It can be hard to qualify for an auto loan if you have bad credit, but there are alternatives. One option is to purchase a car through a rent-to-own program. This is an option that anyone can use, even people with bad credit, but it may not affect your credit in the way you hoped.
Does it require a credit check?
One of the many reasons people choose to purchase cars from rent-to-own agencies is that they do not require credit checks. While there might be some dealers that do, most will not. This means that you can go to a car dealer and drive home a car without the dealer ever finding out what your credit score is.
You will have to produce other forms of documentation though, which may include your driver's license, insurance card, proof of address, and proof of income. Each dealer is different, and you may want to call before you go to find out what you will need.
Is the loan reported on your credit?
One thing you should know before buying through a rent-to-own program is how it will affect your credit. In most cases, rent-to-own deals are not reported to major credit bureaus. If you are hoping to use this loan as a way to rebuild your credit, you may want to think again. Because they do not report to credit bureaus, there will not be a record of the transaction on your credit report.
While this certainly will not hurt your credit score, it will also not help either. What you should realize is that while it may not improve your credit score, it is a great way to get by while your credit is poor. When the rent-to-own program is over and you own the car, your credit may already be better simply from the passing of time. At that point, you may have a score high enough to qualify for a good interest rate on a traditional type of car loan.
What happens if you default on the loan?
Finally, if you are trying to improve your credit score, do not default on the payment arrangement. Even though the dealer will not report your monthly payments on the car, the dealer will most likely report a default on the deal.
This could cause your score to drop significantly, and you can avoid this by making all your payments on time.
If you are in a situation where your credit score is lower than it should be, you can still buy a car from a rent-to-own dealer like Rent To Town Autos. This is a great way to get a vehicle if you need one, and almost anyone will qualify.