Comparable Credit: Why a High Score May Not Be Enough
An 820 score gets my attention. My next question is: what built it? A lender wants to see experience handling the size and type of borrowing you are asking for. A large mortgage does not automatically replace that experience with a car, boat or RV.
“But I have an 820 credit score!”
That is a good start. But what built that score?
Think of your score as getting you through the gate. Once you are inside, the lender still wants to know what you have borrowed, how long you have managed it, and how that compares with the request in front of them. Getting through the gate does not unlock every door.
What does comparable credit actually mean?
The amount matters, but so do the type of borrowing, repayment history, and time you have managed the account. A recently opened loan does not demonstrate the same track record as one managed over time.
Consider an illustrative buyer with an excellent score, a $20,000 car loan opened nine months ago, and a couple of relatively new credit cards. That score does not establish a track record for a $300,000 boat loan.
In the recreational lending programs I work with, that gap can be a major barrier. It is not simply a matter of charging a little more interest.
Does a large mortgage count?
A mortgage contributes to your overall credit history, but do not assume it substitutes for comparable experience financing a declining asset such as a car, boat, or RV. A large mortgage alone may not satisfy that part of a recreational lender’s review.
There is no one-to-one rule where a particular past loan automatically qualifies you for a particular new loan.
What does “thin credit profile” mean?
It usually means there is limited credit history for the lender to evaluate—for example, few accounts or a short track record. That does not mean you have been irresponsible.
Lacking comparable credit is a related but different issue. Someone can have an established credit file and still lack the particular borrowing experience a lender wants for a large recreational loan. You deserve an explanation of which issue matters in your case.
Is comparable credit 10% of my FICO score?
No. FICO’s 10% category is credit mix: the mix of account types in the file. Comparable credit, as discussed here, is a separate underwriting consideration. It can carry much more weight in a lender’s decision than a percentage in a score breakdown might suggest.
Talk through the whole picture
Tell me what you want to buy and what borrowing experience you already have. Please do not take out an unnecessary loan just to try to “build comparable credit.” Let’s discuss your situation first. Start at YourBoatMoney.com or ask ScottBot.
Sources
Educational information, not a loan offer or guarantee of approval. Requirements depend on the lender and transaction.