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Can I Fix My Credit at a Buy Here Pay Here Car Lot?

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Whether or not a car loan from a buy here pay here (BHPH) dealership can help you fix your credit depends on the dealer. An auto loan can be a great way to improve your credit score – if the lender reports loans and timely payments to the credit bureaus. Not all lenders do, which means it’s not always possible to fix your credit at a buy here pay here lot.

How Auto Loans Help Credit

Can I Fix My Credit at a Buy Here Pay Here Lot?Payment history is the largest of five factors that make up your credit score, accounting for 35% of it. The other factors are amounts owed (30%), length of credit history (15%), new credit (10%), and credit mix (10%).

As you make on-time payments on loans and bills, those payments are typically reported to one or more of the three national credit bureaus: TransUnion, Experian, and Equifax. Every timely payment added to your credit history can improve your credit score.

However, not all lenders report payments, including some BHPH dealerships. Even though a BHPH dealer can be a great way to get a car loan when you’re struggling with credit, if they don’t report your on-time payments, they won’t be included in your credit history to increase your credit score.

Make sure to ask about their reporting practices ahead of time if you’re trying to fix your credit with one of these loans.

Auto Loans from Buy Here Pay Here Dealers

Buy here pay here dealerships, also called in-house lenders, are both a dealer and a lender. They are known for not always checking a borrower’s credit in order to consider them for auto financing.

Instead, they rely on your income and down payment to qualify you. Because they don’t rely on an outside credit check, the process can often be quicker than at other dealerships, often allowing you to sign and drive in one day.

Qualifying for a car loan at a BHPH lot means having enough income to cover the monthly payment. They typically also require a down payment that could be as much as 20% or more of a vehicle’s selling price.

BHPH dealerships only sell used cars, and you can often find a range of vehicles on these lots, from older, higher-mileage cars to late model used vehicles. The inventory varies from dealer to dealer depending on what they purchase at auction or take in on trade-ins.

Bad Credit Car Loans through Subprime Lenders

BHPH dealerships aren’t your only option when it comes to getting a bad credit auto loan. Subprime lenders that work through special finance dealers can also help many people that are in unique credit situations. These lenders report loans and timely payments, so they’re a good option for building credit while getting the car you need.

Subprime lenders understand that you’re more than a credit score, so they use additional information to get you approved. The other factors that subprime lenders look at show them that you have the ability, stability, and willingness to take on an auto loan. These include income, employment, residence stability, the ability to make a down payment, and more.

Unlike BHPH dealerships, subprime lenders are able to approve loans on many types of vehicles, including new, used, and certified pre-owned cars. Even though these lenders offer loans on all types of vehicles, what you qualify for depends on your credit situation.

Let Us Help You Get Started

If credit improvement is your goal, you need to make sure that the lender you’re working with reports to the credit bureaus before you sign a contract. Remember that not all BHPH dealers do this, so it’s important to check with them up front.

When you’re ready to take on your next auto loan and fix your credit, we want to help. Here at Auto Credit Express, we can match you with a local special finance dealership that has the lenders available to assist borrowers who are struggling with credit issues.

Save yourself the hassle of searching for a dealer on your own, and start here instead. Begin by filling out our fast and free car loan request form right now.

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AROUND OREGON: A financial lifeline during Covid

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The economic downturn caused by the pandemic has hit Indian Country particularly hard. Entrepreneurs are turning to small, local lending institutions in a region that’s often outside the reach of traditional banks.

Clients of Roxanne Best take part in one of her paddleboard yoga classes on the Okanogan River. (Courtesy/ Underscore)

Roxanne Best was preparing to relaunch her photography business when Covid made its way to the U.S. A serial entrepreneur and member of the Confederated Tribes of the Colville Reservation, Best teaches paddleboard yoga classes and artist-in-business workshops. She also taught “Indianpreneur” classes, the term used by an Oregon nonprofit for its business workshops. To put the photo enterprise back on its feet, she purchased marketing materials and scheduled events to showcase her product to clients.

“Then the pandemic hit and all the gigs I was scheduled for were canceled,” Best said in a telephone interview from her home 40 miles south of the Canadian border. “The income I was expecting was gone.”

Best went from helping other entrepreneurs get started to needing assistance herself. So she turned to the Northwest Native Development Fund, a community development financial institution based in Coulee Dam in north-central Washington state. Known as a CDFI, the fund is a private financial institution that delivers affordable lending to help low-income, low-wealth, and other disadvantaged people and communities. CDFIs mostly focus on specific communities or regions and provide funding and other services to encourage economic development and economic security.

The funds are nothing new — the Northwest Native Development Fund has been around for more than a decade. But the funds have been a lifeline to entrepreneurs who don’t have access to connections with traditional lines of credit during the economic downturn caused by the pandemic. Indian Country, and businesses in the arts, entertainment, and recreation, have taken a hard hit during the pandemic, according to a report by the Federal Reserve Bank of Minneapolis’ Center for Indian Country Development.

Many reservation residents in the Pacific Northwest “don’t have an ATM on their land, let alone a full-service bank,” said Amber Shulz-Oliver, a Yakama-Wasco descendant who is the executive director at the Affiliated Tribes of Northwest Indians – Economic Development Corporation. “Many don’t have collateral like a house or a rich uncle to borrow $10,000. CDFIs can be an institution that is trusted to get that kind of capital to build businesses.”

The battle to end predatory lending

Ted Piccolo, executive director and creator of the Northwest Native Development Fund based on the Colville Indian Reservation, is considered the region’s CDFI guru.

NNDF, which Piccolo founded 13 years ago, has lending capital of about $5 million. He would like to double that war chest by the end of the year.

“If we had to, if people came to the door, we could deploy close to $8 million tomorrow with the money on hand,” he said, noting that total would include loans already out.

The fund opened its doors in 2009 with classes, workshops, and small business planning.

“I was looking for ways to get some of our Native-owned businesses financing who couldn’t get traditional financing,” said Piccolo, a member of the Colville Tribe. “They were stuck in the water, on the sidelines.”

NNDF became a quasi-business consultant, educating business owners about the financing process and the need for good credit. Toward that credit goal, NNDF initiated an “anti-payday loan” program.

“One of the reasons for bad credit was people getting into all this high-risk stuff, super expensive predatory sinkholes that they couldn’t get out of,” Piccolo said.

People were trapped in a system that operated to keep borrowers in debt. Piccolo said predatory lending practices that include the principle, interest, and fees, can reach 200 or 300 percent, and create an exponential and unending debt.

Instead, NNDF offers a loan product that allows an individual to pay off a hypothetical $1,500 loan over 12 months with an interest rate of 15%, building new credit as he or she pays off the loan.

Borrowers are incentivized to pay off their advances with the promise of better interest — as low as 10 percent — on ensuing loans.

As envisioned, borrowers will pay off their NNDF loans and build enough beginning credit to obtain further credit through more traditional banks or credit unions. On top of providing loans, the fund offers counseling to help clients build business and marketing plans. Staffers hold family budget workshops, and in 2019 the fund financed the construction of a house to address a shortage of homes in the region.

Economic development means a robust private sector

CDFIs serving Native American communities give an economic boost for the entire region, Shulz-Oliver said.

“One of the big tools of economic development is a robust private sector, but small businesses need capital,” she said.

Piccolo said the biggest challenge for CDFIs in Indian Country is “human capacity” to operate the financial institutions.

“Out here on the reservation there just are not a lot of loan officers, accountants or controllers,” Piccolo said. “We need to train them and pay them, and still operate at the same time. We’re all learning on the fly, learning how to train while raising money to train and lend.”

And while CDFIs aren’t new — there are at least 1,000 of them, 70 of which serve Native communities, across the country — they’re growing. A 15-member Northwest Native Lending Network of developing or operating CDFIs was organized in 2019 at the Economic Summit for the Affiliated Tribes of Northwest Indians – Economic Development Corporation. The Northwest’s newest CDFI is the Nixyaawii Community Financial Services serving the Confederated Tribes of the Umatilla Indian Reservation in northeastern Oregon.

In the Northwest region, many Native CDFIs’ business portfolios consist primarily of natural resource-based ventures, with loans for logging equipment and fishing boats. However, CDFIs work with all kinds of clients, including a software company trying to get off the ground with help from ATNI’s Economic Development Corporation. The goal of these institutions is to help clients reach financial stability so they no longer need the CDFIs’ services.

“We’re trying to put ourselves out of business, to make individuals credit worthy enough” to access more traditional funding sources, Shulz-Oliver said.

Loan provided needed boost

Best provides training and teaches her yoga classes, but her bread-and-butter is portrait photography, especially photos for high school seniors.

More than a year after the pandemic hit the U.S., Best is still in business, eying senior portraits and the paddleboard yoga season. Best said the NNDF loan provided cash flow that carried her through the initial shock of the economic slump.

“That $5,000 is all it took to get out of the stressed-out mindset,” she said. “Now the bills are paid. You’ve got a good month or two to figure out how to make things work. That one little loan transformed the direction I was able to grow with my businesses.”

This story published with permission as part of the AP Storyshare system. Salem Reporter is a contributor to this network of Oregon news outlets.

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Why Are Certified Pre-Owned Cars More Expensive?

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The used car vs. certified pre-owned (CPO) argument can typically be summed up with the phrase “you get what you pay for.” Both are technically used vehicles, but CPO cars have a few advantages that may be worth their price tag.

Why CPOs Cost More Than Regular Used Cars

A CPO vehicle is commonly called the cream of the crop of used cars, and its price tag often reflects this. CPO vehicles tend to be more expensive than standard used ones.

But, why?

One of the biggest reasons why CPO cars are more expensive than their used counterparts is that CPOs are inspected by a manufacturer-certified mechanic. This means that every CPO vehicle must meet certain standards before it’s labeled as such. A true CPO is sold at a franchised dealership. Mom-and-pop dealers don’t have these vehicle options (and “dealer-certified” is not the same thing as a manufacturer-certified car).

Another reason for the higher price tag is that many CPO vehicles have just come off-lease. When a lessee returns a lease, the manufacturer’s likely to inspect to see if it qualifies for their CPO program. Since most auto lease terms are around two to three years, many off-lease cars make the cut when they’re returned clean and meet the low-mileage requirements. CPO cars are also refurbished, unlike regular used vehicles.

Each auto manufacturer has its own set of standards for their CPO cars, but the guidelines are usually in this ballpark:

  • Vehicles typically must have less than 80,000 miles
  • Some luxury brands require less than 50,000 miles
  • Typically must be less than ten years old, sometimes newer
  • Only one previous owner

Regular used cars don’t go through these rigorous manufacturer inspections before they’re sold. A used vehicle may be inspected in-house at the dealership before it’s sold, but likely not through the manufacturer like a CPO.

CPOs Are Covered

All CPO vehicles come with some sort of warranty, which adds to the overall cost, but offers peace of mind. Being on the newer side, many CPO cars may still be covered under their original manufacturer’s warranty and often include an extended warranty once that expires.

Some perks manufacturers may include in their CPO warranties include:

  • Why Are Certified Pre-Owned Vehicles More Expensive?12-months of 24-hour roadside assistance
  • A 12-month warranty after the manufacturer’s warranty expires
  • A vehicle history report
  • Powertrain coverage
  • Car rental coverage
  • Trip interruption benefits

Of course, manufacturers vary in what their warranties include when you purchase a CPO vehicle. Be sure to read through the exclusions of the warranty so you know what the terms are, how long you’re covered, and if there are any limitations.

Can Bad Credit Borrowers Finance a CPO?

Generally, bad credit borrowers are told to finance a used vehicle over a brand new one because used cars come with a lower sticker price, usually. However, while CPO vehicles tend to be a little more expensive than regular used vehicles, a CPO’s selling price is still likely less than a new car due to initial depreciation. Depreciation is loss of value over time due to mileage, age, and normal wear and tear.

Brand new vehicles lose a lot of value in the first two or three years of ownership, possibly up to 20% in that time, and it’s usually the steepest drop in value over the life of the vehicle. However, after those first couple of years, depreciation tends to slow down. If you opt for a CPO car, it’s usually much less expensive than its brand new equivalent, and very likely has already seen its steepest drop in value.

A CPO car is likely a more attainable option for bad credit borrowers than a brand new one. And if a borrower with credit challenges works with a special finance dealership that’s signed up with subprime lenders, CPO vehicles can be an option if they meet lender requirements.

Ready to Stop Looking and Start Shopping?

Sometimes the toughest part of car shopping is figuring out which dealership you can work with. There are so many dealers out there, and it can be tough for bad credit borrowers to tell which ones are signed up with subprime lenders that can assist with credit challenges.

At Auto Credit Express, we’ve crafted a nationwide network of special finance dealerships that are able and willing to help bad credit borrowers get the vehicle they need. Skip the search for a dealer with bad credit resources and let us do the legwork for you.

Starting is simple: complete our free auto loan request form and we’ll look for a dealership in your local area with no obligation.

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My husband signed for a car for a friend — against my wishes. Now we get notices for unpaid tolls and parking tickets. What if there’s an accident?

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My husband signed a car lease for a friend. He told me he was co-signing because his friend had bad credit even though I objected to that and asked why his friend can’t just buy a used car. Then at the last second, my husband told me that his friend’s credit “was so bad he had to take out the whole loan” in my husband’s name only.

Aside from the fact this story doesn’t add up, he is now getting second notices for unpaid tolls and parking tickets, and just sends them to his friend and trusts him to pay. He ensures the lease payments are made every month, and tells me that tolls will send collections notices before reporting to credit-collection agencies.

He also claims that his friend has insurance, but that doesn’t add up. The state we are in requires the owner to have insurance. He tells me that none of this is my business, and I have no right to be upset. Yet every time another “past due” envelope arrives I panic at the thought of the savings I worked so hard to put away might be gone in one accident, and that the home I wanted to buy with our excellent credit won’t be possible anymore.

Can you help me explain to him why this was a very bad idea, and why it’s not “none of my business,” as he says? What options do I have to get us out of this mess before we lose everything?

Panicking Wife

You can email The Moneyist with any financial and ethical questions related to coronavirus at [email protected]

Dear Panicking,

Yes, your husband is responsible for the vehicle insurance, especially if someone else is driving this car on a regular basis. If the documents say the borrower should be the primary driver, your husband’s arrangement with this friend is a “straw deal” and is likely also illegal.

But your problems go way beyond this car. Your husband’s willingness to take out a lease on behalf of a friend, and endure these collection notices, raises many red flags. What does your husband owe this person? Why would he go above and beyond any reasonable expectation of a friendship to risk his finances and credit rating in this way? The fact that he did this against your express wishes and good sense adds insult to injury. Something is wrong with the bigger picture.

As for your husband’s legal liability. According to Maggiano, DiGirolamo & Lizzi, a law firm based in Fort Lee, N.J., “As strange as it may sound, you can be held liable for a car accident that involves your vehicle — even if you weren’t present at the time. In most motor vehicle accidents, the negligent driver is the one held liable for any injuries or harm caused. However, in certain situations, the law can attribute fault to the owner of the car instead.”

The firm cites the legal principles of negligent entrustment and negligent maintenance. The first involves “entrusting your vehicle to someone who was unfit to drive.” Negligent maintenance “is the failure to properly maintain your vehicle, presenting a safety risk for anyone driving the car. This term ‘negligent maintenance’ is used because you have a duty to other drivers to keep your car in safe, working condition as to minimize the risk of an accident.”

Given that your husband owns the car and it is being driven by someone who is not paying its bills, and creating more costs through careless driving and bad parking, your husband is already fully aware that this is a bad situation. You are left without a “why” or action by your husband to address this. Take a closer look — with the help of an attorney — at your joint/separate finances, and explore ways to protect your savings. You also need to take action to restore your peace of mind.

Otherwise, you will be driving around in proverbial circles without knowing your legal and financial options. Whatever that potential action entails should be decided between you and your attorney in the first instance. I am willing to guess that this is not the first time your husband has made a decision in your marriage that has left you baffled. A lawyer should explain to you why it’s a bad idea to endure these kinds of unilateral decisions, and what you can do about them.

The Moneyist: ‘I cut his hair because he won’t pay for a haircut’: My multimillionaire husband is 90. I’ve looked after him for 41 years, but he won’t help my son

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