Boat Financing

[DTW]

Learned something new today. I have a credit score of over 830 and can qualify for a $150,000 boat loan with no problem. Now if I want to add my daughter to a boat loan for only $60,000 we don't qualify because we have no joint history together. That is where the rub is as she has no credit history, as she has no debt as I bought her a new Car as a college grad gift. Also I paid 100% of her college education. She is a second year CPA working for a big firm making $50,000 plus. I guess in hindsight I shouldn't have bought her a car nor pay for her education so she could have built credit score. No wonder banks had to be bailed out by the Government. And before you say it, boats are a way of life and not an investment, we both know it, but it is a fun life.

 

[Steve195]

Your daughter is extremely fortunate that you are able to provide those things for her. However, if she has been out in the working world for two years and hasn't established her own credit history that's surprising. I know when my daughter was still in college (mostly on my dime) one of the first things she did was to get a couple of low limit credit cards, which she paid in full most months, left a balance on occasionally and began to build her credit history. She's now about 3 years out of school, has a decent job, has a zero interest car loan, just bought a home at 4% interest, no other debt and a credit score in the upper 700's, and a credit history that is almost 6 years old (she's 25 now).

Plain and simple, your daughter is being penalized because she hasn't built a sufficient credit file in the eyes of potential lenders. You buying everything for her doesn't do anything to prove her credit worthiness to the banks, etc. It is prudent for them not to loan to her without a credit history.

 

[boatman37]

my daughter bought a used grand cherokee last year and we co-signed. she graduated from college in may 2015 (at 20 years old in 3 years) and got a very good paying job. a few months ago she bought a 2016 wrangler unlimited sahara with every option available ($42k sticker) and was approved on her own. she also just got pre-approved for a home at about 3.5%. her credit score is still low 700's but she just turned 21. oh..she also bought a brand new yamaha 700 quad that she used a yamaha 0% interest credit card for (she plans to pay that off well before the 12 months are up). but all of those inquiries are what are hurting her credit score.

bottom line, the used cherokee was the key. without that she would have had no credit established.

on another note, i have an uncle that retired from a well paying job about 15 years ago. he always paid cash for everything and always bought beater vehicles. the day he retired he bought a brand new truck for himself and paid cash and bought a brand new car for my aunt but he had her get a loan on it. she had never had a loan in her name and had no credit and he wanted to make sure she would be ok if anything happened to him.

hey....if your daughter needs a few loans to pay on to help build credit she can have some of mine:smt043

 

[northern]

Do not think it works that way in Canada. Our daughter after finishing school bought a house. I had taught her how to invest and by the time she was 21 had 30,000 saved. I told her I would lend her what ever she saved for a down payment. So at 21 she qualified for a 115,000 mortgage at 3.9% in 2004. We did not co-sign. She paid me back the 30K in 3 years.
To that point she had never borrowed for anything.
Our son did the same thing but he did have a few credit cards. He got a mortgage for 240,000 at 2.85% in 2014. We did not co-sign.
When they went for mortgages I told them to forceful but polite. Old like from a country song. "Sing like you do not need the money"

 

[Dancin Dave]

Only 60,000.00?, you buy the boat. Your daughter doesn't need a boat or the loan for such or the maint costs etc... she should be on your boat. Just sayin.

You are blessed to be able to do all you are doing for your daughter , keep up the good work. She will build her credit in time, she doesn't need boat payments.

 

[trflgrl]

Yep, this is hitting a lot of young people like your daughter who are in fortunate circumstances, as well as people of all ages who prefer a cash-only lifestyle (good on boatman37's uncle for recognizing a risk to his wife's future!). If she does want to establish credit, what Steve195 describes can be a good plan for anyone who's diligent--even purchasing a simple necessity like a mattress/box spring set can get the ball rolling, as most creditors won't give the stink eye to a purchase in the $800 - $2000 range the way they might for a vehicle or other much larger purchase. My personal preference was to buy from places that had 0% interest promos and pay within the specified time, as well as to use a credit card for all possible living expenses including utilities, auto insurance, etc., but pay it fully each month.

 

[JVM225]

My daughter is away at college on my dime. I got her a credit card when she was in High School and started driving, and a second one when she went to college.
For the first one, I just added her name and social to one of my accounts, and a year later she was able to get the second on her own.
She only has one of the cards with her at school, uses it for expenses related to school. I see the bill when it comes to our house, and it gets paid off as soon as that bill comes. I pick up the tab for any school expenses, and she pays for the other stuff out of her spending money budget.
I also had her take out an unsubsidized Stafford Loan for her freshman year, and paid it off for her right after it was taken out. It cost me a few bucks (nominal amount) for the application fee, but I figure that building a credit history is important, and might make life easier for her when she graduates and is on her own.
She already has a nice little nest egg to get her started when she graduates. I've always had her (and my almost 16 year old son) on the 50/50 plan. That is that 50% of any cash gifts for special occasions, and 50% of any money earned, gets deposited in the bank. Now they've both caught the savings bug, and are happy about making those deposits.
Our message to the kids is loud and clear. College and all related expenses are on us, but once they graduate, they are on their own. We'll help them out here and there if they need it, but we won't be a crutch.

 

[JVM225]

My personal preference was to buy from places that had 0% interest promos and pay within the specified time, as well as to use a credit card for all possible living expenses including utilities, auto insurance, etc., but pay it fully each month.

I pay for everything I can on my "cash back" card, and then pay it in full when the bill comes. Every couple of months I cash in, and get a nice little check. Not a bad deal.
Haven't paid a penny in credit card interest since they took away the deduction for it 30 years ago.
Admittedly though, you've got to be very disciplined to do it.

 

[Bucit]

Have her get 2 "secured" credit cards from her bank. Her limit will be whatever the bank puts aside, generally $400-$500. Have her charge a lunch, dinner or tank of gas, doesn't need to be much. Then pay it off except for $10. Do it again the next month. After 3 full billing cycles you would me amazed at her newfound credit scores.

 

[trflgrl]

Have her get 2 "secured" credit cards from her bank. Her limit will be whatever the bank puts aside, generally $400-$500. Have her charge a lunch, dinner or tank of gas, doesn't need to be much. Then pay it off except for $10. Do it again the next month. After 3 full billing cycles you would me amazed at her newfound credit scores.

Although I've heard a lot of folks say the same thing, leaving even a tiny balance on a revolving credit line can be counterproductive in three ways: 1.) Late payments create negative impact on credit scores; 2.) Late fees apply, with some exceptions, commonly a % of the balance or a specified "no less than $XX" value which can be $25, $50, or more; 3.) Interest applies, with some exceptions.

The difference lies between revolving credit (the average consumer credit card) and term/fixed credit (buying something on credit with a specific payback period of 6 mo, 1 year, 3 years, whatever--although we commonly call it credit, it operates like a loan). Carrying a balance on revolving credit is more negative than positive; carrying a balance on term/fixed credit is positive assuming on-time payments (if required) and payment in full within the specified term.

 

[boatman37]

my daughter got a credit card when she started college but always paid it in full before the month was up. when she went to get her first jeep they said there was no record of her credit card showing up. apparently because she had always paid it off early?

 

[trflgrl]

my daughter got a credit card when she started college but always paid it in full before the month was up. when she went to get her first jeep they said there was no record of her credit card showing up. apparently because she had always paid it off early?

That really bites. Evidently not all creditors are required to report, or may choose to report to one bureau and not others, so it's possible there was no record at all, or that her account was reported to one bureau and the dealership used a report from another. But consumers can request that a creditor formally report; too late for your daughter, but hopefully not too late for others just starting to build their records.

I can see 13 years of history with TransUnion and Equifax; the account lists don't match exactly--TU shows 1 more credit card and 1 more loan than EQ.

 

[Henry Boyd]

I pay for everything I can on my "cash back" card, and then pay it in full when the bill comes. Every couple of months I cash in, and get a nice little check. Not a bad deal.
Haven't paid a penny in credit card interest since they took away the deduction for it 30 years ago.
Admittedly though, you've got to be very disciplined to do it.

That's a good life strategy, but won't help establish a credit history, and may even damage a credit score. The first is because (crazy as it sounds) that kind of activity is viewed as not using the credit for scoring purposes. If you don't owe any interest then you haven't borrowed anything.

The second part is viewed as a potential risk because there is no long term repayment history. The concern becomes the creditor will max out the card and then be unable to repay. This by the way is not necessarily a reflection of the creditor's honesty. It is a recognition by the bank that people get sick and can't work, or laid off and can't find replacement job and need to use the credit from the card to survive. If you don't use credit then you are better off limiting the amount of credit potential. For example, an Amex card is a better choice than a Visa with an unused $20k spending limit.

For someone starting out a small loan like for furniture that is paid off over time is the best way to go. And in that approach paying on time, if not a little early, is the real key to creating and building a good credit score.

Henry


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