QuestionQUESTION: I am 21 years old and have no credit history at all.
I was driving a family car until just recently when it died. I have two jobs both
of which are seasonal and make a lot of money during the summer. I have
been shopping around for a new car and have come very close to being
accepted for loans however I cannot prove the all of the money that I am
making.
One of my jobs is in a resteraunt where I am a middle-man between wait staff
and kitchen. I get paid under the table on an hourly rate and also get a small
percentage of the waitstaffs tips.
The income from my other job is not enough to prove to the bank that I can
make loan payments.
Is there anything I can do?
ANSWER: It's often said, "no one will give you credit until you already have it." You realize your options are limited, and I know it's frustrating because it's obvious that you're intelligent and work hard, what with two jobs and all. You're also facing two separate problems: establishing credit AND acquiring transportation. You could go to one of those "buy here, pay here" used-car dealerships, but that's risky. The quality and selection of cars tends to be poor, the interest rate is the highest, and very few of them report your payments to any credit bureau, so you're not establishing any real credit. If you do go this route, at least make sure that they do report your payment record to a recognized credit-reporting organization.
To get a loan from a bank or credit union, you're going to need two things: a substantial down payment (40-50%), and a solid co-signer with exceptional credit. With no credit history and no way to verify your current income, the bank needs some justification for loaning you the money. The large down payment is a pretty good guarantee that you're not going to leave the car by the side of the road if it dies; if you do, then the bank can at least get their investment back if they have to repossess it and sell it at auction. The co-signer says to the bank that they know you well enough to stand behind the loan, that they'll make the payments if you don't. Until you've established credit on your own, or can find a way to prove your income on paper, these are the only options I can see for you right now.
---------- FOLLOW-UP ----------
QUESTION: The only inherent problem with that is that I have not been intelligent up until
recently, at least in regards to my finances.
I can make a large down payment (40-50% and rising each week) however the
only person willing to co-sign for me has "average" credit. She is my mother
and I am sharing her car with her until I can find my own.
My sister would co-sign but she feels nervous about the situation considering
my history with money and also she just had a child and is not recovering
well.
Is there anyway to show the money I make at my under-the table job without
endangering my boss?
I'd like to establish my credit as well but that matter is secondary to getting a
vehicle.
Answer1) If you can put together a 50% cash down payment, then your mother's "average" credit may be enough to get the loan. You won't know until you try.
2) That's entirely up to your boss. Banks don't report credit information to the IRS, but trying to convince most people in this country of that fact can be nearly impossible (which is EXACTLY the way the IRS wants it...). If you can get an officer of the bank to phone your boss, and explain exactly what they do and don't report to the government, then you might have a chance. But if your employer is petrified of "the long arm" of the Internal Revenue Service, then no amount of coaxing from anyone may change his or her mind. But as I said before, you'll never know till you try.
