When it comes to getting a car on finance, you may be worried about the likelihood of being approved if you have a low credit score. For many people with bad credit, getting a car may seem impossible but it doesn’t have to be. There are a number of ways in which you can start to rebuild your credit score and help to increase your chances of getting a new car. The guide below has been designed to help you understand why your credit score affects car finance approval rates and the factors that lenders consider before they will provide finance to you.
Is it possible to get car finance with bad credit?
It’s worth noting here that guaranteed car finance does not exist, even if you have good credit. There are a number of criteria that each individual lender puts in place for you to meet before you can get accepted. It’s an age-old misconception that having bad credit means you can’t get a loan or finance; however, this isn’t strictly true for everyone. A lower credit score may make it harder to get approved, but it doesn’t have to be impossible. You may find yourself with a bad credit score due to missed or late payments in the past. Similarly, you can have bad credit when you have high levels of debt. From a lenders point of view, the risk to lend to you is greater, as you may not pay your loan back on time based on your past mistakes. Borrowing money for car finance is all about building trust and showing evidence of a solid credit history. There are a number of ways you can start to fix your credit history and show lenders that you are a responsible borrower.
How to increase your chances of getting a car with bad credit:
If you have a bad credit score and are wanting to get a car on finance, there are a few things you can consider before you start applying.
1-Check your credit report
This may sound daft if you already know your credit history but there can be information on your credit report which could be holding you back. When you check your credit report, you should make sure all your information is accurate and up to date. Having misinformation on your report makes it harder for lenders to find you and verify that you are who you say you are. You should also check your applications for finance and make sure they all look correct, if not, you may have been a victim of a fraudulent application in your name. If you need to update anything or correct something on your credit report, you can contact the agency who provided it.
2-Choose the right lender
Car finance can be obtained from a number of different avenues such as banks, building societies, car finance brokers and online lenders. If you have bad credit, it can be harder to get accepted with banks or building societies as they usually reserve their best rates for those with good credit scores. So, it may be worth exploring lenders who have been specifically designed for bad credit car finance applicants. These lenders focus more on affordability rather than your credit history and as long as you can afford to meet the repayments and prove you can, there could be options available to you.
3-Save up for a deposit
If you’ve got bad credit, lenders may want to see some sort of financial security. You can do this by having a deposit to put down for car finance. It’s also worth considering before your application as some agreements require a deposit contribution. Putting more in for your finance deal means you don’t have to borrow as much and reduces the loan amount. A smaller loan can be more manageable and make your monthly payments cheaper or pay it back quicker. By putting down a deposit and then meeting all your repayment on time and in full, you can help to make your nice finance deal more affordable.
4-Work on your credit score
Having a better credit score is probably the most important factor when it comes to increasing your chances of a car finance approval. Not only does a better credit score help acceptance rates but it also can help to lower your interest rate offered. A lower interest rate means the rate of borrowing is cheaper and you won’t have to pay as much back in interest. You can start to rebuild your credit score by meeting all your current repayment deadlines, reducing any existing debt you may owe, limiting the number of new credit accounts you open and keeping your current credit usage low.