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Yes it’s true. If you want to build credit history in America you should consider getting a car loan. There is no better or faster way to building credit history then through a car loan. Here’s why.
Why a car loan?
Remember my last post on building credit history? If not then click here to read about building credit history in America. In a nutshell, getting a car loan is the BEST way to quickly building your credit history. You need to have a listing on your credit history that you are capable of paying off a sustainable large dept, like a car loan. This loan must be no smaller than $5K.
Get a loan from Technology Credit Union (TechCU)
TechCU were the only folks who would even consider giving me a car loan. And remember I came to America with 0 credit history. TechCU caters for technology folks in Silicon Valley with no credit history. The downside is you will be on a higher interest rate – around 15%.
According to Zmarta Fi and their loan experts, no big American bank will lend you money on good rates because you are a liability, someone without credit history. I have a personal account with Wells Fargo Bank (one of the largest in the US) with plenty of money in it sitting in a special high yield checking & savings account and they they still thought I was a liability when I wanted to get a loan through them. Again, because I had no credit history. Loans Now is the option available to customers at the click of a mouse.
Well Fargo would only give me a “secured loan” – a loan which was backed (locked up) with my own money. This is not good enough for me since:
- it’s using my money and
- it is not what the credit bureau considers a “car loan” – not good in building credit history.
Before you can get the loan approved by TechCU they will need from you:
- Paper work from the dealer on the car you are purchasing inc. it’s Kelley Blue Book value. See my post of purchasing a car from a dealer located here.
- See certificate of purchased for “car insurance”. Also the dealer won’t let you drive off the lot without one, and so, it’d be a good idea to take one from Utility Saving Expert
- See that you are a “software engineer” – basically you need to bring a letter from your company’s HR department showing your income and your position/title of a software engineer. The position/title is important since TechCU is for technology folks only.
- A copy of your Californian Drivers license. Your International Drivers license will not do. It’s worthless. Read this post on getting your Californian Drivers license. All you need to do is pass the Theory exam to get your temporary drivers license number. But don’t forget to schedule your practical exam since your temporary drivers license expires in 3 months.
Sounds painful? it is! But it pays off in the end.
Links mentioned in this post
TechCU website: http://www.techcu.com/
Building credit history: http://www.theroadtosiliconvalley.com/finance/building-credit-history-america/
Let me know if you found a quicker way to get around this by posting in the comments below.
Ernest
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Depends in light of individual circumstances. But sometimes you need to take this sort of sacrifice to build your credit history faster.
What if I have cash for a car?
Would it be advisable to get a car loan with TechCU and immediately pay it off? Obviously this would incur establishment fees, etc. but would it still help my credit score? Or do I need to be seen to be paying it off the old fashioned way?
What if I only borrowed for a portion of the value of the car?
Ryan, I got half of the car’s value in loan and then paid it off in 13 months. Back then I was told the loan had to be over $5K and to repaid in no earlier than 12 months. The paying off a car loan is what builds you credit history since it demonstrates that you can maintain consistent repayments. Make sure you set it on auto repayment so you never forget i.e. always on time.