Do Buy Here Pay Here Dealers Check Credit?

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Even with poor credit.

By

Contributing Writer

Bethany Hickey is a graduate from the University of Michigan-Flint, with a bachelor’s in English-Writing. She is a content writer for Auto Credit Express, CarsDirect, and many other automotive blogs, as well as the Poetry Editor for UM-Flint’s writing magazine.


, Contributing Writer - March 17, 2020

The promise of a no credit check auto loan sounds a little too good to be true, but they do exist. Do you know why they don't need your credit score to approve you for a car loan?

Buy Here Pay Here Dealerships

Car lots shouting “NO CREDIT? NO PROBLEM!” seem fishy at first glance, but the reality is, these dealerships don’t usually check your credit score. They offer what’s called in-house financing, meaning the dealer that sells you the vehicle is also the lender who approves you for the loan. These lots are often called buy here pay here (BHPH) dealerships, or tote the note lots.

BHPH lots are more concerned with your ability to make the monthly/bimonthly/weekly payments on time. They do, however, check your income and require a down payment. If the lot promises no credit check and no money down, you’re likely to be given a higher interest rate.

If you’ve been turned down for auto financing by credit unions or captive financing, you may feel tempted to look into a BHPH dealer.

What’s the Catch?

For some bad credit borrowers, there may be no real catch with these BHPH dealerships. These dealers usually lend to anyone with enough income and a big enough down payment, and you get a car as promised. But if you want to improve your credit, BHPH lots may not be for you.

You may have heard that in order to increase your credit score, you have to first apply for credit and borrow money. It takes credit to build credit, after all. One way to build a credit history is by getting approved for an installment loan, like an auto loan.

While financing a vehicle from a BHPH lot is certainly a car loan, these lots don’t always report your on-time payments to the major credit bureaus. This means that it won’t build your credit history or improve your credit score because it won’t show up on your credit reports. Before deciding to go with a BHPH dealer, ask if they report loans and payments.

Other than a BHPH dealership, there are options for those with less than perfect credit who want to improve their credit score for future lending opportunities.

Bad Credit Auto Loans

In recent years, subprime auto financing has become more mainstream. Subprime lending is for borrowers with less than perfect credit scores. To be considered for approval, these subprime lenders look at more than just your credit score.

BHPH lots promise no credit check financing, but the loan may not improve your credit. So, even if you complete that car loan, you’re right back where you started – with bad credit and high interest rates. This is where subprime financing can help.

Subprime lenders report your loan and timely payments to the credit reporting bureaus, so with good paying behavior, you can improve your credit score for future auto loans. Better credit scores mean better interest rates, and more vehicle options, as well as help with financing in other credit areas (such as a mortgage).

If you want to improve your credit with a car loan, we want to help you achieve that goal. At CarsDirect, we’re connected with dealers across the nation with special financing departments. We match you to a dealership in your local area that works with subprime lenders. Fill out our free and simple auto loan request form to start driving your way to a better credit score.

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, Contributing Writer

Bethany Hickey is a graduate from the University of Michigan-Flint, with a bachelor’s in English-Writing. She is a content writer for Auto Credit Express, CarsDirect, and many other automotive blogs, as well as the Poetry Editor for UM-Flint’s writing magazine.


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