Can I get Car Finance with Bad Credit History?

Unfortunately, not having a credit history will likely hurt your pocket and tie you to similar restrictions and interest rates to those who apply for bad credit car finance.

Why wouldn’t you have a credit score?

Typically you have either never had credit or not taken any new credit for some time.

You’ve not had any credit for over six years

Taking out different types of credit helps you build your credit history. When you close a credit account, it remains visible on your credit file for around six years. If you haven’t taken on any new credit within that time, you wouldn’t have a credit score.

You’ve never had credit!

You cannot get credit before 18 (UK). It’s no surprise if you’ve never used credit, you don’t have a credit history for the credit reference agencies CRAs to report.

Can I get credit with no credit?

Yes. However, buying a car on finance can be tricky if you’ve never borrowed money and have no credit history. Lenders cannot know how likely you are to make the repayments.

No Credit Check Car Finance

Credit checks are a necessary part of the car finance process to give confidence to the finance company and the borrower.

Be very wary of lenders claiming to provide no credit car finance. A bonafide car finance lender regulated by the Financial Conduct Authority will never offer finance without a credit check.

When you get a quote through us, the first credit check is a soft one which has zero effect on your credit. A hard check occurs with your authority only when you accept a quote and decide to proceed.

Even with a good credit history, car finance companies might consider your situation a bad risk, which can typically happen to self-employed or those with an irregular income.

Car finance lenders see several groups as having a higher loan risk. You may face the same restrictions as people with bad credit, subject to your affordability.

• Self-employed.
• Young drivers.
• Students.
• Provisional licence holders.

Self-Employed

Getting car finance for the self-employed has become easier than ever before. The increasing number of people working for themselves means that car finance lenders have become smarter at processing irregularly-income applicants. The take up of open banking is also helping get car finance for the self-employed with bad credit.

Young Drivers

As a young adult driver, there is no certainty you will or won’t get car finance. You’ll need a reasonable credit history to get car finance on your own; with no credit or bad credit history, you may need help. An Open Banking application could assist you, especially if you have good affordability but bad credit. Read the dedicated application page for young driver car finance to learn more.

Students

Most students aged 18 and 22 haven’t had much chance to build up their credit history for car finance. Mature students should have an easier ride to getting car finance.
Car finance lenders want proof of regular income to support your living expenses and the financing and running of a car. Demonstrate you can afford to repay the loan (open banking can help), and you’ll likely get student car finance.

Provisional Licence Holders

Applying for car finance with a provisional licence can be challenging. Not many lenders offer car finance with a provisional licence. Finance costs are usually higher than with a full licence.
However, it’s not all doom and gloom. Some finance companies lend to provisional licence holders. However, expect a higher APR. You might also be set a limit on the sort (or size) of car you’ll be eligible to finance. Read up on car finance with a provisional licence.

On applying for bad credit car finance, the car finance process has two types of credit checks on your credit history that a lender performs.

Soft Search

When you complete the online form, – you apply to receive quotes – you are not applying for finance – that happens later. Lenders conduct a soft search on your credit report and decide whether to offer you a quote or decline your request. A soft search has no impact on your credit score.

Hard Search

Assuming you are successful and receive quotes if you decide to proceed and apply for finance, the lender does a hard search on your report. You’ll get accepted or a rejection. A hard search remains on your file for twelve months and can affect your score.

While you want to avoid getting declined, it’s also essential you don’t apply for too many applications at once, as this doesn’t look good on your credit history.

Can I buy a car with bad credit history on my own?

The short answer is yes, probably!

When buying a car on finance, most people do so independently. The application is in your name only.

With a low credit score, you’ll need your credit history is not great, and you need bad credit car finance; quite a few lenders specialise in offering car finance deals to people buying a car with a bad credit rating. Of course, there’s a catch!

With bad credit car finance, you’ll likely be limited to an HP car finance deal which might be OK. You’re unlikely to get offers for other types of car finance, such as a PCP deal you’d need to buy a new car.

You will have to face high-interest rates, put down a sizeable deposit, or be limited to a cheap car. While this isn’t ideal, it does get you a vehicle: assuming you can afford the monthly repayments.

Assuming you make all your repayments on time. Over time you could improve your credit rating when the contract is up. A higher credit rating sets you up nicely for future credit agreements, such as buying a new car or purchasing your first property.

But, suppose you can’t find any lenders to accept you for car finance. Don’t worry. You’re not out of options yet.

Yes.

Suppose you have a low credit score and can’t get car financing alone! Get some help!

There are two popular options you can go to.

• Joint car finance application.
• Guarantor car loan.

You could take out a car finance agreement with someone you trust despite owning a bad credit score. It’s usually a parent or other family member who gets the call.

Suppose you have a low credit score and can’t get car financing alone! Get some help!

You could take out a car finance agreement with someone you trust despite owning a bad credit score. It’s usually a parent or other family member who gets the call.

It’s stating the obvious, but the other person can’t have a poor credit history! It won’t work!

Indeed they need a significantly better credit score than you and likely a higher income. It also helps if they’re a homeowner.

Taking out a car finance application with someone else will financially link the two of you. You must ensure they are aware of your bad credit profile before proceeding.

As well as benefiting from their positive credit ratings, you’ll be able to get a better car loan with a lower interest rate.

If you’re a young driver looking for a new car as your first purchase, applying with someone else will dramatically improve your chances.

Typically with the car finance process, if you’re taking out a bad credit car finance loan independently, you’ll likely be looking at a Hire Purchase (HP) finance.

By buying a car with someone else on the agreement, you should be able to pick up an HP or Personal Contract Purchase (PCP) deal. These finance products are pretty similar.

Both require a credit check, and you’ll usually sign up for a three to five-year agreement.

HP Car Finance Deals

You’ll make monthly repayments on the car’s total value with the hire purchase deal. At the end of the agreement, you’ll own the vehicle outright. However, in the meantime, the car belongs to the finance providers- so you can’t go crazy with the mods or sell it!

Personal Contract Purchase Deals

A PCP is slightly different. You’ll still make monthly repayments over a contract period, but they won’t exceed the car’s total value. You can pay a balloon payment at the end of the car finance agreement.

A balloon is the ‘guaranteed future value of the car. Unfortunately, this is usually at least a four-figure sum! The benefit of PCP is your monthly car finance payments will be lower than with an HP.

The other options at the end of a PCP are to hand the car back and walk away or take out another PCP deal.

Should I get car finance with an HP or PCP?

We recommend you go for the HP deal if you’re confident you want to own the car at the end of the agreement.

If you’d instead change up your vehicle every couple of years, keep your options open, or want lower monthly payments, a PCP could be better.

A popular way to drive a new car is to lease a long-term rental, but you’ll require a good credit history.

Taking out a personal loan from the bank is also an efficient way with great benefits to getting car finance: however, this option is also likely to be closed to you if you have a poor credit rating.

Having no credit history can be worse than a bad credit rating

You might be wondering – how can you have a bad credit record as a young person who’s never had any finance?

Yep, it’s unfair, but the lender sees someone with no credit history as high risk. Simply put, the finance provider will find no evidence in their credit checks to show that you’re financially responsible.

That means buying a car on finance with bad credit as a young driver between 18-22 can be challenging.

Thankfully, it does get easier, assuming you start getting some credit history under your belt.

That can be as simple as buying an affordable mobile phone on a contract in your name or doing a grocery shop on a credit card once a month, and when payment is due, paying it off totally.

While this will help with buying something like a used car, it’s also crucially important for getting the best deals on future loan applications you might make in the future.

Your credit report is almost like a school report card. It shows how you’re getting on at a glance, and it’s not always fair! Credit history is important at its most basic level as it enables the lender to confirm your identity.

It contains personal information, like your address history and even if you’re on the electoral roll (which is why it’s essential to ensure you are).

A credit report includes all the details about any finance agreements you have – including mortgages, car loans, credit cards, and even store cards.

The credit score you get on your report is a three-digit number. The higher, the better! A good credit score dramatically increases your chances of getting accepted for a car loan, credit card, personal loan, and more.

If you have a low credit score or other issues (like a county court judgment), you’ll have to lower your expectations: you’re likely to get poorer lending options than someone with a decent credit score.

There are three leading Credit Reference Agencies (CFA’s) for UK residents. These are Equafax, TransUnion, and Experian. They all hold data about you (which you can request to see at any time).

They each use slightly different scoring criteria, so it’s worth checking your credit score on all three to ensure your score is solid, as it’s often hard to tell what Credit Reference Agency the lender will use.

We aim to give more accessible access to the best car finance rates for your circumstances and borrowers who might not otherwise get accepted for a car loan.

A car is not a luxury. For many, it’s a necessity and something to be proud to own. Your vehicle is with you for shopping, school runs, trips out, or the children’s taxi service. You’ll get the best available deal from the panel of lenders, including specialist car finance lenders for bad credit. Also, you get a committed account manager to take you through the completion of the purchase.

Yes.

A satisfied account on your credit file means you have paid the outstanding amount in total, which lenders may see as positive.

Getting accepted for car finance is achievable, but you’ll pay a higher APR associated with bad credit car finance.