Can a Buy Here Pay Here Car Hurt Your Credit?

Posted Friday, Jun 07, 2024

A "buy here, pay here" dealership is a type of used car dealer where cars are financed directly on the lot, as opposed to the usual process of applying for a loan through traditional lenders such as banks or credit unions.

BHPH dealerships offer in-house credit options, which means that people with less than perfect credit or no prior success in getting traditional loans can still apply for in-house credit to purchase a vehicle. These dealerships are special because they are willing to assist buyers of all credit levels, and can be a lifesaver when you're in urgent need of a vehicle.

In buy here pay here financing, the dealership takes care of the cost of your vehicle, and you'll make payments directly to them until you fully repay the car loan.

Unlike traditional financing, your credit won't be checked to determine your eligibility to buy the vehicle. However, you will still need to verify your employment during the financing process.

However, there is a lot of misinformation about Pay Here financing. Don't be misled into thinking that BHPH can damage your credit.

The convenience of Buy Here Pay Here

With buy here pay here, you don’t need stellar credit to afford the vehicle you need, and it makes cars accessible for buyers with bad credit or no credit history.

A traditional car dealership works with an auto lender who then provides a loan for a car purchase, which means there are a couple of middlemen involved.

Individuals with poor credit face issues with auto lenders, including banks, credit unions, or online lenders. This is typically the stage at which the lender assesses your bad credit, identifies you as a high-risk borrower with a high probability of not repaying the loan, and rejects your application. At this point, the car dealership advises you to try your luck elsewhere.

Due to this reason, people with poor credit often believe that purchasing a car is out of reach because they can’t get approved at a traditional car dealership.

However, "buy here, pay here" dealerships work differently. Instead of relying on an external auto lender, they both sell and finance vehicles on their lot and act as both the dealer and the lender, giving them more flexibility to approve people with poor credit.

There are several advantages to this financing option, including the fact that you won't have to wait since there is no need for a finance manager to reach out to lenders for approval. Additionally, you won't have to meet as many requirements to be eligible. As long as you have a down payment and enough income to make your car payments, you're generally good to go.

Buy Here Pay Here Dealership Won’t Directly Hurt Your Credit

One common concern people have is whether opting for BHPH financing will negatively impact their credit score.

When you apply for a loan from a traditional lender, you will need to provide various details by filling out numerous documents. These details are then shared with credit bureaus, and sharing of information is referred to as a hard credit check.

When the credit bureaus receive this information, they interpret it as you seeking credit, which can impact your credit score. While a single hard check may only cause a slight decrease in your score, multiple checks within a short period can significantly lower it. Traditional car dealerships typically need to conduct a hard credit check through a credit bureau to get your financing approved through their third-party lender.

With buy here, pay here financing; dealerships can approve your financing directly without going through complicated processes. When you visit the dealership, you'll typically need to fill out simple financing forms on-site to get approved immediately. This means you don't have to send your information through a third party. One advantage is that there is no need for a credit check, so your credit score won't be negatively affected.

On the other hand, BHPH dealerships often report loan payments to credit bureaus, just like traditional lenders. By making timely payments on your BHPH loan, you have the chance to establish or improve your credit history.

Do BHPH Dealerships Run a Credit Check?

If you are considering purchasing a pre-owned car from a buy-here, pay-here dealership, they may ask you to provide documents proving your income and address. Whether a BHPH dealer actually checks your credit can vary from store to store. Even if your credit is checked, rest easy they are not making a lending decision based on your credit score alone. Additionally, you will likely need to provide a down payment.

After determining the loan amount you are eligible for, the dealership will present you with cars available within that price range. You will then make your monthly car payments directly to the dealership.

Responsible Borrowing with Buy Here Pay Here

Paying your payments on time is crucial for maintaining a good credit score. When you constantly miss payments, it can have a negative impact on your credit. This is because banks share information about their customer's payment history with credit bureaus. Timely payments can help increase your credit score, while late or missed payments can hurt it, especially in the case of a car loan.

If you're unable to make payments to a traditional lender, they may repossess your car and inform all the credit bureaus about your missed payments. This can severely damage your credit standing. Moreover, repossession can lead to additional charges you must pay to the company that recovers your vehicle. You might also have to get the car inspected and sold again. If you fail to pay this potentially expensive bill, it will be sent to a collections agency, which will further negatively affect your credit score.

Similarly, if you fail to make regular payments to the Buy-Here-Pay-Here dealership, they can also repossess your vehicle. It depends on your situation and the dealership you're dealing with, but it doesn't necessarily affect your credit score.

If you're having difficulty making a payment for your car loan at the Buy Here, Pay Here dealership, you can contact their financial team to discuss possible solutions. In some cases, these missed payments may not be reported to credit bureaus due to the specific terms of the loan, which can protect your credit score.


We understand that your credit score doesn't define who you are as an individual, and we believe in helping you move forward. Starting somewhere is important, and we're here to assist you in improving your credit score. As a reputable car dealership in Fruitland Park, Florida, Honest Autos offers buy-here-pay-here in-house financing. Our goal is to provide affordable financing options and a great buying experience.

Our team understands the credit challenges our customers face. That's why we have a simple and fast approval process regardless of your credit situation. We take pride in offering fair prices and a wide selection of quality vehicles at our dealership. Every car we sell comes with a limited warranty and has undergone a detailed vehicle inspection.

To learn more about our buy here, pay here financing and how we can help with your next vehicle purchase, please contact us or stop by in person. We look forward to meeting you.