When you apply for any type of car finance, there are going to be a number of credit checks run by the lender to see if you qualify for this type of loan. If you have a low credit score, then this can reduce your chances of being accepted, but this doesn’t mean that you won’t be. In many cases you can still get finance even with a poor credit score.
So, everyone is always saying that it is important to keep your credit score as high as possible, but what is a credit score? Well, to put it simply, your credit score is essentially your financial footprint. It looks at your financial history, to help lenders assess how “safe” you are going to be to lend money to. What we mean by “safe”, is how likely it is that you’re going to pay the loan back based on your financial history. It’s not possible to see whether you’re going to be able to make the specific repayments for the entirety of the contract, but your history will give them a good indication of whether or not you’re reliable.
Your credit score is going to be influenced by a number of different factors. Some of these can include:
There are things that you can do to boost your chances of getting accepted for car finance. The first thing that you can try is to identify problems in your credit score. Get a full copy, go through it and figure out where things have gone wrong, and how you can improve on them. You’ll want to check that there are no mistakes because if there are it can have a negative impact on your score where it shouldn’t.
You also need to think about whether you have any current repayments that you should be making. If you do, then try to make sure they are all paid on time. If you do this and keep up with them, you are showing the new lender that you can be trusted to keep up payments when they are due. This will increase your chances of being accepted as reliability is important when it comes to lending money.
So, if you’re trying to get car finance but you have poor credit, how are you going to do this? We'd first recommend trying to get a guarantor loan. This means that if you don’t make the payments, your guarantor is going to be liable to pay what you don’t. This makes the risk for the lender significantly smaller, meaning they are more likely to accept you.
Something else that you can do is to increase your deposit. If you have a good credit rating, then the minimum deposit required is going to be around 10%. But, if you have a poor credit rating, then increasing the deposit will greatly increase your chances of being approved for the loan.
Also, make sure that you don’t have too many loans, or you haven’t applied for too many. Other lenders can see where you have applied for another loan, and if they think that you are applying for too many, they might come to the conclusion that you aren’t going to be able to pay it back. That’s why, if you’re going to be applying for car finance, it’s a good idea to try not to apply for anything else while this is being considered.
The important takeaway from this is that even if you have poor credit, you can usually still get car finance. Try to build up your credit score as much as you can because this is going to help a lot, but if you can’t, don’t worry, there are things that you can do to get you that dream car.