Why Does My Credit Score Fall Immediately After Buy Here Pay Here Financing?

Credit scores tend to fall after any type of financing, not just buy here pay here. Yet, many tend to point this out as a huge disadvantage of buy here pay here financing and hold the bad credit auto loan solely responsible for your new poor credit score. FICO scores also fall when you apply for a new credit card. You will also see your credit score take a nosedive after you pay off your student loan or home mortgage (weird, we know). But that is how the credit score system works and a fall can happen any time. Just blaming buy here pay here financing for the drop is blatantly unfair and mythical.

So, why does your credit score fall?

To explain this, you will first have to understand the true meaning of credit scores. Your FICO score is a measure of your creditworthiness, or how likely are you to pay off an existing or new debt without any chance of default. When you opt for bad credit used cars in Spartanburg, SC, and finance the same using BPHP financing, you are actually adding another debt to your existing portfolio. Until you start paying off this new debt, the debt burden on your credit report is more now than it used to be. Naturally, your capacity to take yet another loan drops, your creditworthiness deteriorates, and your credit score falls.

This is true for good credit score holders as well who choose to finance their used vehicles from banks. Or, any other buyer who uses debt to buy a car. Only, a fall in credit score hurts a bad credit score holder more as the number is low, to begin with. Hence, let us not put the entire blame of the fall in credit score just on buy here pay here financing. The FICO model makes it happen.

Can you improve your credit score after the drop?

For this, you will need to search for a buy here pay here near me that reports your monthly credit payments to the respective authorities. Not all dealerships go through the trouble of sending your payment information and helping you to improve your credit score. At Family Auto of Spartanburg, the option is available. We are an accredited buy here pay here business and report your credit payments to enable you to improve your credit score. With Family Auto, you can not only fix the initial drop but also go on improving your credit score by paying off the auto loan regularly. Timely payments show the authorities that you can maintain your new debt and you end up with a good score.

With dealerships that do not report, your credit score stays at the new level. Your additional debt shows up in the credit report but the regular payments have no effect to improve the fallen score. This is not the industry’s disadvantage. Just a few dealers do not report. If you finance from the best used car dealerships in Spartanburg, SC, like Family Auto, the fall in your credit score will only be temporary and you need not bother about it as the score will improve with time.