According to recent reports, 6.3 million Americans in Minnesota and other states are at least 90 days late on their car payments. Unfortunately, when drivers get this far behind on their auto loans, they lose their vehicles through repossession. This causes huge credit score drops for Minnesota consumers who may already have bad credit, as well as unexpected fees. Also, statistics show that Minnesota car buyers who get auto financing from buy-here-pay-here (BHPH) dealers are much more likely to miss payments. These types of auto loans are popular among Minnesota consumers with bad credit because BHPH dealers typically don’t run credit checks. However, BHPH loans – like all subprime auto loans – come with high interest rates that make them expensive over time.
So, while finance experts don’t expect delinquent subprime auto loans to cause another recession, they are concerned. For consumers with bad credit scores in Minnesota and every other state, BHPH auto loans may only make their situations worse. Also, most BHPH dealers don’t report positive payments to the credit bureaus.
Why Minnesota Car Buyers with Bad Credit Should Avoid Expensive Auto Loans that Might Lead to Delinquency and Repossession
Buy-Here-Pay-Here auto loans in Minnesota don’t come from banks, but the dealers themselves, and they normally come with interest rates ranging from 15%-20%. Banks and credit unions sometimes provide subprime auto financing, and with much lower APRs. Interestingly enough, 9.7% of dealer-provided loans are currently late by 90 days or more. Yet, only 4% of Minnesota car buyers with bad credit who financed through banks or credit unions are this delinquent with payments.
When Minnesota consumers face repossession, losing their vehicles is just the start of their problems. Sadly, repossession seriously damages credit scores and stays as a negative mark on credit reports for at least seven years. In addition, Minnesota drivers who lose vehicles to repossession often find that they still owe money. This is because, even though banks normally sell repossessed vehicles at auction, their selling prices seldom cover the balances on delinquent auto loans. So, Minnesota consumers who have their cars repossessed must cover the difference, or the “deficiency balance.” If that isn’t bad enough, they usually have to pay the repo fees as well.
At this point, Minnesota drivers can clearly see that they should avoid delinquency if at all possible. So, if you are currently behind on your car payments, catching up is crucial. Or, if you have bad credit and need to finance a vehicle, try to go through your bank and credit union instead of relying on a BHPH auto loan. If you can delay your car purchase for a few months, use this time to improve your credit score so that you can qualify for competitive interest rates on your loan. This should keep your payments lower and reduce your chances of future delinquency.
How Minnesota Consumers Can Improve their Bad Credit Scores and Get Better Deals on Auto Loans
Improving bad credit scores in Minnesota takes time and effort. However, with dedication to credit repair, you should start to see progress pretty quickly. First, get current with all of your bills, including your car payment. Next, pay down high credit card balances. If your credit utilization rate is high (above 30%), and you get it down to under 30% your credit score should get an almost immediate boost. Finally, if you don’t have a credit card, apply for one, and use it sparingly. Minnesota consumers who don’t qualify for unsecured credit cards can apply for secured credit cards with a cash deposit. Of course, no matter what kind of credit card you get, never let your balance get above 30% of your spending limit. Then, always pay your balance in full every month to avoid building debt.
Finally, anyone trying to improve their credit scores in Minnesota should regularly check their credit reports. The truth is that your low credit score may be lower than necessary because of credit report errors. In fact, about 80% of Minnesota credit reports contain inaccuracies of some kind. So, go to www.annualcreditreport.com, and request free copies of your credit reports from TransUnion, Equifax, and Experian. Under the Fair and Accurate Credit Transactions Act (FACTA), you are entitled to do this once every 12 months.
If, while reviewing your credit reports, you find credit score damaging mistakes and errors, contact Credit Repair Lawyers of America in Minnesota. Our team of credit pros is standing by to connect you with an experienced credit attorney who will fix your credit issues and get you clean credit reports – for free.
The Free and Legal way to Get Better Credit
Don’t let errors on your credit reports bring your credit score down. At Credit Repair Lawyers of America, we’ve been cleaning up credit reports for consumers since 2008 for free. How do we do it? The law allows us to collect our fees and costs from the defendants in any successful action. This is why our clients pay nothing for the work we do.
Let’s start the conversation about what we can do for your credit. Set up your free consultation today by calling Attorney Gary Nitzkin at (612) 235-4458 or sending him a message through our contact page.
For more information about Free Credit Repair, please visit https://www.creditrepairlawyersam.com/minnesota/credit-repair/.