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Do Title Loans Go Against Or Help Your Credit Score

You may consider a car title loan if you have bad credit but need money quickly. Although you may be approved and funded fast, you may wonder if title loans go on your credit report or if they can cause problems if you miss a payment or default.  Below, we answer that question and explain the implications of borrowing money against your vehicle.

Do vehicle-secured lenders report timely monthly payments to the credit bureaus? Or do they only report missed payments or loan defaults that lead to a repossession? What happens to your credit score if you default on the required payments, and can your monthly payments improve your FICO score? Read on to find out what you need to know about title loans and your credit score.

 

Do Title Loans Show Up On Your Credit?

Yes, but only if your lender reports your on-time payments to any of the three main credit bureaus. It’s optional for any lender to report your payments to the bureaus, so you should always ask them beforehand what their policy is.

If you own your car, taking out a title loan can be tempting when you need money to cover an unexpectedly significant expense.

Poor credit typically does not jeopardize approval, since you are using your car as collateral. However, that’s not the only consideration in making a final decision.

Not every lender reports your monthly payments to the three credit bureaus. However, at Premier Title Loans, we recommend only working with a lender that reports your payments. That way, you can gradually improve your FICO score after these on-time payments are registered with the credit bureaus. By showing on-time payments each month, you can avoid risky loans in the future.

 

At What Point Do Your Monthly Payments Go On Your Credit

Lenders have different policies regarding reporting your payments to credit bureaus, and these companies do not follow set regulations or best practices when reporting monthly payments.

If you find a company that reports your monthly payments, you should view that as positive when choosing between lenders. Another common question is whether title lending services will even check your credit score. Car 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 FICO score. However, not all lenders offer this option, and those that do will typically limit the amount you can borrow or require a vehicle with significant collateral.

 

A man paying his bills on time each month.

 

I Don’t Have A Credit Profile. Can I Get Approved For A Vehicle-Secured Loan?

In some cases, you’ll have trouble qualifying for an unsecured loan if you have no credit history, which means you’ve never made a payment on a loan or cash advance. Personal loan companies want to know you can make payments on time, and unsecured lenders are cautious about offering loans to customers with no payment history. However, that’s not always the case with a vehicle-secured loan. Since these loans depend more on your vehicle’s equity than your FICO score, there’s a chance you can still be approved mostly based on your collateral and proof of income. If you have no credit history, we recommend letting your lender know before they start underwriting your application. That way, they’ll be able to focus more on the equity in your vehicle versus your lack of a credit history.

 

How Do Car Title Loans Affect Your Credit Score?

People always ask, “Do title loans go on your credit when you pay on time?” The answer to this is yes. Most secured lenders report your monthly payment history to the credit bureaus, just like you would expect with a credit card or home equity loan. Any company reviewing your credit history will see your on-time payments as positive. However, the same applies if you fall behind on or miss payments on any secured or unsecured loan. Make timely payments to improve your FICO score and avoid taking out a loan secured with your vehicle.

 

How Does Your Credit Score Work With A Title Loan

By understanding how your credit score works, you can learn how to rebuild your credit history and eventually rebuild your credit score. The following factors are significant components of your credit score:

  • Your payment history accounts for approximately 35% of your credit score.
  • Credit usage(utilization) accounts for 30% of your credit score.
  • Your credit history accounts for 15% of your score.
  • New credit(10%) and credit mix(10%) also impact your FICO score. However, having too many new credit inquiries can negatively impact your score. The good thing about a title loan is that your lender will initially run a soft credit check to see if you qualify. If they run a full credit check, that will only happen during the final underwriting.
  • Missing a payment or having your vehicle repossessed can significantly reduce your FICO score.

 

How Making Payments On A Vehicle-Secured Loan Can Affect Your Credit Score

Failing to pay on a title loan or pink slip loan can result in a default, which can negatively affect your score. But did you know that your monthly payments may help to rebuild your credit? Lenders are much like banks and installment loan companies; they all report your payments to the credit bureaus. Make your monthly payments on time, and you’ll build your credit history over the life of the loan. Check the Premier Title Loans lending requirements before you apply with us, and make your monthly payments on time to improve your FICO score.