Whether or not a car loan from a buy here pay here (BHPH) dealership can help you fix your credit depends on the dealer. An auto loan can be a great way to improve your credit score – if the lender reports loans and timely payments to the credit bureaus. Not all lenders do, which means it's not always possible to fix your credit at a buy here pay here lot.
How Auto Loans Help Credit
Payment history is the largest of five factors that make up your credit score, accounting for 35% of it. The other factors are amounts owed (30%), length of credit history (15%), new credit (10%), and credit mix (10%).
As you make on-time payments on loans and bills, those payments are typically reported to one or more of the three national credit bureaus: TransUnion, Experian, and Equifax. Every timely payment added to your credit history can improve your credit score.
However, not all lenders report payments, including some BHPH dealerships. Even though a BHPH dealer can be a great way to get a car loan when you're struggling with credit, if they don't report your on-time payments, they won’t be included in your credit history to increase your credit score.
Make sure to ask about their reporting practices ahead of time if you're trying to fix your credit with one of these loans.
Auto Loans from Buy Here Pay Here Dealers
Buy here pay here dealerships, also called in-house lenders, are both a dealer and a lender. They are known for not always checking a borrower's credit in order to consider them for auto financing.
Instead, they rely on your income and down payment to qualify you. Because they don't rely on an outside credit check, the process can often be quicker than at other dealerships, often allowing you to sign and drive in one day.
Qualifying for a car loan at a BHPH lot means having enough income to cover the monthly payment. They typically also require a down payment that could be as much as 20% or more of a vehicle's selling price.
BHPH dealerships only sell used cars, and you can often find a range of vehicles on these lots, from older, higher-mileage cars to late model used vehicles. The inventory varies from dealer to dealer depending on what they purchase at auction or take in on trade-ins.
Bad Credit Car Loans through Subprime Lenders
BHPH dealerships aren't your only option when it comes to getting a bad credit auto loan. Subprime lenders that work through special finance dealers can also help many people that are in unique credit situations. These lenders report loans and timely payments, so they're a good option for building credit while getting the car you need.
Subprime lenders understand that you're more than a credit score, so they use additional information to get you approved. The other factors that subprime lenders look at show them that you have the ability, stability, and willingness to take on an auto loan. These include income, employment, residence stability, the ability to make a down payment, and more.
Unlike BHPH dealerships, subprime lenders are able to approve loans on many types of vehicles, including new, used, and certified pre-owned cars. Even though these lenders offer loans on all types of vehicles, what you qualify for depends on your credit situation.
Let Us Help You Get Started
If credit improvement is your goal, you need to make sure that the lender you're working with reports to the credit bureaus before you sign a contract. Remember that not all BHPH dealers do this, so it's important to check with them up front.
When you're ready to take on your next auto loan and fix your credit, we want to help. Here at Auto Credit Express, we can match you with a local special finance dealership that has the lenders available to assist borrowers who are struggling with credit issues.
Save yourself the hassle of searching for a dealer on your own, and start here instead. Begin by filling out our fast and free car loan request form right now.