Many people with bad credit use automobile title loans West Palm Beach to get quick cash in an emergency, but did you know that an automobile title loan can help a borrower with bad or no credit improve their rating when they repay the debt on time.
Most lenders report to these three credit bureaus Equifax, Experian and TransUnion. These bureaus keep records of the history of your borrowing and debt repayments. Lenders access this information to determine how much risk a particular borrower represents.
Your FICO score essentially determines your ability to borrow money. Lenders use a three-digit credit score to quickly assess your credit worthiness when applying for a loan. A low FICO score results from a poor history of paying debts on time. Those who have a bad credit rating have a difficult time getting funding from traditional lenders.
Automobile Title Loans to Rebuild Credit
The best way to improve a low FICO score is to establish a trend of good credit history. You can actually improve a bad score by paying back a cash title loan properly, because it adds a recent record of positive borrowing on your credit report.
Because automobile title loans are secured using your car as collateral, they are often available to people with low FICO scores. In case the borrower fails to pay, the car is detained to repay the liability. If borrowers are looking to improving their credit they must adhere strictly to the term of the agreement as their repayments are tracked by the bureaus.
Borrowers who consistently pay back the debt on time will likely get a better rating. Since, more recent trends in a borrower’s record are weighted heavier than past trends, it means you can improve or rebuild a bad credit record simply by repaying a title loan according to the payment schedule in the agreement.
Another way you can use an auto title loan to help your credit score is to use the funds to make pending urgent payments on your mortgage or other bad debts, because if you default on your mortgage, it will not only ruin your FICO score, but your house could go into foreclosure and you may end up losing your home.
Before you apply for a title loan, make sure you have a plan to repay it on time and according to the terms of the agreement. If you want to improve your FICO score, a short-term debt is your best option, as it will help you save on interest and extra charges that you would incur with a long-term debt.
Although automobile title loans charge higher rates than traditional loans, they are still much lower than the interest rates of unsecured loans. Make sure you choose a reputed lender with competitive interest rates and flexible payment terms. Avoid predatory lenders who are deceptive and persuade borrowers to agree to unfair loan terms that can end up getting you into deeper debt and lower your score even further.
If you use the cash wisely and repay the debt on schedule, that will be demonstrated you are able to act responsibly with borrowed money, which will be viewed favorably by the credit bureaus and will be reflected in your credit rating. Using an auto title loan to improve your FICO score can help you in the future, rely on conventional funding.