If you borrow money for an auto loan, that information will find its way onto your credit report. Your lender has a lien on your vehicle, which means you cannot sell or otherwise dispose of your car until the debt has been satisfied. Once you have paid off your loan, then your credit report will be updated to reflect that action.
Vehicle Financing
When financing a vehicle, your bank, credit union or finance company holds a lien on the vehicle's title until you have paid off your debt. In some cases they will hold the actual title, transferring it to you once your debt has been satisfied. Details about your auto loan including lender, outstanding balance and payment history are part of your credit report.
Payment Problems
Problems you have with making payments for your vehicle on time can find their way to your credit report. Your lender may notify the three major credit reporting bureaus---Experian, Equifax and TransUnion---of your tardiness, a move that can adversely affect your credit score and make it more difficult for you to receive additional credit. Your lender may also charge you fees and penalties if you fall behind on your auto loan.
Vehicle Repossession
Your new car purchase agreement spells out the consequences of falling behind on car payments. Beyond penalties and related fees, a provision detailing under what circumstances your car can be repossessed will be outlined. Once your auto loan has fallen into default, your creditor can seize it without notice. A vehicle repossession will appear on your credit report, a move which will damage your credit rating.
Working With Your Lender
Contact your lender and explain your situation. Offer to make a partial payment or give them a date when payment in full for that month can be expected. Negative action on your part may not find its way into your credit report if you show good faith by staying in contact with your auto lender.
Your Reports
You can obtain one free copy annually of each of your three credit reports from AnnualCreditReport.com, the only site authorized to dispense that information to you upon your request. Those reports will tell you what creditors are saying about you including your auto lender. Incorrect information about you should be corrected including liens that have been removed.
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