Tractor Trailer Credit Primer
What's a Primer? "A book that covers the basic elements of a subject" according to the
This is not a book but, it is a basic attempt to try and help you understand how your credit works. We speak
with around 250 folk per month and not many really understand how the credit process works.
We are not experts nor Counselors, however, since we do work with Lenders daily and know how the system works we
wanted to share some fundamentals with you.
Basically there is either good credit, bad credit or no credit history. Obviously good credit history does not
require much explanation. Bad credit is referred to as derogatory credit or simply as "derog." You can have a
mixture of some good credit, in fact, a lot of good credit, and have some derog on your report and be disqualified
from a truck loan. The good does not overcome tax liens, delinquent child support, charged-off debt, collections
accounts, or judgments. And there are a few other rare derogatory or bad credit issues that could also prevent you
from getting financed.
If you have mostly bad credit and want to repair your credit you have to do two things. You have to begin to
establish a good track record of what is referred to as paid-as-agreed loans usually for at least one year before
they are considered as a history. Secondly, you have GOT to take care of any old bad debt listed above.
You have to clean the old and establish the new. There are no "magic" quick fixes regardless of who might want you
to give them money to make your old bad credit go away: it ain't gonna happen! You should contact your old
creditors and make arrangements to pay them as reasonable an amount as you can to eliminate the old debt. Often,
this can then be counted as a paid-as-agreed history for you if you ask them to report it that way.
How do you establish a good paid-as-agreed track record if no one will give you a chance? Start
small is the answer. Apply for a credit line somewhere. Buy some furniture at Badcock's or get a small secured loan
on some of the "stuff" that you have been paying cash for all these years. Begin to establish a track record of
on-time payments. (NOTE: a $250 secured credit card that you have had for a few months will not qualify you for a
$30,000 or $40,000 truck loan) You will still need to satisfy your old bad debt to ever get back to being rated as a
standard credit risk.
No credit history. We speak with callers daily who are trying to purchase a Class 8 tractor for around $50,000
who do not have any credit history at all. "I have always paid cash" is the typical response. Well, why don't you
just pay cash for this truck? I often feel like asking (but I don't).
First-time Owner Operators are a high risk even with good credit. Let me state that again: even if you have
excellent credit, all Companies that finance Class 8 semi-tractors consider you a high risk. Why? Because of the failure
rate for first time Owner Operators has historically been so high. Why? Please see our Truck Tutorial for
details, but, basically most new Owners fail due to character related issues.
Many good Company truck drivers have absolutely NO business trying to be a truck owner operator. If you are not
disciplined and prepared to think like a business owner then you are likely to fail too regardless of your credit
rating. You can have excellent credit and not be PREPARED to go into business for your self in any field.
And that is just what being an Owner Operator is, a business. If you go to your local Bank and ask them for a loan
to buy a tractor, they will ask you for the past two years of your tax returns AS AN Owner Operator to base their
loan decision on how you ran your business.
Of course, if you are first time buyer or haven't been an Owner for a number of years they will typically decline
your loan, regardless of your credit history. They will allow you to refinance your home if you are a home owner
with good credit and give you money on a home-equity loan, but, not as an outright loan to purchase a truck with NO
successful and profitable track record as an Owner Operator. We do not recommend tying your
home to your truck!
Now, can you begin to understand how high the risk is to a Lender for someone with a poor record, or no track
record of paying their bills? You are a very high risk simply because you are a first time Owner Operator AND you
have issues with your previous creditors who have trusted you.
That is why anyone who does give you a "second chance" wants to see you reach in your own pocket and come up with a
substantial enough down payment to show them that you are serious and are willing to invest in a new start.
Speaking of high risk, did you realize that it takes BETTER credit to purchase a trailer than a tractor? With so
much theft, abandonments, and repos in the trailer sales business, they are very difficult to get financed. We can
help with a trailer purchase alone if your credit is average+ and you are a homeowner.
Becoming an Owner Operator is actually going into business like any other business and requires self-discipline,
good work habits, the ability to get along with others, and to pay your bills in a timely manner. All your
trucking-related bills need to be paid on time or you will be back in a Company Truck in about 90 days!
Most of the Owner Operator Training Programs that comes with the purchase of a Freightliner SelecTruck is
devoted to budgeting properly. Running a business is running a budget. Let me stop and sober you up for just a
moment. If you haven't been able handle the simple bills related to
operating a household, are you really sure that you are ready to take on the added overhead (bills) involved in
operating a Class 8 semi-tractor?
We cannot answer that for you, but, if you do feel that you are ready and desire to make a fresh start give us a
call Monday thru Friday 8:30 AM - 5:30 PM EST, or click the banner below to start on the path to
recovery. We can Lease you a tractor while you Repair your credit and accumulate a down payment by running as an Owner Operator.
We look forward to working with you.