A young man called me the other day to ask my advice about getting a car loan. He had been turned down for the loan he had recently applied for.
Of course, as a Dave Ramsey fan, my first piece of advice was to save up and pay cash for a car. But that is not what this young man was concerned about. He wanted to know how to find out why he was turned down for a car loan.
I told him the bank or credit union should send him a letter explaining exactly why he was turned down. It could have been insufficient income or bad credit. It could have been a myriad of reasons. I told him to also check his credit report
Each year you can get one free credit report from each of the three major reporting companies: Experian, Equifax, and Transunion. Simply go to www.AnnualCreditReport.com and complete the forms.You don’t need to pay for a credit report.
Some experts recommend that you get a report from one company at a time. Check over the report. If you see any errors, contact them at the number provided on the report. If there are items that you need to care of, do so. Cancel credit cards you no longer use. Call creditors and take care of paying any outstanding bills. It may take a couple of months for corrections and payoffs to appear on your credit report and for errors to be cleared off.
Wait 60-90 days and then order a report from one of the other companies to see if items have been corrected. Then request your report from the third company four to six months later to be sure nothing new popped up.
Ordering a periodic credit report is a great way to monitor your credit and watch for possible identity theft attempts. Everyone should get at least one copy of their repor each year. And they’re FREE!
The young man who called me has saved up quite a bit towards his new car. His old car is in decent shape but is twenty years old and needs work. It would be a good starter car for a high school student who wants to learn to work on his own car. This young man doesn’t have time or knowledge to do the repairs himself.
He plans to sell the old car rather than trade it in, which will probably result in a higher sales price. He is shopping around both for a good deal on a used car and the best interest rates. He plans to use no more than 50% of his savings plus the proceeds from selling his old car to put half down on the new car. He won’t buy a car he can’t pay half down while still having plenty in savings for his emergency fund.
He hopes to have the new loan paid off within eighteen months. Once it is paid off, he will put the payment amount in savings each month so he can pay cash for his next car.
He will be requesting his credit report today.
When was the last time you requested a copy of yours?