There’s nothing stopping you from buying a car with cash immediately after a repossession – but financing can be another story. Within one year after a vehicle repo, qualifying for a car loan can be tough. Here’s an option you may have right after a repossession.
Credit Reports After Repossession
Vehicle repossessions can hurt your credit score and make it hard to be eligible for an auto loan. Most traditional and subprime lenders don’t accept borrowers with a repossession that’s less than 12 months old. If you apply for an auto loan with a traditional lender a few months after the repo, unfortunately, you’re not likely to qualify.
If it’s been a year since the vehicle was repo’d and you need a car loan, then your credit score could be the stopping factor. Most traditional auto lenders (think banks and credit unions) have high credit score requirements, and typically require borrowers to have a credit score over 660. There’s no hard and fast rule on what credit score you need across all lenders, but that’s a good rule of thumb.
If your credit score is poor now and it’s been less than a year since the repossession, a buy here pay here (BHPH) dealership may be what you need.
In-House Vehicle Financing
BHPH dealerships have in-house financing. As the name suggests, you apply for financing at the dealership and the dealer is the lender. These are typically independent dealers that are limited to selling used vehicles.
While used cars may be your only option, these dealers often skip over the credit check. Without a credit pull, your recent repossession doesn’t impact your eligibility. For many of these dealerships, your proof of income, down payment size, and proof of identity are the most important parts of your eligibility.
What you may need for a BHPH auto loan:
- Down payment, possibly up to 20% of the vehicle’s selling price
- Proof of income, typically computer-generated check stubs
- Proof of identity and/or valid driver’s license
- Proof of residency, proven with a recent utility bill in your name
- Working phone
If you’re able to qualify for a loan from a BHPH dealer, expect a higher than an average interest rate. Since many of these dealerships skip pulling your credit, they tend to charge more for borrowing. Think of this as the trade-off for skipping the credit check.
To lessen your interest charges, we recommend putting a large down payment on the vehicle and choosing a short loan term to pay down the loan quickly. Most auto loans are simple interest, which means paying the car off faster equals less interest accrued during the life of the loan.
Rebuilding After Vehicle Repossession
Vehicle repossession can remain on your credit reports for up to seven years. That feels like a long time, however, they lose some of their potency with each passing year. As we mentioned, after 12 months, some lenders may be willing to work with you if you prove your ability to repay a loan and have maintained your credit score in the meantime.
Subprime lenders often work with borrowers in tough credit circumstances, such as an old repossession. In some cases, a car repo may be considered situational bad credit if a financial hardship caused the repossession and you had good credit up to that event.
A good way to bounce back after a repo is by paying everything on time, all the time. Even bills that aren’t automatically reported could have the potential to be reported as missed payments, such as a missed electric bill or late insurance premium. Checking out credit reporting services such as Experian Boost may be worth your time, too, if you have multiple bills or services that you already pay on time each month. Getting those services reported on your credit reports can add more credit mix variety and add some positive payment history.
Find a Dealership With Some Help
Ready to find a dealer that can assist with bad credit and a past repossession? At The Car Connection, we’ve created a coast-to-coast network of special finance dealerships, and we want to look for one in your local area. Get started right away by filling out our free auto loan request form.