

Ask HN: Building Credit - trickjarrett

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.<p>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.<p>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.<p>So fellow Hackers, tell me how to hack the system ;)
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run4yourlives
>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.

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noodle
"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.

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anamax
(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.)

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Protophore
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.

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ld50
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.

