When you apply for car finance, lenders will carry out several checks to assess your eligibility as a borrower. They need to check your identity, your credit score, and your affordability. These checks are in place to protect you and the lender and make sure you don’t end up with a car finance agreement that isn’t right for you.
What do they check when applying for car finance?
Responsible lenders need to carry out checks to make sure they are giving the right car finance deals to the right people.
The more you know about what will happen after you click apply, the better prepared you’ll be to navigate the process quickly and easily.
No matter whether you apply for Hire Purchase or Personal Contract Purchase, the checks will be much the same.
When you apply for car finance, checks will likely include:
Proof of identity and personal details check
To protect you from fraud, lenders must be able to verify that you are who you say you are. Your UK photo driving licence is the most common proof of identify with a car finance application, but you can also use your passport.
Address history check
You’ll also need to supply proof of address for at least three years of address history. Unfortunately, it’s tough to get car finance if you haven’t lived in the UK for at least three years.
Driving licence check
While some lenders can offer car finance to people with provisional driving licences, most will ask you to provide a full UK driving licence.
Employment status check
Depending on your employment status, you might need to share details of where you’ve been working for the last three years.
Proof of income check
Lenders need proof of income to be sure you’ll be able to cover your monthly repayments. Most providers will ask for three months of payslips or bank statements.
Affordability check
An affordability check reassures lenders that you have enough disposable income to pay for your monthly repayments and the costs that come with running a car. This check also helps them verify the amount you can comfortably afford to borrow.
Credit history check
Credit checks can get confusing when it comes to applying for car finance. In most cases, you’ll go through two types of check.
First, the lender will run a soft credit check. This is used to assess your initial eligibility, but it won’t be shown on your credit report and shouldn’t impact your score.
If you choose to proceed after this point, the lender will run a hard credit check. This type of credit check is visible on your credit report and, if you have too many hard credit checks on your credit report in a short time, that could lower your score and make it harder for you to find finance in the future.