A dismissed bankruptcy is extremely damaging to a consumer's credit report. However, there may still be a way to get approved for a car loan.
Recently, we received a question from a potential car buyer wondering how a dismissed bankruptcy will affect their chances of auto loan approval.
"I have a question about bankruptcy. I started a bankruptcy but didn't complete it so it was dismissed. Am I still eligible to apply? The process never got past the filing stage. I don't want to waste time applying if this is a problem."
Based on the information provided, here is what we can answer:
"I don't want to waste time applying if this is a problem."
First of all, applying with us is free of charge with no obligation. Auto Credit Express is not a lender. What we do is connect car buyers with a dealer that specializes in working with unique credit situations. They are connected to lenders that have many special finance programs that can help buyers get back on the road.
For buyers who have a dismissed bankruptcy on their credit report, a Buy Here Pay Here car dealership is typically the best option for purchasing a vehicle, and we may not have a dealer in their local area that can provide that service.
But, before we get to that, let's dig a little deeper into the question.
"I started a bankruptcy but didn't complete it so it was dismissed. Am I still eligible to apply? The process never got past the filing stage."
Aside from unpaid child support, a dismissed bankruptcy is the worst thing anyone can have on their credit report. A dismissal is bad for a couple of reasons.
- A dismissed bankruptcy will cause more damage because the filing, along with all other debts - the majority of which are typically 90 to 180 days (or more) past due - will remain on a credit report for up to 7 years.
- Lenders see a BK dismissal as a sign that a borrower was not only unable to follow through on their promise to repay previous creditors, but also unable to complete the bankruptcy process with the court.
We also don't know how long ago the buyer filed for the bankruptcy that was dismissed. Like other credit issues, its impact will lessen over time. If it is a recent filing, even subprime lenders will not be able to approve their application. But even if it happened recently, a Buy Here Pay Here dealer may still be able to help.
How Buy Here Pay Here is Different from Subprime Lending
A Buy Here Pay Here (BHPH) dealer is a car dealership that provides auto loans for car buyers without a credit check. They focus on employment history and income. As long as a buyers have job stability and the income to support the payments, they can purchase a car from a BHPH lot.
That's because a BHPH dealer is also the lender. They don't work with banks or finance companies and base payment schedules on when borrowers get paid. Borrowers usually also make their payments in person at the dealership. For car buyers with severely damaged credit, this is the best - and often only - option for financing a car.
And here's a tip if you are working with a BHPH dealer: If credit repair is also a goal, you'll want to ask the dealer if they will be reporting your loan and payments to at least one of the three major credit reporting agencies. That's because, since they aren't checking your credit or working with outside financial institutions and because of the cost involved, many don't report this information.
If the dealer you work with does not report your payments, you have other opportunities to repair your credit.
We Can Help
Even if you have credit issues, you're not out of options. Auto Credit Express has a nationwide network of dealers that have the ability to work with most credit types. Our application process is fast, easy and of no obligation. Just complete our online application and we will get right to work in matching you with a car dealer in your local area who will do everything possible to help you get back on the road.