In my seven years of being a dealer manager, I have viewed thousands of credit bureaus. I have interviewed hundreds of people with poor credit scores and can confirm that they fall within one of these categories.
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- The truly down-on their luck. There are many financial problems that can happen. These include the death of a loved one, severe illness, business failures, and other issues that can ruin credit scores. This is only a small percentage (less than 10%) of Americans with bad credit. These people are absolutely deserving of another chance.
- People who act down but are actually just reckless. Although “My dog got really sick” may sound absurd, I have heard it at least once. One woman even told me that she didn’t make any payments on time because of “really bad menstrual cramps”.
- The uninformed and/or entitled. The worst category is those who don’t believe they are obligated to pay. These are arrogant people who don’t believe the rules apply to their situation, people who aren’t very smart and/or who have no idea what credit is. This group is only 20% of people with poor credit.
- Only 5-10% of people with poor credit are in a truly dire situation. 90-95% of people who have bad credit scores are owed their bad credit score due to what they’ve done or what they haven’t done.
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This brings me to my point.
America is not good at extending credit to people with bad credit scores. All of these people will continue to do the same thing, making late payments, ducking the repo man and so on. If we give credit to them all, it’s bad for America. It is their nature. These people don’t need money to buy a car. We have to teach them the rules.
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If someone defaults on a loan or fails to pay their bills on time, it is called default. If someone does something wrong, they should be forced to prove themselves again. These people will be hurt long-term if they have access to credit.
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This is not to say that these people should have difficulty getting credit. I believe first-time buyers should be given credit and extended credit.