How Will My Credit Score Affect My Car Finance Eligibility?

How Will My Credit Score Affect My Car Finance Eligibility?

There are numerous types of car finance that you can apply for, but whether it is PCP, HP or something else you are interested in, you can be sure that a credit check will be involved. The reason why car finance companies will want to find out about your credit situation is so that they can assess whether or not you are likely to repay your loan, and so they will look for evidence of this in your credit report. This article should explain how your chances of being accepted for car finance could be affected by your credit score.

How Is My Credit Score Used to Determine My Car Finance Eligibility?

Finance lenders will look at your credit rating to give them an indication of how likely you are to make your repayments. They make this assessment based on a few things that your credit report will show them.

Consistency with Repayments

Your report will show finance companies how consistent you have been with paying back loans in the past or if you have constantly missed payments. If it reveals that you frequently neglect your repayments, you will be labelled as a high-risk borrower, which means that you could be refused car finance or offered an undesirable rate of interest.

Outstanding Debt

It is not detrimental to have outstanding debt, many people will be paying off another loan when they apply for car finance, however, if you are already paying off loans with numerous companies, this will make finance providers wary of lending to you. With so many loans to repay at once, everything can get on top of you and you can all too easily fall into greater debt.

Imagine if you needed to make a large unexpected payment which meant that you were unable to pay your bills one month. This could lead to a chain reaction and cause you to miss several other bills and repayments, and this situation is difficult to overcome, which is why lenders are reluctant to accept those with a lot of outstanding debt. Generally, the more loans you have yet to pay off, the higher your interest rate will be.

Credit Dependency

Another thing that will be taken into consideration when lenders look into your activity is how much you rely on credit. If you have lots of active credit cards and have taken out a large number of loans in the past, this may suggest that you are over-reliant on credit.

Car finance providers will take all of the aforementioned factors into account when making their final decision about whether or not to accept you. A positive credit score can play a substantial part in increasing your chances of being successful.

Do I Need a Credit Check?

As soon as you begin thinking about applying for car finance, you should take it upon yourself to do a bit of personal research so that you have an idea whether you will be accepted or not. Checking your credit report can alert you to any information that is incorrect or missing from your file, so that you will be able to update it.

It is also a good idea to check the contents of your credit file so that you are not hit by any nasty surprises when your finance application is considered. It may reveal any recent issues which could be problematic for lenders and give you a chance to improve your score. This could mean paying off outstanding debt, cancelling unnecessary credit cards or registering on the electoral roll so that your identity can be verified.


What Do I Do if I am Refused Credit for a Car?

Credit history is built up over time and it cannot be cleaned up instantly, but if you are made aware of anything dragging your score down, you may be able to make enough improvements to transform a poor credit rating into a fair one, which could be the difference between your credit application being rejected or approved.

If you are refused credit by one lender, it is worth shopping around, as you may be accepted by another, although be aware that multiple finance applications can put lenders off. The benefit of making an application with a bad credit car finance specialist like Smile is that we will assess the offers available from various providers at once, so that you have the best chance of being approved and getting a good deal.