What is The Effect Of Car Title Loans On Your Credit
If you have bad credit but need money quickly, you may consider a car title loan. Although you can get a title loan quickly, you may wonder do title loans go on your credit report? Below, we answer that question and help you understand the implications of borrowing money against your vehicle.
Do title loan issuers report to credit bureaus? What happens to your credit if you don’t pay your title loan? Keep reading for the answers to these questions and more information that can help you make a good decision when choosing a title loan.
Do Title Loans Go on Your Credit?
Yes, but only if the online title loan lender reports them to the credit bureaus (Equifax, TransUnion and Experian). So, this is one of the first questions you should ask your prospective borrower.
If you own your car, it’s tempting to take out a title loan when you need money to fund an unexpected large expense. There are many benefits to car title loans.
Your imperfect credit will not typically jeopardize approval since you put up your car for collateral. However, that’s not the only consideration in making a final decision.
When Do Title Loans Go on Your Credit Report?
Different lenders have different policies when it comes to reporting your car title loan to credit bureaus. If you’re concerned about lowering your credit score, discuss this with each of the lenders you approach.
Once you find a few companies that do not report title loans, you can make a final decision based on other aspects of the loans offered. Another common question is if title lending services will even check your credit score in the first place. Online title loans are based on the value of your car, and you put your vehicle up for collateral. So, why would the lender need to check your credit?
It’s possible to find lenders that won’t check your credit score. However, not all lenders give you this option.
What Happens if I Don’t Pay My Title Loan on Time?
If you don’t pay your title loan, chances are your lender will report it to the credit bureaus. This will negatively impact your credit score. So, if you’re trying to rebuild your credit score, try to work out a payment schedule that works for you.
On the other hand, paying off the title loan can improve your credit. If you primarily want to rebuild your credit, ask your lender to report the loan, payments and pay off.
I Don’t Have Any Credit? Can I Still Get a Title Loan?
In the eyes of some lenders, having no credit is just as bad as having bad credit. Getting an auto title loan and making payments on time can actually help you build a positive credit score.
You could have a low credit score because you haven’t borrowed money in the past. Taking out a title loan, therefore, could actually help you improve your credit score.
How Do Title Loans Affect Your Credit?
You may wonder, “Do title loans go on your credit when you pay on time?” You can have good credit or bad credit and there are things you can do to improve the score. Paying the loan on time will improve your score and you also see a bump when you make the last payment for the loan. By making on time monthly payments you can quickly improve the odds of getting approved for both secured and unsecured loans.
How Does Your Credit Score Work?
Understanding how the three major credit bureaus calculate your credit score can help you understand the impact of title loans on your credit. There are five distinct criteria that affect your total score. These factors include the following:
- Your payment history makes up 35% of your credit score.
- Credit use or credit utilization accounts for 30% of your credit score.
- The credit bureaus also look at how long your credit history is. This accounts for 15% of your credit score.
- New credit and credit mix also impact your score by 10% each. However, having too many new credit inquiries can negatively impact your score.
Getting a car title loan can affect the new credit portion of your credit score. Additionally, making payments on time can positively affect payment history, the most important part of your credit score.
How Can a Title Loan Affect Or Lower Your Credit Score?
So, if you put your car up for collateral, how can a title loan hurt or affect your credit score? Earlier, we asked, “Do secured loan payments go on your credit report?” Failing to make payments on a standard title loan or pink slip loans can result in a default. This will almost surely show up on your credit report and negatively affect your score.
As you can see, paying your monthly title loan installment can critically impact your credit score.
Jessica has blogged about the title loan industry since 2012. Before that, she managed a team of customer service representatives for one of the largest payday loan companies in the US. Since coming to Premier Title Loans she’s overseen our sales and marketing department and looks forward to educating consumers on their different financing options. Jessica is always open to feedback and questions that relate to short term loans!