Credit unions and establishing credit

My son bought his first car today. He had been pre-approved by his credit union for a loan. At the dealership, we tried to see if the dealer might do better with a lower interest rate. So he completed the required papers, etc. We were informed that he had no credit rating, despite the fact that he has already applied and was accepted for a loan at his credit union and had also been granted a Visa card through it. We were told that credit worthiness cannot be established through credit union membership. Turns out the dealer rate was indeed lower, so we went that route. Were they putting us on ?

Probably a misunderstanding. Membership in a credit union in and of itself wouldn’t generate records with Equifax/Experian/TransUnion, if that membership just constituted said a savings account or checking account. Nor would it if that Visa Card is actually a Check Card / Debit Card and not representing an actual line of credit.

If the Visa is an actual credit card, but it was just opened very recently because your son was opening accounts with the credit union to get this car loan, then it’d show up both as a credit application and an open account, but with basically a 0 month history it wouldn’t have much value in terms of assessing credit worthiness. So in such a scenario it wouldn’t be all that inaccurate to say your son essentially had no credit record, if his only credit account was just opened and had no payment history.

When your son was approved for a car loan by the credit union he should have been given a check by the credit union to buy the car from the dealer.

– or —

He should have told the dealer he was approved for a loan by his credit union. At that point the dealer should have contacted the credit union and the three of them work out the details to complete the sale.

In either case, never assume the dealer wants to work hard with a third party for the loan.

With respect to a credit rating, it doesn’t matter if your son established an account with a bank, credit union, credit card company or your Friendly Loanshark Company. He has to establish credit with the lending institution, actually use the credit and build a credit history in order to have a credit rating. Only then would a car dealer be able to check his credit history.