Do Title Loans Affect Credit Ratings?
Did you know that over half of Americans don’t have an emergency fund saved up? This means that when an emergency arises (and they always, somehow manage to at the perfectly wrong time) over half of Americans have to look to bank loans, title loans, or the dreaded credit cards and payday loans to make ends meet.
Now, maybe this is fine for some Americans, maybe they have a great credit score or consistent and high streams of income and don’t have to worry about minimum payments, credit card fees, exorbitant payday loan APRs, or the possibility of losing their car.
But the average credit score in America in 2019 is between 673 and 695 – this falls just below ‘decent’ at 700. This means that most people don’t have emergency savings or the fall back of a great credit score to get a sudden bank loan when unexpected expenses pop up.
So, what should they do?
Common Myths About Credit Ratings & Title Loans
There are lots of myths floating around about credit ratings, title loans, scoring, and more. But the VIP Title Loans thinks the best way to help our customers is to educate them!
Read on to learn about the happy marriage between credit scores and title loans, as well as the pitfalls that some other forms of loans try to trap you in.
Getting a Loan Will Affect My Credit Score
This is true and false – depending on what sort of loan you choose to get.
A loan through the bank, credit cards, or opening and closing accounts will indeed affect your score – and quite possibly negatively.
However, both payday loans and title loans do not check your credit score and therefore do not affect it positively or negatively.
Of course, payday loans have extremely high-interest rates, which means you spend more, which means you have less for bills and other obligations, which could actually put you further into debt – therefore affecting your credit score.
The same can be said of title loans, of course, which is why it is important to do your research, compare companies, and choose the one with the lowest APR.
If a Loan Doesn’t Check Your Credit – It’s Fishy
This is a common misconception about title loans.
People often think that if we aren’t checking your credit score, we aren’t legitimate, or are not reputable.
Actually, it’s quite the opposite.
VIP Title Loans is a Registered Creditor with the state of Texas and therefore governed by Texas laws. Sadly, this is rare for our industry. Most of our competitors are out-of-state lenders governed by out-of-state laws that are more favorable to them (and worse for you).
Additionally, credit scores are used by banks and other large companies to determine how risky it is to give you money, but with a title loan, your collateral is your car, which means a credit check to analyze ‘riskiness’ is not needed.
If You Want a Good Credit Score – You Need to Avoid Debt
This is another common myth about credit scores, and it’s a shame because the truth is actually just the opposite.
Credit card companies and banks want to see that you have a good credit history, which means you go into debt and then pay it off on time and in full.
Companies don’t want to see a blank slate, because then they don’t know if you’re risky or not. They want to see a nice, long, safe credit history.
This means the best way to raise your credit score – is to pay off your debts on time. Luckily, a title loan can help here too.
We have helped working parents, students, and those struggling with their debts by providing fast, easy title loans with low APRs.
As an example – let’s say you have $1,000 in credit card debt and you simply cannot seem to pay it off on time and meeting the minimum. Most likely, that credit card is charging you 24% APR.
Now consider getting a title loan from VIP Title Loans for $1,000 to pay off that credit card debt in full – this will raise your credit score, and instead of paying 24% APR, you’ll only be paying 6% APR.
That’s a lot of savings!
Learn More About the Scoring & Saving Powers of an Auto Title Loan from VIP Title Loans
Call or come into any of our six locations to learn more.
Or, if you are ready to take your credit, debt, and finances into your own hands now – fill out our no-obligation online title loan application to begin the process now.
Don’t hesitate to check our FAQs for more answers, or our blog page to learn more about us and our services.