You are looking for a new or used car but are worried whether you’ll get accepted for bad credit car finance. Like many people, you might think that a bad credit reference is almost certain to lead to any application for new credit to be rejected.
Although some lenders may indeed turn you down if you have bad credit – if you have defaulted on the repayment of past loans, had County Court Judgments (CCJs) against you, have been declared bankrupt, or are too young yet to have established any kind of credit record – there are specialist lenders who arrange car finance for those with bad credit.
But if you have bad credit, here are a few tips on the do’s and don’ts of applying for car finance:
Think before you apply
- don’t make countless applications in the hope that sooner or later you are going to find a lender prepared to advance the bad credit car finance you need – every rejection simply makes your credit rating worse;
- this is where a specialist broker may help by first conducting a “soft credit check” or “quotation search” to establish those lenders most likely to entertain your application – even if you have bad credit – without in any way involving the credit reference agencies (and, therefore, creating no impact on your credit score);
Improve your credit rating
- if your need for car finance is less urgent, or you are prepared to wait a while, there are also a number of steps to improve your credit rating;
- an article published in the Daily Mail’s financial pages on the 16th of August 2017 runs through the details;
- the first – and probably most obvious – step is to request sight of your credit record (the main agencies Experian and Equifax offer free 30-day trials which give you such access, before a subscription rate applies) – to ensure the record is accurate and any errors are corrected straight away;
- make sure your name is on the electoral roll at your current address – it is used by credit reference agencies to confirm your identity;
- demonstrate what a responsible borrower you are – or have become – by keeping loans you are currently repaying up to date (for at least six months);
- cancel or close credit cards and borrowing facilities you no longer need – lenders look at your current total borrowing capacity before agreeing to increase it still further);
- don’t flit between jobs before applying for bad credit car finance – lenders much prefer a long, undisturbed period of employment with the same employer;
- don’t move house before making your application – lenders much prefer owners or tenants who have lived at the same address for three years or more; and
- if possible, give a landline number, rather than your mobile number, on your application form – since lenders much prefer the former.
All is not lost if you are looking for bad credit car finance. Not only are there lenders still prepared to advance the loan you may be looking for, but you might also choose to improve your credit rating.