Without being boastful, I’ve looked at thousands of credit bureaus in my 7+ years as a dealership manager. I’ve interviewed hundreds of people with less-than-perfect credit, and I can tell you that people with bad credit scores fall into one of the following categories:

1. The genuinely down-on-their-luck. Financial problems like the death of a family member, severe illness, business failure, etc do happen, and they do ruin credit scores. However, as a percentage of the people in the USA who have bad credit, this is a very small group (less than 10%). These people absolutely deserve a second chance.

2. People who pretend they’re down on their luck, but who are really just irresponsible. “My dog got really sick” might sound like a laughable excuse for terrible credit, but I’ve heard that one at least once. I even had a woman tell me once that she hadn’t ever made a payment on time in her adult life because she had “really bad menstrual cramps” (not making that up).

While the more common excuse is “we got behind,” the fact is that we all have bad things happen to us. The difference between the credit worthy and the credit challenged is very often how these people respond to these events. I’d say 70% or so of people with bad credit fall into this group, and while these people likely deserve another chance, they should have to work for it a little bit so they don’t take it for granted.

3. The entitled and/or unaware. This is the worst category of all – people who don’t think they have to pay. They’re arrogant people who don’t think the rules apply to them, people who aren’t terribly smart, and/or people who fundamentally fail to understand the concept of credit. I’d say this is a small group as well – just 20% or so of the people with bad credit.

Again, only 5-10% of all people with bad credit are truly in a bad situation beyond their control – 90-95% of people with bad credit deserve their bad credit score because of what they’ve done (or, more precisely, what they haven’t done).

Which brings me to my point:

Extending credit to anyone and everyone with a bad credit score is bad for America. If we give credit to all of these people, they’re just going to keep on doing what they’ve been doing, failing to make payments, ducking the repo man, etc. It’s their nature. Lending money to these people so they can buy a brand new car on some sort of sub-prime special isn’t helping them – if we want them to change their ways, we need to make them play by the same rules as everyone else.

When someone defaults on a loan, fails to make payments on time, etc. – does something negative – they should be made to work very hard to gain our trust again. Readily available credit only hurts these people long term.

For the record, I’m not saying that credit should be impossible for these people to obtain. I also believe that first-time buyers should be given the benefit of the doubt and extended credit as much as possible.

However, opening the flood gates as described in this Automotive News article is bad news.

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