How Bad Credit Can Affect Car Finance Applications

Whenever you apply to receive car finance, the lender will perform a credit check to see if you are eligible.

For consumers with a good credit rating, this means they will almost certainly be accepted and receive a lower interest rate. But what about people who don’t have a good credit score, can they still get vehicle finance?

Well, the answer is yes, but it also depends. A low credit score will reduce the quality of the deal you can get, meaning high interest rates. A poor credit score will make it increasingly difficult to be eligible to receive car finance from a lender. However, there are bad credit car finance solutions available to help consumers.

What is Your Credit Score?

Firstly, it’s important to understand what your credit score is and how it affects requests to borrow, such as from loans, credit cards, mortgages, and vehicle finance.

Called a credit report, your score is a financial footprint that highlights your financial history. Lenders tap into it to decide whether you are a safe choice to lend money to. In other words, how likely you are to pay the money back. Paying loans and bills on time will result in a robust credit score, whereas having missed payments, overdue payments, and legal action affects your credit history negatively.

Everybody in the UK can check their credit score from a credit agency and understand how they can improve it.

Applying for car finance with bad credit

If you have a poor credit rating, it will be difficult to be accepted for car finance. Still, there are options open to customers who don’t have a strong enough credit score. Specifically, some lenders are dedicated to lending car finance to consumers with poor or limited credit history. These companies work the same way as any other car finance service but with a focus on poor credit customers.

Whether it’s limited funds, a customer with little credit history through a lack of borrowing, or someone with a poor credit history, some services can help. Even for people who have missed payments or have defaults, it is possible to get car financing deals.

These specialist companies can offer finance to poor credit clients because they don’t judge solely on credit history. Instead, they also look at the customer’s current situation and how they can afford repayments at that time.

Improve credit rating to get car finance

If you do have poor credit history and are concerned about being denied car finance, you can start working today to improve your credit score. Even if you work with a bad credit car finance specialist, there are many benefits to improving your credit, including improved interest rates when borrowing.

Check your credit report and identify problems

Several credit agencies allow you to access your credit report for free, allowing you to see the issues in your history and how you can improve your score.

Become a registered voter

All lenders will check your credit history and what your name and address are. Being on the electoral register is a good way to give lenders access to your information. It’s not a vital step, but finance companies do favour customers on the electoral roll.

Make all current and future payments on time

If you have a poor credit history, it’s almost certainly because you have missed or defaulted on payments in the past. A great way to start repairing your credit score is to make all payments you currently have on time. It may take some time to change, but eventually your credit score will repair, and lenders will see you are financially responsible.

Don’t apply for finance too much

If you apply for vehicle finance or another type of credit (loan or card) and are refused, don’t apply again immediately afterwards. Lenders could assume you are desperate and less likely to cope financially. All finance applications show on your credit report.