that loan type. If you want to change loan types, downpayment or something else then maybe your credit scores will work.

And as far as blindly lending based upon a credit score, you couldn't be further from the truth. As I said, you look at credit score to see if it's worth while proceeding further with the other documentation. The present day issue is quite heavy on the election year hype/media/public confidence drop due to said media hype AND a change in loan types and approval criteria handed down in 1999. You see the lenders don't make the approval rules. The government has final say on loan standards on Fannie Mae, Freddie Mac, VA, & FHA loans.

bluedroptop, we've always been able to use the non traditional credit building standards on all loan types with one proviso -as long as the credit wasn't bad. Which means we are back to FICO scores.

carguy123 wrote: bluedroptop, we've always been able to use the non traditional credit building standards on all loan types with one proviso -as long as the credit wasn't bad. Which means we are back to FICO scores.

Agreed - non-traditional credit underwriting is possible for limited credit borrowers, not for bad credit.

However, if you do non-traditional credit approval on a conventional loan, you give up your limited waiver of reps and warrants when you sell to the agency. We've never been willing to take on that risk.

I'd quibble with your assessment of banks vs. mortgage companies, but we've already taken this out of the realm of consumer education. Good luck - TPOs are a dying breed these days.

It was meant to be a limited assessment.

I learn a lot here when all I expected was to read how to race on the cheap.

I guess Off Topic really means just that.

Datsun1500 wrote:

carguy123 wrote: And if you ever want a car or house you better have a credit history.

Or pay cash..... There was a long thread on this on the old board with some arguing that it could not be done, with others actually doing it....

I remember that thread. And the guy boasting about paying cash for his $700K home... and yet he never did answer the "where did you live before that" question...

I don't think there any short-cuts to building credit. And I don't think there's anything wrong with getting a co-signer for your first loan. My first car loan (for a used truck when I was 20) was co-signed by my mother. I made the payments (3 years) and haven't had a problem with getting a loan since (now 38). My bank recently gave me a line of credit for far more than I initially asked for (and actually used). I hope to have it paid off in a year or so. My only other loan is a no-interest loan from my mother to buy my truck (turns out it's tough to get a loan for vehicle with over 100K miles... and in lieu of being an eBay non-payer, I bit the bullet and asked for help. My own fault for not getting ducks in line before placing a bid.). Again, she will be paid back in about a year.

For the past couple of years, I've usually paid off my card balances each month, but I've carried balances in the past. There's the idea of saving up to pay cash for everything and the "must-have-it-now-use-credit" creed. Like most things in life, I believe a proper balance is somewhere in the middle.

Interestingly enough, when I got home yesterday I had a letter from the Pres and CEO of my Seard Citi card. Because I wasn't using my credit card the way they thought I should, they were reducing my limit from $10,000 to $6,000. I have mostly only used it to charge all the stuff to rebuild my 80 Spitfire and it got up to about $1,500. I was going to write him a letter, but the mood passed. I didn't want the darned thing in the first place, but got $20 off my garage door opener for taking it out. The sales cluck that did the paper work was amazed I got approved for $10k and acted like she wanted to go home with me. She kept saying "well look atchu". Anywho, my intentions are to transfer the balance over to my Chase card for no interest, once I pay it off.

Many of the credit card lenders are reducing credit limits and are using just about any excuse to justify it.

Now here's the rub, one aspect of credit scores is the ratio of your open balances vs. your credit limits. This will raise change your ratio and your score will go down.

This scares me more than any other aspect of the current crunch.

They've raised the minimum acceptable credit score in the mortgage industry and if you couple that with lowered credit scores due to reduced credit limits this could drive many people out of the market place.

For whatever reason, I've been super busy this week with 3 to 4 times more business than normal. It seems all my builders are selling homes and my Bankers are getting beau coup requests for mortgage loans, which they cannot do, so I've been working into the wee hours of the morning. If credit scores drop by an average of 50 points (and that is what the experts are saying) then probably half of the new loans I took in this week wouldn't be able to purchase a home. Fortunately this won't have an immediate, across the board effect so hopefully after the election and McCain wins we will see some loosening of the purse strings as things get out of election muck raking mode and back to normal.

actually before the banks started amortizing loans they did simple interest loans, but housing and property were cheap enough reletive to income it worked

as for manual underwriting a loan with little to no credit, go to a local bank, not a big multinational chain, or go to a credit union, they looook more at the dredit you have with them than with what you have elsewhere, yes it can be done

we are in a housing crisis due in large part to poeple who bought houses they couldn't afford with none of their own money, I say if you can't swing at least 10% you aren't ready to buy a house

and again it's better to have no credit than bad credit, most bankd, even local ones when you have a checking oaccoutn with a debit card they run it through mastercard or visa, event he small local banks do this, and yes this does add to your dredit score

carguy123 wrote: Many of the credit card lenders are reducing credit limits and are using just about any excuse to justify it. Now here's the rub, one aspect of credit scores is the ratio of your open balances vs. your credit limits. This will raise change your ratio and your score will go down.

Hey, I asked before, but didn't get a reply - is there anywhere that will give me the 3-digit score for free, even once a year? I did the link provided on page 1, and while it gave me a credit report, it did not give me my score. I'd like to know what it is without wasting $8.

Thanks, especially to you, cg123, for all the straight info.

I don't know of anywhere to get the credit scores for free.

The credit bureaus say you aren't wasting your $8 since now you know your credit scores. And you really need all three. They can vary widely since each bureau can have totally different information about you.

No creditor is required to report your credit, they choose to report your credit. Since it costs them to report you some don't report but once a year and some only report to 1 or 2 bureaus. Some rotate the new data between bureaus.

The only legal requirement is if they CHOOSE to report you to the bureau that they can't report it any worse than it really is. And they are responsible for any damages caused by misreporting.

I've always heard that if you're denied a loan, the lending institution must supply you with the specific materials that caused them to make that decision, if requested.

Since the OP was previously denied a car loan, he could have checked his score then, but it's probably too late now.

They don't have to give him or to even show him his credit report. All they have to do is to say that information contained in the credit report is what caused the turn down.

If you've been turned down for credit then you can get a free credit report, but it won't contain the credit score. Usually the lender will tell him his credit score if he asks.

Well off to the autocross. We're taking the Viper out for the very first time. Since you can't explore the limits of a Viper on the streets we have no idea how well we'll look. We'll either look very good or like fools. Any bets on which one?

I'm late on this thread, but I wanted to comment on the idea that using a credit card and paying it off in full each month won't build credit. It will! I had heard the same thing when I went to buy my first condo. I had only had credit cards (for about 10 years) and always paid them off. Never carried a balance even one month. No school loans, no car loans, nothing else. I mentioned my worries to my mortgage broker, but after checking my FICO scores, he told me to keep doing whatever I had been doing. All excellent scores (over 700 or something, can't remember).

Yes, as long as the creditor reports to the bureau, you're OK. The credit bureau has no way to know if you've made minimum payments or paid it off, all they see is that you have had a payment history.

I have found that my score is 790. Is that good? Will it get me the best rates?

jrw1621 wrote: I have found that my score is 790. Is that good? Will it get me the best rates?

That's very good. Near perfect.

I recieved a letter from Am. Family Insurance stating that my rates were not the lowest that they could offer due to results found on my credit report. Along with that statement, I was given the opportunity to get a free report.

Datsun1500 wrote:

carguy123 wrote: And if you ever want a car or house you better have a credit history.

Or pay cash..... There was a long thread on this on the old board with some arguing that it could not be done, with others actually doing it....

All you need is a paper clip . . .

Xceler8x wrote: I learn a lot here when all I expected was to read how to race on the cheap.

Ha. I am with you on this. I'm now a financial and political expert who can wire up a Megasquirt to a 1954 VW Beetle while simultaneously spitting off acronyms for 15-letter words backwards.