Bad credit really is a broad term. Bad credit is a descriptive term that refers to less than perfect credit but bad credit really is in the eye of the beholder. Credit may be bad to some and okay to others depending on who’s asking. If you have been extended any type of credit in the past and been unable to pay on the required terms you may have bad credit; But it’s not that simple. First of all, there are a thousand and one variables. Your credit history is a compilation of credit that has been extended to you if the form of credit cards, auto loans, home loans, and personal loans over time. Most of your credit only shows up in your credit file for seven years from when it was reported. If an institution or creditor does not report to any of the three main credit bureaus it probably won’t show up on your credit at all. Some derogatory items on your credit that are usually not considered “credit” until they show up because they are very past due and in collections. These can include utility bills, phone bills, cable bills, hospital bills, and even fines can show up on your credit. One interesting thing to note is that you may have a dozen hospital bills that show past due, but if you’ve made all of your car payments on time it will be easier to get a car loan. I once talked to a lender who said “I don’t care how they paid their cable bill I just want to know that they are going to make their car payment.”
Here’s another thing to consider. There are three main credit bureaus, TransUnion ™, Equifax ™, and Experian ™. They will all have slightly different information reported on them and sometimes very different scores as you may already know. Did you know however, that your credit score will vary depending on what type of credit you are applying for? If you apply for a credit card you may have a 625 TansUnion ™ score but when you apply for an auto loan your TransUnion ™ score is 601. This is because the credit bureau tries to determine how likely you are to pay on the required terms of each different scenario. You may have had a credit card that average payments were $80 a month and paid every payment on time but when it came time to make your $407 a month car payment you were late a few times. The biggest determining factor in determining whether or not you get a loan is not so much your score but your “credit history”.
