We have put together a few frequently asked questions for people who may want to know more about getting car finance when they have a bad credit history.
What is bad credit car finance?
Bad credit car finance is a loan to get a vehicle that may have broader criteria than a mainstream lender such as a bank when it comes to calculating an applicant’s creditworthiness.
A lender who specialises in offering car finance to those with a poor credit history may take into account other factors apart from a person’s credit history or score.
These factors could include whether the applicant can actually afford to make the monthly repayments of the loan.
What can cause bad credit?
There are many reasons you could be refused car finance and lenders may not tell you why you have been rejected. This could be due to having a poor credit history:
- Missing payments on utilities or previous loans or credit
- Making less than the agreed monthly repayments on credit commitments
- Paying only the minimum each month on a credit card
- County Court Judgements
- Defaults on previous loans or credit agreements
- Declaring bankruptcy
- Currently in an Individual Voluntary Arrangement (IVA)
- Having no credit history at all
How can I tell if I have bad credit?
You may start notice you are being refused by lenders such as your bank or other car finance companies that offer low APR loans.
There is a way you can see for yourself by getting a free credit report from any of the top 3 credit reference agencies: Experian, Equifax and TransUnion
How can I fix bad credit?
You could start by looking at your free credit reports so you can see what lenders see when they are making a decision, which could be based on your past credit commitments and repayment behaviour.
You may even be unaware of what has impacted your credit history if you have never looked at a free credit report before, such as missing payments on utilities and other bills apart from loans.
If you currently have a product such as credit card you could try to increase the monthly repayments if you are only paying the minimum back each month and you can afford to so.
If you do have bad credit, you may need to take on higher APR finance products and build up full repayments each month that will show on your credit report. Doing this could help to enhance that you have the commitment and ability to repay any future loans,
Do I need to pay a substantial deposit to get car finance if I have poor credit?
Some bad credit car loan providers may require a deposit as part of their criteria.
With Go Car Credit you may only decide to pay a deposit if the maximum loan amount the finance company is willing to lend you is too low for the specific model and make of car you really want to get.
Will a bad credit car finance company guarantee my application is successful?
No ethical lender will guarantee that an application for car finance with bad credit will be approved. It will always depend on the lenders specific criteria, affordability and confidence in your ability to pay back the car loan.
Will a poor credit car finance lender always perform a credit check?
All ethical car finance lenders specialising in bad credit loans should always perform a credit check. This is to make sure you can afford the monthly repayments on top of your other credit commitments that will appear in your credit history.
Why do I need to provide income and expenditure details for a bad credit car loan?
An additional way for bad credit lenders to assess your affordability on top of other current credit commitments and bills listed on your credit history, is to ask you questions about all other expenses that are not shown there.
It helps the lender to identify your disposable income each month and this counts towards the total amount they are willing to lend you, and the actual monthly repayment amount.
Does getting a car loan with a bad credit lender mean my credit will be better at the end of my agreements?
Go Car Credit offer our existing customers the opportunity to apply for a renewal product with us.
As an ethical lender we will always assess the creditworthiness and affordability of all customers who make an application with us. Whether it is a new customer looking to improve their credit history or an existing customer looking to upgrade their vehicle.
If an existing customer does qualify to renew with us, they could be offered a lower APR on their next vehicle they wish to finance with us.