After a repossession, life can get hectic without a car. A repossession can negatively affect your credit score and your ability to get financed again, but there are ways to get another auto loan.
How a Repossession Affects Your Credit Score
Generally speaking, a repossession can drop your credit score by 100 points, which isn’t great, but its exact effect on your credit score depends on your specific situation. The repo also remains on your credit reports for up to seven years. This negative effect does lessen over time, but immediately after a repossession, it can be really difficult to get approved for another car loan.
Lenders may now view you as a very high-risk borrower with a repossession on your credit reports, because it usually means you’ve defaulted on an auto loan.
But if your vehicle was just recently repossessed and you need another car right away, there are a few options to explore.
Buy Here Pay Here Dealerships
You may have heard about dealerships that don’t check your credit score when considering you for approval – and they most certainly exist. They’re called buy here pay here (BHPH) or tote the note lots.
At these BHPH lots, the dealer is also the lender, and they use your income and a down payment to determine your eligibility for an auto loan. Since they don’t usually check your credit reports or score, this could be one route to take after a repossession if you need a vehicle immediately, provided you have a down payment.
However, since BHPH dealerships don’t check your credit score, they may not report your loan or on-time payments to the credit bureaus. If they don’t report the loan or timely payments, your credit score probably isn’t going to improve. At the same time, they’re likely to report a default, repossession, and any missed/late payments.
Additionally, BHPH dealers only sell used cars and they’re known to offer higher than average interest rates on their auto loans. So, you may be paying more for the vehicle than it’s actually worth – especially if you sign a long loan term.
If you want to improve your credit score after a repossession, subprime financing could also be an option to explore.
Subprime Auto Loans
Subprime, or bad credit, financing is for credit-challenged borrowers that may no longer be eligible for a traditional car loan. Luckily, subprime lenders use more than your credit score for financing, and you may meet the requirements of some of them for a bad credit auto loan.
Common stipulations required for subprime financing include:
- Income of at least $1,500 to $2,500, proven with check stubs
- Working contract cell phone or landline phone
- Proof of residence with a utility bill or bank statement in your name
- Valid driver’s license
- Down payment of at least 10% of the vehicle’s selling price, or a minimum of $1,000
- A list of five to eight personal references
A subprime lender may require more items, but these are the most commonly requested when applying for a bad credit car loan. At the same time, some subprime lenders only consider applicants with a repossession that’s over a year old.
Subprime auto loans are also reported to the credit bureaus. If you make timely payments, this can help you rebuild your credit after a repossession, assuming you’re keeping up with your other bills as well.
Where to Find Subprime Lenders
Subprime lenders work with dealerships that have special finance departments, but not all dealers work with this type of lender. This is where Auto Credit Express can help.
We’re connected with dealerships throughout the U.S. that have special finance departments that work with bad credit lenders. If you’re facing a repossession, or have a unique credit situation, a bad credit car loan may work for you. To get started, simply fill out our free auto loan request form. It's secure and only takes a few minutes. Let us help you get back on the road!