Back in high school I knew a girl name Tina*. Tina was a nice person; however, she was always borrowing money from other students and never paying them back. We were high school students, so we’re not talking big bucks, maybe $5.00. However, it was the 90s, a time when a gallon of gas was $0.87 (oh how I miss those days), so $5.00 could actually get you something or somewhere. When Tina asked to borrow money from me, I told her no. Based on her reputation, the chances of me getting my money back was slim to none. At this time I also had a good friend name Simone*. Simone rarely asked to borrow money, only in times of emergency. Mind you, an emergency for us back then was not having enough money to buy a soda for lunch. Simone always repaid any money she borrowed, so no one, including myself, had a problem helping her out if she found herself in a jam.
Lenders do not have the opportunity to get to know you personally. They don’t hang out with you, or know your friends and family; therefore, your credit report informs them of your reputation (concerning borrowing and repaying money). Do you pay your car note on time every month? Have you only been late twice in the last 12 months? Are you late every month? Was the car repossessed? This type of information is shown on a credit report and allows potential lenders to gauge if you are a Tina, a Simone or somewhere in between.
*names have been changed