Tractor Trailer Operator Credit Primer
Tractor Trailer Credit Primer – For all Flatbed truck drivers
What’s a Primer? “A book that covers the basic elements of a subject” according to the dictionary.
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 historical 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. Click Here for important information for you on why and how truckers fail and succeed.
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 tractor-trailer buyer or haven’t been an Owner Operator for a number of years truck financing companies and truck dealerships 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 buying 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.
As mentioned, becoming an Owner Operator is actually going into the trucking business is 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!
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 your household, are you really sure that you are ready to take on the added overhead (bills) involved in operating a Class 8 semi-tractor?
Revised Hours Of Service Regulations for Truckers: Click Here