Do Lemon Law Claims Affect Your Credit Score or Car Loan?

It’s difficult enough going through the frustration of owning a defective car, then pursuing a lemon law claim, without worrying about any repercussions. Some people think lemon law claims affect their credit score or their ability to later get another car loan. With all the complexities involved, it’s easy to see why people might wonder about the outcomes to their financial wellbeing.

The good news is that your lemon law claim cannot hurt your credit.

Filing a lemon law claim itself does not directly impact your credit score. Your credit score is primarily influenced by factors like your payment history, credit utilization, and debt levels; not by the act of filing a legal claim.

Let’s look at the typical lemon law process and see where any of the misconceptions could get started. Then we’ll review how people could think that the lemon law claim itself might cause problems, when that is actually not the case.

Typical Lemon Law Claim Process

What happens during a typical lemon law claim process is that you will meet with a lemon law attorney? The attorney provides a free consultation so you get a chance to share all the facts about your claim. You’ll submit repair records, phone conversation notes, letters, texts and more; everything you have that proves your claim. The attorney, with their knowledge of and experience with state and federal laws, determines if your claim is valid and if your car can qualify as a lemon.

This is the key point: The defect needs to be substantial and affect the vehicle’s use, value or safety. There can be some variables involved with this definition, and your attorney will address those according to the circumstances involved with your claim.

None of this work impinges on your credit score. And pursuing your claim won’t damage it, either.

If you want to move ahead with your claim against the manufacturer, it can be pursued in various ways. Often, lemon law claims are settled before they go to court. Sometimes you go through arbitration, which is more informal than a court case. Usually, the arbiter’s decision is binding on the manufacturer, but not on you. So, if you’re dissatisfied with the decision, you can still sue the manufacturer.

But What Happens If You Stop Making Your Loan Payments During the Lemon Law Process?

Some people think that if they are in the middle of a lemon law claim, there’s no reason to keep paying their car loan. That is not true. Since some vehicle owners are worried about lemon law claims and their credit, this is the area that often gets misunderstood.

Please note: You must continue making your car loan payments while the lemon law case is ongoing. If you miss payments, that can lead to negative marks on your credit report or even repossession. Also note that these actions are about payment behavior, not the claim itself.

If you stop making loan payments while pursuing a lemon law claim, the lender can report late payments to credit bureaus, damaging your credit score. So, this is where a lot of the misunderstanding comes from.

It’s important to keep paying your loan during the lemon law process to avoid these issues. The lemon law claim doesn’t excuse you from your financial obligations until a resolution (like a buyback or replacement) is reached.

Could It Ever Help Your Credit?

Interestingly, resolving a lemon law claim successfully can sometimes improve your credit. For example:

If the manufacturer buys back your defective vehicle, they typically pay off the loan in full. This reduces your overall debt, which can boost your credit score.

You might also receive a refund or settlement that lets you pay off the loan early or put money toward a new car with better terms.

Could It Reduce Your Credit Scores Temporarily?

The lemon law claim process itself doesn’t affect your credit. How your credit is scored involves mixes of the types of credit you have and their longevity (how long you’ve had them open). While a successful lemon law claim doesn’t directly hurt credit, if the settlement involves paying off the existing loan, that loan closing may temporarily, and only slightly (and it depends on each person’s unique credit situation) lower your credit scores. Usually, this is not a problem for most people, as your credit score is not solely dependent on one loan opening or closing.

Does It Affect Future Auto Loan Eligibility?

No; the claim itself doesn’t affect that.

There’s no direct link between filing a lemon law claim and being denied a future auto loan. Lenders take into account multiple facets about your financial situation. They don’t typically check whether you’ve filed a lemon law claim in the past. It’s not a standard part of credit reports or loan applications. Again, the key is to keep up with your payments during the lemon law process. If your credit stays solid, your eligibility for future loans shouldn’t be impacted by your claim.

Key Takeaways

Concerns about lemon law claims and future financial activities aren’t entirely baseless—payment issues during a lemon law claim can affect your credit—but the claim itself isn’t the problem. As long as you stay current on your payments, filing a lemon law claim won’t hurt your credit score or your ability to get an auto loan later. If you have any questions concerning your particular case, speaking with a lemon law lawyer can help.

Why You Need a Lemon Law Attorney

As we’ve seen, a lemon law claim in and of itself doesn’t affect your credit score. A lemon law attorney can help you get the most for your lemon vehicle, so you can end the frustration caused by your faulty car. What is actually worth worrying about in the case of lemon laws and credit is ensuring that car loan payments are kept up. You’ll also want to keep up your car insurance, too, until the lemon law case is resolved, to ensure you don’t suffer penalties or fines.

The clearest path to resolving your lemon law problems is working with a skilled lemon law attorney. They know how to keep your case moving forward, meeting all required filing deadlines and aggressively protecting your rights against the manufacturer. Manufacturers aren’t motivated to provide compensation; often they will try to dismiss, reduce or avoid your claim. Your lemon law attorney knows this, and also knows that the manufacturer will often want to settle the case to avoid court.

Trust Allen Stewart, P.C. for Expert Lemon Law Representation

Now that you know that a lemon law claim cannot hurt your credit, and the closing of your loan after you win your claim can only minimally affect your credit score, you may be ready to move forward. Allen Stewart, P.C. offers years of experience winning lemon law claims across the country, including in Texas, California, and New York. We fight for you so you can win just compensation for your substantial vehicle defect.

Please know that the manufacturer will bring to bear its legal team to try and evade, reduce, or deny your claim. You need an experienced, winning lemon law attorney to fight for your rights. Take advantage of our free consultation. Call Allen Stewart, P.C. (866-440-2460) or contact us online. Thanks to federal law, our clients pay nothing out of pocket, so contact us now for a free consultation.