Every now and then I will get a customer who is concerned about their credit as it applies to pawn loans.
They really want to know if pawn shops report to credit bureaus or not.
The answer quiet simply is no.
Pawn shops really have nothing to do with your credit score or the credit bureaus that determine those scores.
Really, when you get right down to it, pawn shops exist because people have a hard enough time with credit as it is.
When you think about it, pawn shops are the ‘Poor man’s bank.’
What that means is that when someone doesn’t have the income, job, credit history or score to get money they need to cover their bills from a conventional bank – they turn to pawn shops.
There’s absolutely nothing wrong with that.
That’s exactly what pawn shops are there for. That’s who they are in business to help.
Without pawn shops, people who may have a patchy credit history, or don’t have the employment history that regular financial institutions desire would be without any real means of affordable financing.
Pawn shops act as a safety net for this portion of our society and thankfully, they pretty much always have.
Pawn Shops Don’t Care About Credit Bureaus
When you go into a pawn shop and try to make a loan, the pawn shops aren’t going to run your credit report.
They don’t care what has happened in your past, everyone deserves a fresh start and the opportunity to get the money they need when they need it the most.
All pawn shops care about is what is right in front of them.
They are going to make you a loan based on the collateral that you bring into them, nothing else.
If you bring them in something valuable to make a loan against, then you will have the opportunity to borrow more money than if you bring in something less valuable.
Even better yet, the interest rate that a pawn shop charges you to make a loan is going to be the same no matter what your history is like versus someone else.
Where as banks will play with the interest rates in an attempt to get the most money possible out of you, pawn shops treat everyone the same, right across the board.
Pawn Loans Are Considered Secured Loans
The reason that pawn shops don’t care about your credit history is because pawn loans are what are known as “Secured Loans.”
The loan that they make you is secured by the merchandise that you bring in.
If you default on the loan for whatever reason, they keep the merchandise and it’s really that simple.
Of course, this has some additional benefits as well.
Pawn Loans Are No-Recourse Loans
Furthermore, if you default on your pawn loan, it’s not going to affect your credit what so ever.
Because pawn loans are secured by the merchandise that you bring in, they are also considered no-recourse loans.
What that means is that a pawn shop isn’t going to try to sue you for the balance of the loan.
They aren’t going to send you to collections or harass you on the phone all day.
There is no recourse that they take against you to try to get the loan paid.
They simply keep whatever you brought in and didn’t pay on, and that’s the end of it.
How I like to phrase this is that a pawn loan is the “Harassment Free Financing” option that people can use when they just want to get the money they need without being haunted by it for the rest of their lives.
Pawn shops don’t report to the three major credit bureaus. In fact, pawn shops have nothing to do with credit bureaus and they have no interest in getting involved with them either.
Pawn shops loan you money on the items you bring in, not your credit history, whatever it may be.
Furthermore, pawn shops charge everyone the same interest rates. It doesn’t matter what happened in your past, a pawn shop just sees you as a good person that has had an emergency expense come up and needs a little case.
In many ways, pawn shops are one of the most fair financial institutions in existence, which might explain why they’ve been around for so long.