In general, some bad credit rankings appear to be not as bad to a lender as other bad credit rankings. This includes consumers with a situational credit problem. In this case, you can usually identify a significant personal event or economic disaster that was the cause of the bad credit situation. Some examples of this include:
- Illness or physical injury.
- Divorce or marital separation.
- Unemployment from a job.
- Medical problems resulting in credit issues or bankruptcy
These items tend to give you a more favorable lender evaluation (assuming that before the event you had good credit). In this scenario, the lender may assume that you really are a decent credit risk given your good credit history before the event.
Bad Credit or No Credit
In this case, we are talking about consumers with little or no applied for credit, or consumers that have a large number of charge-off accounts including bad checks, unpaid charge accounts, unresolved repossessions, unpaid utility bills or medical bills, and other items that indicate the consumer is a bad credit risk. If you are in this situation, you really need to change your habits or you will remain trapped in the “bad credit cycle” and never improve your credit situation. In a no credit situation, a vehicle loan can help you establish credit but you may need a cosigner to get a loan.
