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Can a Buy Here Pay Here Car Hurt Your Credit?

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There’s plenty of misinformation out there surrounding various types of vehicle financing. Don’t let it mislead you into thinking one kind is better than others.

A buy here pay here dealership is set up to both sell you the vehicle of your choice and get you financing for it on the spot. Conversely, a traditional dealership will work to sell you the car, but use a third-party bank to finance you, or require you to bring your own financing. The third party will check your credit, and offer you an interest rate based on your credit score. Sometimes, they won’t approve you at all, and you have to start the process all over again elsewhere.

However, with on-lot financing, the buy here pay here dealer is actually covering the cost of your vehicle, and you’ll make payments directly to them until your car loan is paid off. During any financing process, you’ll need to verify your employment. But at a buy here pay here car lot, your credit won’t be checked to determine whether you’re qualified to purchase the vehicle. Because a credit check isn’t run, buy here pay here car lots are a great opportunity to secure a bad credit car loan. Now, let’s talk about whether these buy here pay here car loans will affect your credit.

No Hard Credit Check To Impact Your Credit

When you apply for credit through a traditional lender, you’ll fill out dozens of documents with all of your personal information, and that information is then sent to credit bureaus like Transunion and Equifax. When this happens, this is called a hard credit check. Because the credit bureau sees this as you inquiring for a line of credit, it can have an impact on your credit score. While doing one hard check like this may only lower your credit score by a few points, doing this several times within a short time frame can significantly lower your score. Most traditional car dealerships will need to run a hard credit check through a credit bureau to get your financing approved through their third-party lender.

With on-lot financing, the dealerships don’t have to jump through all of these hoops to approve your financing. They are financing you directly from the dealership, so many times you’ll just need to fill out short financing forms on-site to get approved on the spot, without sending your information through a third party. Because there is no intermediary for financing, no credit check is required, and your score won’t be lowered as a result.

Buy Here Pay Here Car

Missing Bad Credit Car Loan Payments and Your Credit Score

You’ve heard it a million times: making payments on time is your ticket to great credit. Skipping or missing payments, especially when you make it a habit, is bad for your credit score. This happens because banks have an open line of communication with credit bureaus, keeping tabs on all of their customers’ payments and payment history. This can be a positive thing if you’re making the proper payments and using them to improve your credit score, or it can negatively impact your credit score if you aren’t holding up your end of the car loan deal.

With a traditional lender, if you fail to make payments, they will likely repossess your car and report your nonpayment to all the credit bureaus. You can expect your credit to be seriously damaged if this happens. A repossession also can result in extra fines and fees to pay to the recovery company, have the car inspected, and get it resold. If you do not pay this often expensive bill, it will be sent to collections. This will ding your credit score once again.

Should you not make regular payments to a buy here pay here car lot, then they can still repossess your vehicle. Depending on your situation and the buy here pay here dealership you’re working with, your credit score still may not suffer. Just be sure to verify with them, like the friendly financial advisors at Auto Bank of Kansas City.

If you will have a problem making one of your car payments to a buy here pay here dealership, calling one of their financial advisors to talk about what you can do to make up for it can save you from making a regrettable decision to not pay back your loan. Some of these instances may not be reported to the credit bureaus, because of the nature of the loan, which will spare your credit score. If you have questions about what will impact your credit and what will not, be sure to talk to one of the members of our finance department to verify.

Working with a Buy Here Pay Here Dealership Won’t Directly Hurt Your Credit

As with other financial issues, your credit score is your responsibility. If you find yourself with a poor credit history but in need of a car, a bad credit loan through one of our Kansas City car dealerships may be the best option for your credit score. Overall, getting on-lot financing for a buy here pay here car won’t directly negatively impact your credit score.

If this is good news to you, browse our used cars for sale. You’ll find many great options for reliable cars that don’t require a perfect credit score to qualify to purchase. Our financial advisors will help you find the best financing option to fit your lifestyle and get you into an affordably-priced used car and back on the road.

If this sounds like you, or someone in your family, we’re happy to sit down and go over the options and the details. At Auto Bank, not only will you receive a great deal on a dependable vehicle, you’ll receive excellent customer service too. Call our team at (816) 231-9300 to get the process started today.