Do Title Loans Go on Your Credit?

How Do Car Title Loans Go On Your Credit Report?

Car title loans are a secured loan option that can be accessed by qualified individuals, even if they have a low credit score. When an individual has subprime credit, they may not be able to qualify for many different kinds of loan options due to their past financial history. Since a perfect credit history is not needed to apply for a title loan, this can be an option for many borrowers with bad credit who need emergency cash assistance. If applying for a U.S. auto title loan is a decision that you plan on making in the near future, you might be wondering if title loans go on your credit report.¹ If you decide to proceed with a title loan application and your credit is pulled, that can negatively impact your credit score and show on your credit report as a credit inquiry. Typically, this pull will only hurt your credit score by a few points, so in the grand scheme of your finances, it’s not that impactful. Additionally, keep in mind that checking your own credit report will not hurt your credit score!

If you want to fully comprehend how title loans may affect your credit, it is necessary to understand the concept of a credit report. A credit report is a detailed record of someone’s credit history, and it includes important financial information, such as the individual’s past and current debt, payment history, and any instances of late payments or loan defaults reported to the credit bureau. In order to determine your creditworthiness, a lender or financial institution will check your credit report during a loan application to review your ability to handle new and past debt obligations.

Individuals can access their credit reports from credit reporting agencies, such as Equifax, Experian, and TransUnion. Each of the three nationwide credit bureaus must provide you with a free copy of your credit report every 12 months under federal law. If you are trying to build your credit score, it is incredibly important to consistently review your credit report to ensure everything is accurate and there are no errors.

Keep reading to learn more about how title loans affect your credit score!

How Do Title Loans Affect Your Credit History?

Besides your credit being pulled during your application, there are a few other ways that title loans can affect your credit history. One of the biggest ways that a title loan can affect your credit score is primarily based on your actions as a borrower. If you default on your loan and fail to keep up with your title loan payments, the title loan company can decide to seize your vehicle and sell it at an auction in order to cover the remainder of your debt.

If your lender or loan servicer reports your payment history to the major credit bureaus, your loan performance will directly impact your credit report. Consistently missing payments will negatively affect your credit score. Whether or not your lender is reporting your loan performance to the major credit bureaus, you should understand that it is crucial to prioritize your loan payments if you want to avoid vehicle repossession.

In some cases, if your vehicle is repossessed, you will have the opportunity to pay off the unpaid balance and recover the vehicle. According to Experian, vehicle repossession can potentially stay on an individual’s credit report for 7 years. Although many title lenders and loan servicers are willing to work with you to avoid vehicle repossession, communication is key! If you feel like you cannot handle your monthly title loan payment due to job loss or unexpected hardship, make sure to discuss any financial issues with your lender or loan servicer before you default on your loan, not after.

Do Title Loans Build Credit?

A title loan can potentially help you build your credit history, but it depends entirely on your loan performance and whether or not your lender or loan servicer will report your payments to the major credit bureaus. Understandably, a title loan cannot help you build your credit score if you consistently miss payments or if your lender is not reporting your payments to the major credit reporting agencies.

You might be wondering, “Do all title loan lenders report to credit bureaus?” Make sure to reach out to your lender or loan servicer and ask if they are reporting your payment progress to the major credit bureaus.

If you are trying to build a positive credit history and you currently have a title loan or are considering applying for one in the future, ensure that you make your loan payments a priority each month.

Additionally, consider these important tips for building up your credit score:

1. Consider Your Payment History: In addition to your title loan payment, your other debt obligations should be a priority as well. Keep your credit card balances low, and if you are still financing your vehicle, make sure you pay your car loan on time each month.
2. Keep Your Total Utilization Low: The reason why your credit card balances need to stay low is because credit utilization accounts for around 30% of how your credit score is calculated. The lower you can get your balances, the higher your credit score could be in the future.
3. Consider Debt Consolidation: According to the Federal Reserve Bank of Philadelphia, the average consumer in America is over 70,000 in debt. If your debt has become unmanageable and your credit score has taken a nosedive, it may be time to speak to a debt professional and learn how to consolidate your debt. If you are eligible for a car title loan, you can use your loan proceeds to consolidate your existing debt.¹

Do Title Loans Go Against Your Credit?

If you stop making payments and end up defaulting on your title loan, there will be serious consequences. As mentioned previously, loan default can lead to vehicle repossession, which will adversely affect your credit score. A title loan has the potential to go against your credit, but you can avoid the negative consequences by paying your loan on time each month and being a responsible borrower!

However, life happens, and if you experience any financial difficulties during the repayment process, make sure to be proactive and communicate with your lender or loan servicer. Many title lenders and servicers may be willing to help you find an alternative solution if you call early to discuss your options!

Do Title Loan Lenders Check Your Credit Score?

One of the key reasons why it will be difficult to find a lender who offers instant online title loans is that your credit will be checked during your application. This process is not instantaneous, and it helps a lender review your financial history and ability to handle a new debt obligation.

Even though a title lender will review your credit history during your application, it is possible to get a car title loan with bad credit. If you have any questions about the application process for a car title loan, don’t hesitate to call 855-422-7402 to speak with a ChoiceCash title loan agent!¹