How To Buy A Car With No Credit Or Bad Credit

Repairing Bad Credit

When you have bad credit, it can keep you from realizing your dreams. It’s more difficult to buy a house, get a student loan, and get a car. When you can get credit from someone, the interest rate is usually exorbitant and you end up paying a considerable amount more than the purchase price of whatever you are buying.

The key to repairing your credit is to take an aggressive pro-active approach. It will take some time, but in the end, it will be well worth it.

The first step is to get a copy of your credit report. As we told you in a previous chapter, you are entitled to one free credit report per year when you request one at
www.freecreditreport.com. Once you have the report, go over it and make a plan.

Begin by trying to resolve the outstanding debts that are showing on the report. The idea here is to make as much restitution you can toward settling the bills that have caused you to get bad credit in the first place. A horrible but old and closed bad credit item most often gets viewed better than an open current bad credit item.

How do you resolve these issues? Contact the creditors and ask about making a re-payment plan. If you have huge credit card debt, for example, often the companies will work with you to make a payment plan just so they can recover some of the bad debt.

If there’s any way you can pay off the credit card entirely, that would be the best option. Ask if they are willing to settle for less than the entire amount due. They will be more likely to do this if you can offer them an amount of money that would be acceptable. In other words, if you owe $3,000 and can offer them $2,000 to discharge the debt, they are more likely to accept this than if you offered them $500.

After a certain period of time, some companies will “charge off” the debt owed to them. A charge off does not mean that a forgiveness of debt occurs, it only indicates the creditor has made an accounting notation that they do not believe that the debt will ever be repaid. A charge off represents a significant black mark on one’s credit report.

Another viable option, although it is often thought of as extreme, is to file a Chapter 7 bankruptcy. In this context the bankruptcy paves the way to the first step of credit repair by putting an end to the old bad credit items. While bankruptcy adds it’s own significantly terrible credit reporting item, bankruptcy by definition will be “resolved” when the case ends.

In terms of a credit report a bankruptcy is not a clean slate. A bankruptcy remains a nasty item on one’s credit report for as long as ten years. On the positive side, however, the bankruptcy is a clear time or “line in the sand”, from which the debtor can begin to rebuild. With open unresolved charge offs there is no such point in time where rebuilding can start. Open unresolved charge offs remaining glaring poor credit cavities on ones credit report.

A bankruptcy is certainly not a favorite resolution by the creditors but it shows that the debtors have recognized there is a problem and has taken some action. When you have open items or charge offs left on your credit report, it indicates that you were/are apathetic about the charges and don’t care to try and make resolutions of the problems.

Once you’ve tried to make resolutions on the outstanding debt you have, the next step is to assess how much damage has been done and how you can go about reversing that damage. After you’ve paid as much debt as you can, you should get another copy of your credit report from one or all of the major credit reporting agencies. We’ll give you contact information at the end of the book for these companies.

You can only receive one free credit report per year, as we’ve said, so requesting additional copies will probably cost you a small fee, but we highly recommend this so you can better understand where you are after you’ve attempted to mend the past due balances.

It’s very important to pay particular attention to any items that may be incorrectly reported. Many of those unfamiliar with credit reports share a mistaken belief that credit reports display a near perfect accuracy. In reality errors on a credit report occur with alarming frequency. Reporting agencies rarely verify or cross check information unless they have a specific reason to do so.

Inaccuracies on a credit report may take several forms including reporting of credit information on items which were never associated with the individual in question, items which may be related to an individual but are reported improperly or items which may be attributed to the individual but should no longer be reported on a credit report. Important personal items are often miss-reported as well including ones address, social security number and employment history.

If you discover inaccuracies on your credit report, responsibility lies with you to begin the corrections process. Letters must be written explaining exactly what the problem is and the remedy you feel is warranted.

Especially when dealing with inaccuracies, remember that each credit reporting agency maintains its own database of information. Therefore one agency might report an item properly while others report it improperly and vise versa. Furthermore, if a common inaccuracy exists with multiple reporting agencies the repair process must take place with each agency reporting the item inaccurately individually.

In many cases this means to remove an item that has made its way onto each bureaus agency report, you must write three sets of letters and follow the process through with all three different agencies in order to be sure an item comes off from the reports. Depending on how many incorrect items you have on your credit report, this could mean writing and sending out many letters, but you must be persistent. You deserve to be treated right!

Once notified of a problem an agency will contact the creditor or reporter of the item in question and seek a response regarding the accuracy of the item. Under the Federal Fair Credit Reporting Act if the agencies do not receive a reasonable proper response within 30 days they are obligated to follow your directives on proper treatment of the item.

Should a proper response be received the bureau may well request more information on why you believe your position be the correct one. Many people advocate dealing with only one item per correspondence.

Once you find you have completed this task follow up once again or check the report again. Just because a letter has been written and a creditor has not responded within a given time frame does not mean that the agency will remove the report without further follow up and an additional correspondence.

On the other hand keep in mind changes may take a month or more to appear on a report. While the process for proper credit reporting is in place, assuring accuracy of your own credit report rests with you.

Improving your credit score is one of the few areas of life where doing nothing can be tremendously productive. Once the items causing negative impact on the credit report have ended, the simple passing of time does wonders for your credit score.

While the advantage of improving your score with the passing of time comes in the form of non-existent effort, the disadvantage comes in that time must take its own course. Even those with the best of credit cannot buy more time or speed the passing of time. Generally the date used to trigger the passing of time in this context starts with the date of the last activity of the account.

Your strongest tool for rebuilding your credit is staying current on your payments and not defaulting on any debt repayment plans. Even though we’ve said doing nothing helps tremendously in rebuilding your credit, repeating poor credit habits can make things much worse. Creditors can be somewhat understanding of a bad credit incident, if it is corrected.

This can be particularly true when the bad credit originated with problems outside of the debtors control such as emergency medical bills. Repeated bad credit behavior indicates a problem with deeper roots and looks to be a stronger indication that future credit worthiness looks shaky. If you want your credit to improve, be perfect with your new credit, as well as old credit where accounts remain open.

To accelerate the rebuilding process try to have at least three active credit lines open, and be perfect with them. Car loans or mortgages count if you still make payments, as well as old credit cards if they can still be used.

If you need to obtain new credit, store cards or gas cards can be easier to obtain than major credit cards. However, if those fall beyond reach, any one can be accepted for secured credit cards. We touched on that subject earlier in the section regarding establishing credit.

Make sure when taking a new credit for rebuilding purposes that the creditor reports to the major credit agencies. Not all creditors submit information to the credit bureaus, and almost no debit card or check card issuers do, even ones with a MasterCard or Visa logo.

Use the credit you have obtained and make your payments on time. On time means never being 30 days late. At fifteen days you may pay a late fee, but late items must hit 30 days overdue before they will be reported.

Using credit does not mean abusing it; you need not run the card up to its limit. On the other hand, leaving the card in your wallet will not help rebuild your credit as much as positive usage. So, go ahead and use the credit card, just don’t overspend and pay off the entire balance every billing period.

There are several companies out there who claim to be able to rebuild and repair your credit. There are also numerous debt reconsolidation companies offering their services. Are these viable solutions to your credit problems? 

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