How to Deal with Bad Credit when You Are Trying to Buy a Car
Repairing Bad Credit – Step One
The first step for a potential car buyer would be obtaining their three credit reports from the major credit reporting agencies: Equifax (www.equifax.com), Experian (www.experian.com), and Trans Union (www.transunion.com). Once they are obtained, the reports can be reviewed for negative items to be disputed. Disputed items are removed or corrected. If an item cannot be re-verified it is removed from the report.
Borrowers have the right under federal law to dispute negative items on their credit file every thirty days and are allowed to repeat the process as many times as they want. Eventually the credit bureaus may no longer be able to verify the information and at that point it would have to be removed from the file.
Repairing Bad Credit – Step Two
Step two is writing letters to the credit bureaus regarding negative items in the credit file. Negative items that a car buyer should get removed are things such as bankruptcy, charge offs, or collection accounts. The letter should state that these accounts do not belong to the consumer and should be removed from the credit file immediately.
If an account has been paid off but was severely past due at one point, it is best to write the bureaus that the account was never past due and that the credit report must be updated immediately to state that the account has always been current.
Repairing Bad Credit – Step Three
The third step requires receiving written proof from the creditor that the account is the consumer’s. This is done by requesting written proof of this, which would be the original contract. Most companies throw this out and store the information on computers. In this situation the car buyer can simply call the Attorney General’s Office of the state they are in and say that a creditor is damaging their credit by reporting an account that is not the consumer’s. The car buyer can add that they have requested written proof but the creditor did not have it. The Attorney General’s Office will then have the creditor remove the account from the file.
If the creditor does still have the original contract the consumer can then offer to repay the loan at 10 cents on the dollar. If the creditor does not like this idea the car buyer can threaten to file for bankruptcy and the creditor will receive nothing. This usually leads to the creditor negotiating with the consumer. The idea behind this tactic is to pay much less than the actual debt and to avoid paying interest charges or any penalties.
Repairing Bad Credit – Step Four
Step four is making the payment(s). If payment arrangements are made with any creditor they must be made under one condition. Before any payment is sent in by the car buyer, the creditor must mail a written agreement that they will report the account to the credit bureaus as current, paid off, and never late. Unless this is done it may not be worth paying the account off as it might remain on the consumer’s credit file. Once repayment terms have been negotiated and payment has been made, the creditors will either delete the negative accounts or change them to a positive rating.
Repairing Bad Credit – Step Five
The fifth step is building a positive credit profile. This is done by simply making purchases with credit and repaying the money that was borrowed. This re-establishes a positive pattern of repayment.
Repairing bad credit in order to buy a car may seem like a very difficult process. But if these five easy steps are followed the car buyer will have an edge over the creditors, as well as repaired credit, and a car.