How do I get car finance if I have bad credit?

How do I get car finance if I have bad credit?

You may be finding it difficult to get approved for car finance if you have experienced bad credit in the past, which may have resulted from missing previous credit repayments, or even by having a County Court Judgement (CCJ) or bankruptcy against your name.

Even if you’ve never had a loan or credit card before you could end up with a low credit rating because lenders can’t access any proof to show that you could successfully manage your borrowing.

Just because you have a bad credit rating from previous financial actions it does not mean lenders will instantly say no, but it could mean your options are more restricted as to which lenders will finance you for your next car.

Normally it is virtually impossible to borrow from a mainstream lender if you have bad credit, which is why there are specialist lenders like ourselves who can take into account any extenuating circumstances such as a poor credit history, self-employment or income from benefits and view customers as an individual, not just a number.

Your credit history isn’t the only consideration when providers decide to lend you money. They also take into account your job, salary, stability and other assets you might have, such as a property you own.

While you might face higher interest charges, taking on a high interest loan gives you the chance to rebuild your credit profile by demonstrating that you’re a trustworthy borrower. If you are willing to take a disciplined approach to repayments, this route could help you get back on the road to a good credit score. Providing you always make payments on time, you will be able to demonstrate that you can manage your money responsibly.

However, think carefully about whether you’re able to afford repayments before making an application. You can use our car finance calculator to see how much you could borrow and that you monthly payments could be.

If you have bad credit from past decisions or circumstances you need to think about looking for car finance or a loan in a different way, as your options can be more limited than if you have a good or excellent credit profile.

It is not impossible to get a car loan when you have bad credit. As well as Go Car Credit, there are many alternative lenders that cater for people who have a bad credit history. Take a look at the tips below to help you choose the right finance solution for you and your circumstances.

Understanding your credit profile

Do your research and make sure you fully understand your current credit profile. By understanding this you are less likely to be surprised when applying for car finance.

You can find out what your credit profile looks like for free using Noddle. Noddle offers you access to your credit report free for life – not just for 30 days. It’s genuinely free and always will be, unlike some of the other credit report providers.

Searching for a car loan will not harm your credit profile, but applying for car finance that may not be suited to your credit profile could affect it. It’s important that you should check out your potential lenders carefully before you apply for credit because every time you make an application a record will appear on your credit file for a 12-month period – and some companies will reduce your credit score by a certain amount for each search done on your name in that time frame.

What if I have been refused car finance elsewhere?

Here at Go Car Credit we specialise in offering car finance to people who have experienced bad credit in the past and we can provide loans to people who have been denied access to mainstream credit.

If you have bad credit, a lender will want to make sure the amount you want to borrow is affordable for your current financial situation.

Is there anything I can do to improve my chances of getting car finance?

To increase your chances of getting your application approved for car finance, offer to put down a deposit if you are able to. If you can make a decent down payment on the vehicle, the risk to the lender is reduced.

The average deposit on a car is around 10% but if you can put down more do so as it increases your chances of getting the car finance you need.

Make sure you are paying your bills on time and any other credit in which you owe such as credit cards and loans. By doing this it shows that you can confidently manage your outgoings and you are a responsible borrower.

Have you been refused car finance because you have no credit history?

It may seem a little unfair that you have managed your money well and have not had the need until now to borrow money. You may be wondering why a lender will not loan you finance as you would not see yourself as a risky bet for them. Read on to find out why lenders like borrowers with a credit history and how you can start making steps towards a good credit history.

Lenders will always prefer to lend to established borrowers because first time borrowers do not have a history of credit and paying off debt so how do they know you are a good payer when you have never had the opportunity to pay a lender back a loan?.

Lenders have a specific ‘lending criteria’ that needs to be fulfilled which can differ from lender to lender. So just because you have been declined credit from one lender does not mean you will be declined from another.

Lenders also take into account your personal circumstances, payment history and several other factors to make a final lending decision.

That should not put you off though, as a first time borrower it is your opportunity to establish a positive credit history and ensure that future attempts to access credit are less difficult.

Fortunately for first-time credit applicants, more and more credit cards and loans are being designed for those with bad credit or limited credit histories to help them start building or rebuilding their credit profile.

For people new to credit, the aim is to prove you can be trusted with credit, despite a lack of history in paying off debt is the key here.

A common question people might ask is how can you establish a credit history if no one has ever given you credit? here are a few simple steps you can take to start building a credit history:

Open and manage a UK bank account

Setting up and using a UK current account will help build your credit history if you run it responsibly (e.g. making sure you have enough money in your account to cover your payments each month) because it will demonstrate that you can have a responsible, ongoing relationship with a bank.

Some banks offer new customers an interest-free overdraft for the first 12 months, which can be an alternative to applying for a credit card if you only need a small amount of credit for a few days and can pay off your overdraft.
Opening and managing a current account responsibly will help your credit rating even if the account doesn’t include an overdraft.

Set up a direct debit

Set up some regular Direct Debit payments to pay bills such as your gas and electricity or your home or mobile phone. Always make sure you have enough money in your bank account to pay any bills being paid by Direct Debit or standing order.

Don’t miss any payments

Make sure you pay all your bills on time, as a missed or late payment will count against you. If the lender has to go to court to get the money, then a county court judgment (or decree in Scotland) will severely affect your ability to get credit and it will remain on your file for six years.

Register on the electoral roll

It is important that credit reference agencies have a record of previous addresses where you have lived as that is continuous proof that helps provide a profile. This historical data is part and parcel of building your financial footprint.

Applying for credit

Before you start filling out an application form, make sure you have the following personal information to hand:

  • Your bank or building society account details
  • Your employer’s name and address
  • A list of the money you have coming in and going out each month and
  • Details of any existing credit commitments

If you would like to make an application for car finance please use our car finance application form, it only takes a few minutes!