Little “White Lies” Have Big Consequences

I review many auto loan applications and see all sorts of ways people fudge the figures thinking it will help them get approved for a car loan. A lot of the time indiscretions made on the application only lead to frustration. Attention to detail can make or brake your auto loan.

People often think that if they “adjust” some of their information on a credit application, the auto lender will like the application more and approve it. Sometimes the bank will even give the borrower an initial approval. A problem arises when the auto finance company starts to verify all of the credit application information and begins to finds discrepancies. Usually the customer is driving “their new car” by the time the bank goes through this process and has to bring it back to the dealership. One of the worst feelings in the world is having to call a customer and tell them that they have to bring the car back because the loan fell through.

The two most common places that people stretch the truth on a credit application are in the Employment and Residence sections. Coincidently, that is also the most important information to the lender. Let’s look at both areas closely.

Employment:

Banks always want to know how much money you make. They almost always ask for Gross Monthly Income (monthly income before taxes and other deductions are taken out of your check). If you don’t know how much you make, find out. Only putting your net (take home) pay into the income box of a credit application may not give you enough income for a car payment, or at least for the car you want. If you are paid hourly, and work 40-hours per week, multiply your hourly rate by 173.3; the total is your Gross Monthly Income (GMI). If you get bonuses and commissions you can count those too. The easiest way to find out how much you make in this case is to divide the Year-to-Date (YTD) Gross on your year-end pay-stub by the number of months you worked there over that year. A lot of people underestimate their gross income because they only think about how much money is actually going into their bank account. Be sure to get full credit for the income you do have, but don’t lie about it either. If you calculate $2,500 per month gross income, do not write $3,500 thinking that it will look better to the bank. It will indeed “look” better, but when they review your pay-stub and call your employer (to verify your job) they may find out the truth and cancel on your loan.

Your time on the job is the other very important piece of employment information that can lead to problems if discrepancies are found. One of the most common errors is claiming you have worked for a company for several years, but your employer says you are a “seasonal” employee, or they will only say how long you have been there since your most recent hire date. Some people do have seasonal jobs or are regularly subject to lay-offs and that information is very useful when your loan is being decisioned. If you started at company (A) four years ago and worked there for one year, then worked at company (B) for two years, and have been back at company (A) for the past year, do not write down that you have worked for company (A) for four years. put one year, and list company (B) as the previous employer. Of course, the lender would like the application better if you have four years on the job, but when they call your employer to verify your employment they will find out that you have really only been there for one year and could cancel your loan.

Residence:

The time at address is similar to time at current job. Be as clear and honest as possible.

The Rent or Mortgage payment amount is a common spot for error as well. Many people have roommates and list only their portion of the rent. Most banks will only let you divide the rent up between however many people are on the lease. If you have one room mate and you are the only one on the lease you need to list the entire rent amount. When the bank calls the landlord they will find out how much the total rent is and how many renters are on the lease. At the same time, if you are married and only one of you is applying for the auto loan, the lender will probably still use the whole rent or mortgage amount. If you are married to the only other adult in the house, you should write the whole rent amount.

Raising your income, lowering your rent or exaggerating the amount of time you have been at your job and or residence can help you get an approval for an auto loan, but the bank will find out the real numbers and adjust your approval accordingly. They may even turn your approval into a denial. Set yourself up for success and be as clear as possible on the application and tell your loan officer all the details. While there may be answers that sound better, the plain truth usually works out the best in the end.

At Washington Auto Credit we can help you submit your application to the bank the right way. Fill it out on our website and we will contact you to be sure we have all the details necessary get you approved and keep you approved!