We are asked this question so often we have decided to write an article on it. Customers want to know is it hard to get accepted for car finance; and if they have a poor credit score can they still be accepted for a car loan. Bad Credit Car Finance – does it exist? Is finance out of reach for me?
In general, you don’t need a good credit history to be offered car finance. Your credit history will determine what offer you are given. Experian have recently advised that nearly 20% of there customers that have accepted car finance offers have credit scores below 600. Obviously; those with an extremely poor credit history will not be offered finance.
What credit checks are done for Car Finance?
Finance companies will not want to offer money out to just anyone. Imagine if you were lending your own money out; you would want to be positive that you will get the sum returned right? For this reason; your credit score will be checked by finance companies. They will look at your credit history so they can evaluate how likely you are to repay the car loan you are about to take out.
It is up to the lender what credit checks they carry out for their due diligence. They could use a third-party service; such as Experian or Equifax. Or they could use have their own internal credit scores; which can be based on various sources of information including your credit report. A good credit report is not the sole factor but will play a strong part in your chances of getting a loan.
Your credit report is useful for lenders because it shows them how consistent you are when repaying your debts in the past. It will show missed payment or defaults. If you have these, they will think you are less likely to repay a new loan than someone that pays for everything on time. Makes sense, right? Also, if you already have many loans and are near to your credit limit, this may suggest that you cannot afford to take on another loan.
My credit history is poor? What next?
If you have applied and been declined; all is not lost. The decision to decline you would have been made by the finance lenders. Just because you were declined; doesn’t mean that you will be in future. There are several ways you can improve your credit score; one of which is by paying your bills on time. Paying on time is a great way to prove to lenders that you’re capable of managing finances effectively.
More ways to improve your credit score can be found on our blog article: https://www.carfinancedeals.com/blog/104/how-to-improve-your-credit-score-bust-myths–improve-your-rating
The good news is that your credit report doesn’t stay the same from the moment you first get one. It’s a constantly changing record that reflects if and how you use credit throughout your life. It updates every 30 days. If you pay everything on time; within 3 months you should have improved your score enough to re-apply and hopefully, this time get finance approved.