If you’re short on cash, you may want to consider taking out a loan. But traditional personal loans have strict eligibility requirements that you may not meet, especially if your credit score isn’t perfect. Fortunately, most credit types are accepted by title loan companies, which is why so many people rely on title loans to get fast cash.
Before you apply for a title loan, it’s important to think about how this decision will impact your credit. This is especially true if you’re already worried about your credit score and actively making an effort to improve it. So, do title loans affect your credit? Here’s what you can expect:
Will A Title Loan Show Up On Your Credit Report?
Most title loan companies report to the three major credit bureaus: Equifax, Experian, and TransUnion. These credit bureaus collect credit information from various creditors and use it to create and maintain credit reports for consumers.
In other words, if you take out a title loan, it will appear on your credit report, which means it will impact your score. Because it is on your credit report, it will also be visible to other creditors who check your credit.
How Can Title Loans Affect Your Credit?
Taking out a title loan can impact your credit in several different ways, including:
- New Hard Inquiry
- Credit Mix
- Length of Credit History
- Payment History
New Hard Inquiry
Every time you apply for a loan, the lender that is reviewing your application will perform a credit check to evaluate your creditworthiness. Lenders check your credit so they can see how well you have managed debts in the past. They use this information to determine what kind of borrower you may be if you are approved for another loan.
This credit check is an important part of the application process, but unfortunately, it also results in a new hard inquiry on your credit report.
The credit reporting agencies record hard inquiries to track how often you seek new lines of credit. Too many hard inquiries within a short period of time could indicate that you are experiencing financial trouble and trying to take out loans that you may not be able to repay.
Hard inquiries account for about 10% of your overall credit score. Every new hard inquiry that appears on your credit report can lower your credit score. The good news is that this impact is temporary. A hard inquiry remains on your credit report for two years, but it will usually only impact your score for several months.
So, if you apply for a title loan, be prepared for your credit score to take a slight dip as a result of the new hard inquiry on your credit report.
Your credit mix, which is a measure of the diversity of your loans, is another factor that impacts your credit score. Just like hard inquiries, credit mix accounts for about 10% of your overall score.
There are two main types of credit: installment and revolving. Installment credit has a set end date and requires the borrower to make regular payments. Examples of installment credit include mortgages, auto loans, personal loans, and title loans. Revolving credit, such as a credit card account, has no end date and requires the borrower to make a minimum payment every month.
Having a diversified credit mix that includes both installment and revolving credit can increase your credit score. Why? This shows creditors that you are capable of managing different types of credit accounts.
Taking out a title loan adds an installment loan to your credit mix. If this makes your credit mix more diverse, this could improve your credit score.
Length of Credit History
The length of your credit history, which is the average age of all of your credit accounts, can also impact your overall credit score. The longer an account has been open, the better it is for your credit score. This is because a long credit history indicates that you are an experienced and responsible borrower. This factor accounts for about 15% of your credit score.
To calculate the age of your credit accounts, the credit reporting agencies look at the date on which each account was opened. Then, the credit reporting agencies calculate the average age of all of your accounts. Only active accounts or lines of credit are included in this calculation.
If you take out a title loan, this will appear as a brand-new line of credit on your credit report. Having a brand-new line of credit can lower the average age of your accounts, which may negatively impact your score. However, it should not significantly lower the average age of your accounts, so it shouldn’t have a major impact on your score.
Payment history accounts for 35% of your overall score, which is why it is the most important factor that impacts your credit. Your payment history includes whether you’ve made late payments, missed payments, or had debts sent to collection agencies.
Title loan companies report your payments to the credit bureaus. This means every time you make a payment on your title loan, the information is sent to the credit bureaus and added to your credit report.
Because payment history has such a major impact on your score, making on-time, consistent payments on your title loan may lead to a significant improvement in your credit score.
Of course, the opposite is also true. Missing a title loan payment or making a late payment could have a negative impact on your score. This is why it is so important to only borrow what you can afford to repay.
How to Improve Your Credit With A Title Loan
The bottom line? Taking out a title loan could help or harm your credit score–it all depends on your actions. If you want to improve your credit score, the key is making on-time, consistent payments on your title loan. Doing this can increase your score over the course of the loan. Missing a payment or making a late payment–even if it only occurs once–could significantly decrease your credit score.
How to Apply For A Title Loan
Now you should understand how taking out a title loan will impact your credit. If you’re ready to get the fast cash you need, follow these steps to apply for a title loan with I Need Cash Now:
- Contact our loan officers. Start the process by calling our loan officers directly at 1-855-713-6522. You can also submit your information using the form on our website. A loan officer will contact you shortly after receiving your information.
- Review your free quote. Be prepared to provide some basic information to your loan officer, including your vehicle’s make, model, mileage, and year. Your loan officer will prepare a free quote based on the information you provide.
- Finalize your loan. If you’re happy with your quote, all you need to do to finalize the loan is sign and submit paperwork. Your loan officer will explain what you need to do to complete this step of the process.
- Collect your cash. The sooner you sign and submit the paperwork, the sooner you can collect your cash. You can choose to pick up your cash in person or have it sent to you via check or wire transfer.
Applying for a title loan is easy. Contact us to start your application today.