With a car being one of the most expensive purchases you are ever likely to make, you won’t be alone if you’re unable to purchase one outright with cash. Many of us need to seek out a car finance deal in order to make a new set of wheels a reality – but will your credit score allow you to do that?
If you have a bad credit score, you might find it difficult to obtain finance for all kinds of things – not just a car – or the rates you receive for loans may be less than desirable.
But it’s important to appreciate that your credit history isn’t the only thing lenders will consider when making decisions in response to your applications for finance. Nor is anyone ‘blacklisted’ from getting car finance, simply because of a bad credit score.
So, it’s perfectly possible for people to get approved for car finance, even those with poor credit histories. Let’s take a look, then, at some steps that could help improve your own chances.
Pinpoint and address issues in your credit report
In the UK, it is companies known as ‘credit reference agencies’, or CRAs, that compile information on your management of credit, including whether you make your payments regularly and on time.
The three main CRAs are Experian, Equifax and TransUnion, each of which holds a file on you, called a credit file or credit report. Your credit report will typically contain such details as your current credit accounts and arrangements, like bank and credit card accounts and outstanding loan agreements. Public record information such as County Court Judgements (CCJs), bankruptcies and house repossessions will also appear, remaining on your report for at least six years.
CRAs are statutorily obliged to give you a copy of your credit report for free, so it’s a great first step to request and take a look at yours.
Review how you have previously handled your money, and consider what you could improve on. Ensure there are no mistakes on the report, and if necessary, think about how you can alter your budgeting to prevent future missed or late repayments that could further damage your credit score.
Offer to pay a larger deposit
While it is often necessary to pay a deposit to obtain car finance anyway, you’ll be more attractive to lenders if you increase the size of the deposit you offer. It will indicate to the lender that you can afford to pay slightly more and will be likelier to make timely repayments on the loan.
But don’t worry too much if you aren’t in a position to pay a larger deposit, or even any deposit at all. Our own panel of lenders here at CarFinanceGenie includes lenders that offer great no-deposit car finance deals, even to applicants with poor credit.
If possible, improve your credit before applying
Not everyone looking to buy a car actually needs one straight away. The car that you are looking to purchase may be more of a ‘treat’ or ‘luxury’ purchase than something you need for the workday commute, for example.
So, if you don’t strictly need a new vehicle immediately, it might be best to hold off and focus on improving your credit situation first. You might do this by ensuring you’re on the electoral roll. Or perhaps you could take out a credit card and use it to make timely repayments on something relatively inexpensive and manageable, such as a TV or sofa, which could help to bolster your score?
Seek decisions from companies that only do ‘soft searches’
‘Hard searches’ and ‘soft searches’ are both types of credit check that a company such as a bank, building society or credit provider may perform to gain insight into your financial behaviour.
A hard search is the more in-depth of the two, constituting a thorough search of your credit report. Unfortunately, every hard search is recorded on your credit report, which means any company searching it will be able to see you have previously applied for credit.
Too many hard searches in a short space of time could adversely affect your credit score for months, potentially damaging your chances of being accepted for credit in future.
So, if you’re in a position where you might be going from one potential car finance lender to another making applications, you’ll appreciate a company that only does soft searches, which do not appear on your report or impact on your credit score. CarFinanceGenie, for instance, will never perform a hard search without your permission.
Choose a broker with a strong track record for bad credit car finance
As we touched on above, one of the things that make us special here at CarFinanceGenie is our emphasis on catering to the needs of people who may have less-than-perfect credit histories.
As a broker, we can present you with the benefit of a range of lenders, some of which specialise in providing bad credit car finance. We’re proud to say we have achieved acceptance even for customers who may have previously been rejected by lenders.
Take advantage of our hassle-free and straightforward application process today, and you might be surprised by how great a car finance deal you could get with our help!