Can you get a car loan with a charge on your credit report?
When a creditor decides to stop pursuing you for missed payments, they may list the debt as “charged off” and consider it a loss. A charge stays on your credit reports for up to seven years from the date of the first missed payment and lowers your credit score. If you have a write-off listed on your reports, you are not automatically disqualified from getting a car loan, you just need to find the right dealership.
Where to get a car loan after forfeiture
If you have a write-off on your credit reports, chances are a traditional lender won’t approve you for financing. Although you should always try to get pre-approved from your bank or credit union, be aware that you may need to look elsewhere.
When your credit is bad due to one or more charge-offs and your bank or credit union has turned you down, you have two types of dealers you can go to:
Special Finance Dealers – These dealerships are registered with subprime lenders and specialize in providing car financing to consumers in credit difficulty. Subprime lenders look at your credit score and reports, but consider outside factors such as income, employment, and residency, to name a few. Each subprime lender has different requirements, so make sure you know what they are looking for. What makes bad credit car loans great is that you can improve your credit score by making all payments on time.
Buy here pay here dealers – Buy here pay here (BHPH) dealerships also offer car loans to those with credit problems. What makes them different is that the dealership is also the lender and most don’t do credit checks. As long as you have the income to qualify and the required down payment, it doesn’t matter what’s on your credit reports. However, BHPH dealers may not report to credit bureaus, so you may not be able to improve your credit score with one of these loans.
How to Improve a Charge on Your Credit Reports
Just because your debt is canceled doesn’t mean you’re off the hook. You are still responsible for the debt you owe, and you have three ways to handle a charged account:
- Repay the lender – If your debt has not been sold to a collection agency, you can simply endeavor to repay the original lender. Once you pay them back, make sure the lender changes the account status to “debit paid” and updates the balance to zero.
- Pay the collection agency – If your account was sold to a collection agency, you can pay them. Be sure to ask the collection agency for proof that they own the account and that they list the collection as a “paid collection” after you pay them back.
- Settle the debt – You can negotiate a settlement where the lender or collection agency agrees to less than the amount originally agreed. Make sure the charge is listed as “Settled Charge”.
One final tip once the debt is paid off: ask for a final payment letter to keep on file in case you need to dispute an improperly listed charge or collection.
Need help finding a dealer to work with?
Having a charge on your credit reports lowers your credit score, but you can still get the vehicle you need even if your credit is in trouble. AT Auto Express CreditWe’ve been helping car buyers with bad credit get the financing they need for over 20 years.
We are not lenders, but our job is to connect you with a local dealer who has the lending resources available to help people in unique credit situations. To connect to a dealership, complete our free and easy auto loan application form. Don’t worry about finding a dealer, get started now!