If you’re asking this question, you’re probably worried. Your credit history can feel like a major roadblock, and you’ve heard that Buy Here Pay Here (BHPH) dealerships are different. They often don’t check your credit, so maybe—just maybe—a repossession won’t show up and hurt your score.
The internet is full of vague, non-committal answers. Some articles say a repossession “may not affect” your credit score, while others imply that if this type of car dealership doesn’t do a hard credit check to approve you, they won’t report negative activity either.
This is confusing, and making a decision based on bad information can have a lasting impact on your financial life. Many people find themselves in this exact situation, worried about the risk of a potential repo.
Below, you’ll get a real, no-nonsense answer from me, Eric Malak, the owner of a Buy Here Pay Here dealership and an expert in the space.
Plus, I’ll go into the details of how bad your credit could be affected, how you could possibly rebuild your credit with a BHPH car loan, and the best way to handle things with a dealer if you’re having trouble making your payments.
The Direct Answer: Yes, It Can Go On Your Credit
The biggest mistake a borrower can make is assuming a BHPH dealership exists in a bubble outside the credit reporting system. The lender in this situation has several options for recourse. While not all BHPH dealers report to a credit bureau, many do. And even for those who don’t, the chain of events following a repossession can still ruin your creditworthiness.
Here is the specific chain of events after a loan goes into default:
Step 1: The “Charge Off”
First, the dealership will repossess the vehicle, an event commonly called a repo. If you are unable to get the car back, the dealer will write off the account as a loss.
If the dealer reports to credit bureaus, this action will appear on your credit report. This notification to the bureau creates a long-term record of delinquency.
A repossession, whether you voluntarily surrender the car or not, becomes a “charge off.” This is a severely negative event, indicating to future lenders that you did not fulfill your financial obligation as outlined in your contract.
Step 2: The Deficiency and The “Judgement Due”
After the recovery of the vehicle and its sale at auction, there is often a remaining balance. This is called the “deficiency balance,” and it represents the cost you still owe. This is where things can go from bad to worse. This is a financial risk every borrower takes on with a secured loan.
If the dealer decides to pursue this deficiency balance, they can win a “judgement due” in court. This “judgement due” is a separate, public-record item on your credit report that is incredibly damaging and can remain for years.
I used to take these charge off accounts to court and always win a judgement. One time one of these accounts wanted to buy a house, but they needed to clear that judgement with me so they came and paid off their balance 5 years later.
“No Credit Check” Does NOT Mean “No Credit Reporting”
This is the most dangerous myth. It’s crucial to understand that these are two separate actions.
- Pulling Credit (The Check): This is part of the underwriting process. Many BHPH dealers skip this, which is their main appeal. They finance you based on income and a stable residence, often requiring a significant down payment instead of a high credit score. The lender takes on more risk, which is why the interest rate is typically higher.
- Reporting Credit (The History): This is the process of reporting your payment history. A dealer can absolutely do this even if they never pulled your credit to begin with. Your loan agreement is a binding contract, and failing to pay is a breach of that contract.
Assuming a dealer who offers “no credit check” loans won’t report a repossession is a risky gamble.
To add to this, here is a critical piece of information that nobody really knows: Just because a BHPH dealer isn’t reporting to the credit bureaus at the moment, doesn’t mean they won’t change their mind and report everything later.
Credit bureaus like Equifax, Experian, and TransUnion allow the lender to upload a file containing all of their charge-offs. This file could date back to when the car dealership first opened.
For example, a dealer who hasn’t reported credit since 2014 can decide today to start reporting again. When they do, they can include all of their charge-offs from the previous years in that first file. So, just because a lender hasn’t been reporting doesn’t mean they lose the right to report your repo later on.
It could show up on your credit history years after you thought the issue was over.
The Silver Lining: How a BHPH Loan Can Rebuild Your Credit
But let’s not just focus on the negative. For a responsible customer, a reporting BHPH dealer offers a massive opportunity.
If a dealer reports your payment history, every on-time payment helps to rebuild your credit history. It establishes a positive track record that can raise your score over time.
This gives you the option to one day move past BHPH vehicles and qualify for traditional financing with a much lower interest rate. It can be a great way to improve your creditworthiness for the future.
Before It Gets to Repossession: What the Experts Want to Hear
If you’re facing financial hardship, you need to understand your rights and obligations under your loan agreement. Communicating proactively with the lender is key to exploring your options. The generic advice to “talk to the dealer” is useless without knowing what to say. The answer is simple: honesty is the best policy.
Let the dealer know upfront and explain why it happened. Whether it was a financial hardship, a divorce, or an accident, BHPH dealers specialize in dealing with customers with previous repos, so you are not going to scare them off.
But lying to them about it could give them second thoughts about financing you.
Don’t ghost them. Don’t make up stories. A direct, honest phone call explaining your situation is the single best tool you have to avoid repossession and protect your credit.