Can a car title loan affect your credit score?

My credit score has dropped over the last few years and I’ve been working to improve it. A month or two ago, I applied for a personal loan but I was denied. Instead, I took out a car title loan. I’m about to pay off the title loan but I was curious. Does a title loan affect my credit score?

Answer
Recognizing the importance of maintaining a good credit score and working to improve it is a savvy move for your finances!
Any loan you take out has the potential to affect your credit score. However, a title loan will rarely have any impact on your credit score.
Because car title loans use your car as collateral and repossessions only occur if you default on your payment, the lender usually doesn’t report loan progress to the credit bureaus.
Additionally, most car title loan companies repossess the vehicle rather than sell your debt to a collection agency. By not reporting loan progress or offloading the debt, your credit score is left untouched.
To build your credit, use a credit card to pay for your car insurance and pay off the balance in full each month. If you use your credit card and make payments on time, you can boost your credit score over time.
Insurance companies use credit as one of many factors when generating your rate. Once your credit has improved, download Jerry to compare quotes.
The Jerry app collects quotes from up to 50 top insurance companies like Travelers, Nationwide, and Progressive in seconds! They even help cancel your old policy once you select your preferred policy.
Jack Walsh
Answered on Nov 05, 2021
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