Get a car loan with bills in collection Going through a traditional lender can be difficult, and even a subprime lender can turn you down if you have a large amount of debt currently in arrears. However, the type of bad credit you have does play a role.
When you stop paying in an account long enough and the business decides they don’t want to chase after money owed, they often pay off or sell the debt to a collection agency. The agency will then try to collect the money you are owed.
It can be difficult to deal with calls from collectors or the letters they send. You can almost feel like you’re drowning in bills and lawsuits from the collection agency. Not to mention, collection bills can stay on your credit report for up to seven years and negatively impact your credit score. This is in addition to late payments and direct debits which will also affect your credit.
However, consumers are encouraged to pay the collection accounts, provided the debt is valid and the statute of limitations has not passed. FICO scoring models – the most widely used credit score – do not take into account paid collection accounts. In other words, the people who pay their bills (even those who have gone into collections) will be achieved a better FICO score.
While collection bills can still show up on your credit reports even after you’ve paid them, there will be a distinction. The balance owed on the account should be shown as “paid” on your reports, which is certainly better than seeing “due” in the eyes of a lender.
Situational bad credit vs usual bad credit
When you apply for a car loan, a lender will look at your credit reports and credit scores to gain insight into your financial history. If seeing effects in collection will concern a lender, they can also distinguish two types of bad credit:
- Usual bad credit – A form of bad credit in which a borrower has a history of late payments or missing payments. Lenders find it difficult to trust a borrower with habitual bad credit because their history shows that they are a repeat offender.
- Situational bad credit – This is bad credit that results from a life event that changed a borrower’s financial situation, such as job loss, divorce, or medical bills that pile up as a result of ‘injury or illness. After the event, the borrower falls behind on bills and the late payments add up and lead to bad credit.
If a borrower was responsible for their bills before a situational event, a lender is often able to tell the difference between this type of bad credit and typical bad credit. It certainly helps your cause if you are in need of an auto loan.
Get a car loan with bills in collection
A lender may deny you a car loan because of collection bills, and it will be even more difficult to obtain financing if you have a large amount of credit currently in arrears. In some cases, a lender may make the loan only if these unpaid collections are repaid.
So, if you are in need of a car loan with bills in collection, it definitely helps in dealing with old debts and keeping up to date with overdue balances. It will also work in your favor if you are working with a special financial lender.
Subprime lenders understand and are able to resolve credit problems because they place importance on non-credit factors such as income and job stability. However, these lenders usually only work through special finance dealers.
Auto Express Credit wants to help you find a local special financing dealer. We match car buyers with dealerships in their area who work with subprime lenders. All you need to do to start the process is submit for free and secure auto loan application form.