You’ve decided a title loan is your preferred way to get some fast cash, but before you head to a website or brick and mortar storefront, you wonder if the payments will do anything to improve or even harm your credit score. In other words, will the title loan company report the payments you make to the three major credit bureaus? Here’s the thing: There is no industry standard about reporting a borrower’s information to the credit agencies. Experian and Transunion both say that in most cases, a title loan won’t have any impact on your credit scores. Equifax has not made any recent comments about how this form of borrowing can affect your FICO score.
This is good or bad, depending upon your personal situation. For example, are you seeking to improve your finances without affecting your credit score? The lack of a “hard inquiry” is great because it won’t knock it down five or fewer points. On the other hand, do you want to boost your score by showing healthy consumer habits (i.e. repaying the loan)? If so, that can a problem as it probably won’t go on the monthly reports.
Most title loan companies will not run a typical credit check when you apply for a loan. They may do so, but most lenders say on their site that no credit checks are done as a bonus. Instead, they check your viability as a borrower by looking at:
• Your proof of income
• Your bank details
• Your vehicle’s value
A lender will then approve or decline a title loan based on those factors. Keep in mind; they may report your timely payments to the credit bureaus. It is almost a given that they are going to report any failure on your part to meet the terms of the loan. In other words, default or skip payments and it is likely you’ll see this as a negative issue. Expect a reduction in your credit or FICO score. Any drop can make future borrowing and credit acquisition less likely.
Why would a lender not check your credit score?
Many visitors to our site turn to online title loan lenders because other finance companies have turned them down. Most borrowing options are not available to them. But they may wonder why the lender doesn’t take a look at their credit report or score. The answer is quite simple: Your application for a car title loan means that you have a vehicle with value and you are going to offer that vehicle as a form of collateral against the loan. Should you default on the loan entirely, the lender will claim that vehicle and sell it to offset any loss. It is almost no real risk to them to make the loan. Add to that the loans are often at a higher rate of interest than other consumer borrowing options and you can see why they don’t quite need to take the peek at your report or score.
What if you are aiming to repair your credit score or history? Will the title loan do you any good? It really varies widely, and some of the bigger names in title loans may report both positive and negative issues on your account. If you are aiming to boost your score, this could be a good way to attain that goal. But it will require research and a direct inquiry of the individual lenders methods. That way you can determine if they are making those positive reports. If so, you may also want to look into a title lender who enables you to make automatic payments and pay down the debt. Setting up auto pay can sometimes decrease an interest rate. But will absolutely prevent you from defaulting on the loan and protects your credit.
What To Expect When You Submit An Application To An Online Lender
If you still worry that your shaky credit may impact your ability to get a title loan, let’s take a quick look at just how this process works. The lender wants to know your vehicle’s title is “clean”. Meaning there is no loan against and you own it free and clear. Your name must be on the title, and there has to be a certain amount of value to the car. If it has a salvage title you may still get funding. But it may be less as a salvage title car is difficult to resell (should you default on the loan).
You complete the application, and the lender uses what is known as the Kelley Blue Book to determine what a realistic market value might be for the car. You then get around half of the value for the loan. The application processes will vary from lender to lender. But, this is the general overview of how an application works and what it requires. Using a vehicle as collateral can be a good way to get fast cash, and you won’t have to worry about any hits to the credit score.