‘They’ll deny me for “thin file/short history”’: I have a limited credit history and worry about getting an auto loan. Will getting a new credit card hurt my chances?

Hi Money Minder,

I’m thinking about taking out a $15k auto loan in early 2025, but I have some concerns.

I’m afraid they might reject me because of my limited credit history. I’ve only had one credit card, and I was turned down for another one in January due to my “thin file.”

Should I apply for a new credit card this month, or will that hurt my chances of getting the auto loan next year?

EDIT: I’m a 26-year-old guy, making $30-35k a year, with a credit score between 791-798.

Thanks for your help, Money Minder!

Response from THE MONEY MINDER:

Hello There,

It’s understandable to feel concerned about the potential challenges you might face when applying for an auto loan in 2025 due to your limited credit history. Your proactive approach in trying to build your credit profile by considering applying for a new credit card is commendable. However, it’s essential to weigh the potential impact on your credit score and loan approval chances carefully.

Since you have a high credit score in the upper 700s, applying for a new credit card may have a temporary negative impact on your score due to the hard inquiry that accompanies a new credit application. This slight dip in your score is usually short-lived and can be outweighed by responsible credit usage over time. To minimize any potential negative effects, you could space out your credit card and auto loan applications.

Additionally, focusing on maintaining a healthy credit utilization ratio, paying your bills on time, and continuing to manage your credit responsibly can help strengthen your credit profile. You might also consider exploring other strategies to diversify your credit mix by exploring credit-building tools like a secured credit card or becoming an authorized user on someone else’s credit account.

Ultimately, a well-thought-out and disciplined approach to managing your credit can significantly improve your chances of securing favorable terms on the auto loan you plan to apply for in 2025. By staying informed and making sound financial decisions, you are taking proactive steps towards achieving your goal of getting an auto loan to finance your needs.

Best of luck with your credit-building journey, and feel free to reach out if you have any more questions or need further guidance.

Farewell from THE MONEY MINDER.