Car finance with bad credit can be tricky but it doesn’t mean that its impossible. If you’ve ever been refused car finance in the past, you may think you will be declined everywhere. Whilst you may have been declined already, there are a few ways in which you can increase your chances of getting approved for bad credit car finance.
How can I increase my chances of being approved?
1. Check your credit score
Many people are refused car finance and are not sure why. However, your credit score and credit file can be a really good indication of why you are not being accepted. Your credit file shows your history of borrowing and lending. If you’ve not taken out any credit in the past, you may assume you have a good credit score. However sometimes you may find yourself with a low credit score as you don’t have any borrowing history for potential lenders to determine whether you can be trusted to pay back a possible loan.
Your credit file shows your personal information, financial partners and your borrowing and lending history. If you’ve had trouble making repayments in the past, have a County Court Judgement, entered into an Individual voluntary arrangement, have been declared bankrupt or paying back minimum payments on a credit agreement each month. You can check your credit file online for free using a credit reference agency such as Experian, Equifax or Credit Karma.
2. Don’t make multiple applications in a short space of time
When looking for a car loan, it’s good to shop around and do your research. However, you should only make multiple applications to sites which use a soft search credit check. A soft search credit check allows lenders to check your credit file without leaving a mark on it. Making multiple hard searches on your credit file are recorded and can lower your credit score. It can also indicate to lenders that you are desperate for credit.
3. Put down a deposit
Having a deposit for car finance can increase your chances of being approved for a loan. Lenders may favour you as you won’t have to borrow as much and it can indicate that you’re good with your money. A larger deposit means that you don’t have to borrow as much from the lender and it could also reduce the amount of interest on your loan.
4. Consider a guarantor loan
A guarantor loan can be a great idea if you are struggling to get approved for finance. When you apply for a guarantor loan, your guarantor is usually a friend or family member who agree to meet the repayment schedule if you fail to do so. For the lender, this means that their agreement will be paid back each month.
5. Increase your credit score
There are many different easy in which you can easily increase your credit score to increase your chances of being approved for a car loan.
Register on the electoral roll. In the UK, the electoral roll is a list of all the people in the UK who are eligible for voting. The electoral roll contains our full name and current address which helps potential lenders verify that you are who you say you are and reduces the risk of fraudulent applications. Even if you do not want to vote in the UK, registering on the electrical roll doesn’t mean that you have to.
Make repayments on time. This is one of the easiest ways to increase your credit score. If you have a high level of debt or have had trouble in the past making repayments, it can be tricky. However, even just a few months’ worth of evidence that you can make all your payments on time and in full, can help to improve your credit score.
Fix your credit file. When you check your credit file you should look out for a few things which could be dragging your score down. Make sure all your information is accurate and up to date. Even an incorrect address can harm your credit score. You should also look at the credit you’ve applied for, if something doesn’t look correct, you may be the victim of a fraudulent application in your name. Also, if you have taken out credit with someone else in the past, you may still be linked on your credit file even if the credit agreement has expired. If they have a low credit score, it could be negatively impacting your score too. You can contact your credit reference agency to fix any mistakes on your file.
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