Building Credit To Buy A Car

Dear Miss Mota Mouth,

I would really like to buy a car now but I don’t have any credit yet even though I have a job. At least I don’t have bad credit but what should I do? My current car is a real clunker and I am 25 and want a nice car!
Whitney in Costa Mesa

Dear Whitney,

The first step is to really start shopping around banks, credit unions and even insurance companies like State Farm who will finance you. Get a good idea of what their rates would be with your credit currently undeveloped. Interest rates can legally be as high as 29.9% but you shouldn’t accept anything more than 10% or you will be a slave to the lender.

Consider keeping the clunker for a while and starting a program to improve your credit:
1. Take out a credit card or two that you pay off in FULL every month
2. Ask your parents to add you as a responsible party to a credit card of theirs (but do not use it yourself- just gain the credit history)
3. Make sure that you have no outstanding debts to any bills like utilities from past rentals, medical bills, etc and if you have those- pay them off and ask the collection agency to take them off your credit. (if they say they will then they have 5 business days to notify you that they have done so)
4. Don’t repeatedly pull your credit report because that will knock points off automatically.

After even 6 months you will start to gain a solid credit history that lenders will like.

Patience is indeed a virtue and jumping ahead will bite you where it hurts so take the correct steps to do this the right way.

Good luck!

M

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