Owning a car in the UK offers unparalleled freedom, giving you the ability to manoeuvre as you please. But what if a blemished credit score casts a shadow on this freedom? Let’s take a closer look at how Motorly can help you get car finance with a less-than-perfect credit score.
Exploring Car Finance
Car finance refers to any financial product that allows you to purchase a car without having to pay the entire cost upfront. Common variants in the UK include Personal Contract Purchase (PCP), Hire Purchase (HP), and personal car loans. Now, let’s understand the role your credit score plays.
Unravelling Credit Score
Simply put, your credit score is a numerical reflection of your financial trustworthiness, drawn from your past fiscal conduct. Depending on the credit agency you use, it’s often marked as a score out of either 700 or 1000, with a higher score auguring well for credit approval at favourable terms. Conversely, a lower score could muddle your financing prospects.
Impact of Credit Score on Car Finance
When seeking car finance, lenders scrutinise your credit score to quantify the risk associated with lending you funds. This three-digit figure enables them to gauge your repayment capacity and propensity.
How a Poor Credit Score can Affect You
A less-than-perfect credit score may lead to a denied car finance application. Even if approved, you might face heightened interest rates, hefty down payments, or truncated repayment periods.
Securing Car Finance with Bad Credit: A Possibility?
Indeed, securing car finance with a poor credit score is challenging yet possible. Motorly are experts in Bad Credit Car Finance and can help you obtain the finance you need. Let’s delve deeper into this prospect.
Beyond Credit Score: Lenders’ Considerations
While your credit score is a key determinant, it’s not the be-all and end-all for lenders. They also weigh your income, employment tenure, and debt-to-income ratio. Despite a dented credit score, these favourable factors could still swing the approval in your favour.
Strategies to Secure Car Finance Despite Bad Credit
Even with an adverse credit score, there are tactics you can employ to enhance your car finance prospects.
The Co-Signer Route
Enlisting a co-signer with a robust credit score could amplify your chances of approval. Essentially, the co-signer pledges to shoulder the loan burden if you default on repayments.
Bolstering Your Credit Score
Elevating your credit score could significantly improve your car financing terms. Timely bill payments, reduced debt, and refraining from new credit enquiries are proven tactics to uplift your score.
Making a Substantial Down Payment
A substantial down payment shrinks the loan amount, thereby reducing the lender’s risk. Consequently, lenders might be more inclined to approve your application.
Opting for a Budget-Friendly Vehicle
Choosing a more economical car could minimise the loan amount, making approval more likely.
Selecting the Right Lender
All lenders don’t have identical criteria for car finance approval. Some specialise in catering to applicants with poor credit. It’s worth conducting thorough research to identify a lender that suits your situation. Motorly can help you find the right finance partner depending on you current circumstances.
So can I get a car on finance if I have a bad credit score?
To address the titular question: Yes, you can secure car finance despite a poor credit score. The journey might be a tad more challenging, with the terms not as favourable, but actionable steps can enhance your chances. Understand your credit score, strive to improve it, and carefully weigh your options.
Frequently Asked Questions
1. Is car finance feasible with a poor credit score?
Yes, it’s feasible but could involve more hurdles and less favourable terms.
2. What factors do lenders consider apart from credit score?
Lenders may also consider your income, job stability, and debt-to-income ratio.
3. How can I increase my chances of securing car finance with poor credit?
Consider employing a co-signer, improving your credit score, making a larger down payment, opting for an economical car, or identifying the right lender.
4. Can improving my credit score help me secure better car finance terms?
Indeed, an improved credit score can bolster your chances of securing car finance at favourable terms.
5. Are there lenders who specialise in car finance for individuals with poor credit?
Yes, certain lenders specialise in serving those with less-than-stellar credit. Conducting diligent research can help you find these lenders.
6. How long does it take to improve a bad credit score?
Improving a bad credit score takes time and consistent effort. It depends on various factors, such as the severity of your credit issues and your ability to address them. With responsible financial habits, you can gradually improve your credit score over time.
Ready to take the next step? Visit the Motorly Bad Credit Car Finance Page to find out more
What is a credit score?
A credit score is a three-digit number that represents your creditworthiness. It is based on information from your credit report, which is a record of your credit activity. The higher your credit score, the more likely you are to be approved for credit and to qualify for favourable interest rates and terms.
How does your credit score affect your ability to obtain car finance?
Your credit score is one of the factors that lenders consider when deciding whether to approve you for a car loan. A good credit score can improve your chances of getting approved for a loan and may also help you get a better interest rate on the loan.
What steps can a user take to improve their credit score?
Here are some steps you can take to improve your credit score:
Pay your bills on time: Late or missed payments can have a negative impact on your credit score.
Keep your credit card balances low: High balances can indicate to lenders that you are overextended and may have difficulty repaying a loan.
Use credit responsibly: Don’t apply for too many new credit cards at once, and avoid using all of your available credit.
Check your credit report for errors: Errors on your credit report can lower your credit score. You can request a free copy of your credit report from each of the three major credit bureaus (Experian, TransUnion, and Equifax) once per year.
Consider a credit-builder loan: This type of loan is designed to help you build credit. You borrow a small amount of money and make regular payments to repay the loan. This can help you establish a positive credit history.
What are the benefits of improving your credit score?
Once you improve your credit score, you may be able to qualify for credit cards and loans with better interest rates and terms. This can save you money on interest and make it easier for you to afford the things you want or need, such as a car or a home.
It is still possible to get Car Finance with a bad credit rating?
It is possible to get car finance with a bad credit score, although the terms of the deal may be less favourable. Lenders who offer car loans to people with bad credit may charge higher interest rates to compensate for the increased risk. However, options are still available to you.
Shopping for a new car can sometimes be a challenging process, especially if your personal circumstances could get in the way of you obtaining the car that you want. A bad credit history can affect your eligibility for securing car finance, as well as other factors such as being in an IVA or having CCJs against your name.
If you have had issues with your finances in the past, it is possible that you are currently in a Debt Management Plan (DMP), which can often lead to problems obtaining the car finance you need.
At Motorly, we specialise in helping people get behind the wheel of a new car, whatever their credit history. Whilst being in a Debt Management Plan will mean that you have a few more actions to take to get finance, we can help you every step of the way.
What is a Debt Management Plan?
A Debt Management Plan (DMP), is a program put in place by a DMP provider to help you manage and control your debts in a way that is both responsible and manageable. Debt Management Plans can be a suitable route to take for those with the following debts:
Overdraft debts
Store cards and credit cards
Personal Loans
Catalogues and in-store credit debts
A debt management plan cannot help with certain ‘priority debts’ such as:
Council tax bills
Gas and electricity utility bills
Child support and maintenance costs
Income tax bills
National Insurance
VAT bills
Mortgage and rent arrears
Court fines and charges
Essential hire purchases
Your debt consultant will organise your Debt Management Plan to ensure that you start to reduce the debt you owe in the most efficient way. Each month, you will pay a fee to the Debt Management Plan provider, who will then pay the money to your creditors on your behalf. In doing so, your plan provider will assist you in keeping track of your obligations and stop you from spending your money irresponsibly.
Is it possible to get Car Finance when I am under a Debt Management Plan?
If you are currently in a debt management plan, it can be hard to make new purchases. This is because your Debt Management Provider will be stringent when deciding what new expenditure you are allowed to take on. This is particularly true when it comes to purchasing a new car.
However, it is still possible to get a car finance agreement approved when you are in a DMP. You will need to show that your new car is an essential purchase (such as being able to get to work), and also show that the vehicle is affordable within your agreed budget, without having an impact on your existing debt agreements.
When your Debt Management Provider is checking to see if your car is a necessity purchase, they will consider the following:
Do you care for a vulnerable or elderly person? If you take care of a relative who is elderly or vulnerable, you will likely need the car for shopping trips and journeys to the doctor etc. Your DMP will likely accept that the car is required in this case.
Do you have any health problems or issues? If you have a health condition that affects your ability to travel, your DMP could decide that your car is a necessity.
Are you a parent or guardian? The school run is a major use of the car for many people. Your DMP provider will usually agree that a car is required in these instances.
How long is your commute to work? The daily commute to your place of work is likely to be the biggest reason for needing a car. Simply put, if you can’t get to work you aren’t able to earn money. Your DMP provider will typically agree that you require a car in these circumstances.
Can you afford the car payments?
The most important factor you need to consider when looking into car finance is whether you can afford to pay the payments constantly for the lifetime of the contract. By taking out a car finance agreement, this debt will be added to the plan that your provider is managing.
The Motorly team can help you understand how the process works, help you find a suitable car for your budget and perform a credit check.
Are you eligible for car finance?
If you are currently in a Debt Management Plan, you are likely to have a lower credit score. This is due to the level of debt you currently have, along with the fact that a DMP is in place, showing up on your credit file. However, whilst it can make it harder to get car finance, it is still possible to get an agreement that is suitable for your circumstances.
Motorly is a specialist at finding car finance solutions for those with fair to poor credit scores, including those in an IVA or Debt Management Plan. We offer bad credit car finance and debt management car finance plans that enable people just like you to get behind the wheels of a new car.
Would a bad credit car finance deal be right for you?
If you currently have a bad credit score, it’s still possible to find a finance deal that is right for your needs. Motorly has a wealth of experience in helping those with bad credit find the perfect finance solution for their needs.
Refused car finance but not sure why? Here are the top 5 reasons why a car finance application is not successful.
Credit Score
A poor credit score is the main reason why customers are rejected for finance. Whilst it’s not the only thing lenders considered, it’s a key factor in whether you will be successful or not.
Having a bad creditrating will not mean you are automatically rejected when you apply. However, a poor credit rating will at best limit your options when looking for a suitable car finance deal.
Never taken out credit before? A small or non-existent credit history can just be as bad as a poor one. Lenders will be unable to see how good you are at paying your bills on time and keeping on top of your debts, making you a bigger risk to lend to.
Employment Status
Your employment status is another factor that is taken into account. The positive news is if you are employed in full-time or part-time work, you should be able to find a suitable for you.
Those who are self-employed or have an income that does change every month may find it harder to obtain finance. The reason for this is because of the uncertainty that comes with not having regular monthly pay makes car finance lenders wary of accepting the application.
Age
Whilst you can pass your driving licence at 17, if you want to take out a car finance agreement you will have to wait until you are at least 22 until you are accepted. The main issue here is that most young people have a limited credit history.
Affordability
Responsible Lending practices are a key part of the finance process that borrowers go through. When looking over your application, lenders will look at your monthly income and spending patterns to see how much money is left at the end of the month. If a monthly car payment would wipe out your remaining budget, it’s likely your application could be refused.
Mistakes
A big reason for applications being rejected is because of simple mistakes. A slight error with an address, a wrong date or a typo could make all the difference between your application being accepted or not.
The best way to avoid this happening is to take your time and double-check all your details before you submit your application.
