Can you get Car Finance with Bad Credit Rating?
Buying a car on finance is one of the most popular ways to get into the driving seat of a car, but can you get car finance if you have bad credit?
Yes. You can get car finance with bad credit history.
A poor credit score doesn’t have to stop you from borrowing the money to buy a car on finance. Still, some lenders won’t approve applications for car finance with bad credit.
Even if you can’t get car finance with other lenders who have rejected you, all is not lost! With a large panel of lenders, many specialising in offering car finance for poor credit ratings, there’ll, hopefully, be a deal for you.
You could also get car finance with bad credit history if any of the following apply to you:
- Individual Voluntary Agreement (IVA)
- County Court Judgment (CCJ)
- Bankrupt in the past
- On benefits
Apply for a quote with No impact on your credit score
If you’re unsure and believe your poor credit history will stop you from getting car finance. Don’t worry. You can find out if you will likely gain acceptance by completing the quick online form, with no obligation and NO Impact on your credit score.
What is a Bad Credit Score?
How do I know if I have a poor credit score?
Three credit agencies dominate the UK credit scores, each using a different scoring system. You don’t have one credit score. You have three!
Each CRA’s bandings for Bad/Poor Credit are as follows. Note they do not use the term bad credit but refer to poor credit.
Poor credit bands
Experian 0 – 720
Equafax 0 – 438
TransUnion 0 – 565
Credit scores get reviewed weekly/monthly and can go up and down depending on how you manage your finances, so if you are in a poor credit score band, you can soon increase your score.
Can I get Car Finance with Bad Credit History? Yes. Why not apply for a NO obligation Quote with NO Impact on your Credit Score and find out?
Can I get Car Finance with No Credit History?
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 help 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.
Unfortunately, not having a credit history will likely hurt your pocket and tie you to similar restrictions and interest rates to those with bad credit.
No Credit Check Car Finance
Credit checks are necessary 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.
7 Ways to Up your Credit Score and Increase the chance of getting Car Finance with Bad Credit
Should I Check my Credit Report before applying for car finance?
Checking out your credit score is something you should do regularly and especially before you apply for any significant finance.
Suppose you’re looking to get car finance and have a bad credit history. You’ll want to improve your credit as much as possible before you apply. It does not take long to boost your score, but it requires some discipline.
What can I do to Improve my Credit?
- Are you on the electoral register at your current address? If not, simply registering will bump up your credit. Indeed many lenders will reject an applicant, not on the electoral roll.
- Check your credit report for mistakes. Errors do happen and can affect your score.
- Signing up with your Bank for Open Banking allows you to authorise lenders to view your bank transactions. Letting lenders see your spending and how you manage your money could swing a decision in your favour.
- Ensure your applications are accurate. Inaccuracies or omissions won’t help but may affect your getting credit.
- Make payments on time. If a direct debit or SO fails to go through, rectify it quickly, and you’ll probably avoid a missed payment cross on your report.
- Don’t use too much credit on your credit and store cards. If you max out your monthly limit, it may count against you.
- Don’t draw cash on credit cards. Multiple cash withdrawals may look to the lender that you’re struggling financially.
Soft and Hard Credit Searches Explained
On applying for car finance, there are two types of credit checks on your credit history that a lender performs.
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.
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 Independently Buy a Car on Finance with a Bad Credit Score?
Can I buy a car with bad credit history on my own?
The short answer is yes, maybe!
When buying a car on finance, most people do so independently. The application is in your name only.
Unfortunately, you typically need a good credit score to succeed. That said, with a bad credit score, it’s not impossible to buy a car on finance, and there’s likely to be a car loan for you.
Nowadays, 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!
You’ll likely be limited to an HP car finance deal which might be OK. You won’t 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.
Can I Apply to Buy a Car on Finance with Someone Else when I have a Bad Credit Score?
Suppose you can’t get car finance by yourself! 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 to have 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.
How Does Car Finance Work when Buying a Car with Another Person?
Typically when you have a bad credit history and want to purchase a car with someone else to improve your chances of a successful application, there are two routes you can go.
They are a joint car finance application or a guarantor car loan.
In both these scenarios, you must make the application with someone you trust – ideally, a close family member or parent/guardian.
In a joint application, you are legally obligated to pay for the car and own it jointly at the end of the agreement.
A guarantor application is where you’re the first port of call to pay – but if you fail to, it lies on the guarantor. But, with guarantor finance, you, the borrower, will own the car. Not the guarantor, even if they pay off the loan.
Guarantor loans can be a little awkward to approach, so ask someone you won’t fall out with!
What Kind of Car Finance can you get Buying a Car with a Bad Credit Score?
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 a 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.
What Information is in a Credit Report?
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.
Who Calculates my 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.
Why Use Us?
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.
- Proof of driving licence
- Proof of address
- Proof of income
Have you accidentally cancelled a direct debit, making your monthly payments late? Or went over your mobile limit and didn’t repay it right away? Even a couple of missed payments can devastate your credit score.
In many instances, people can have credit scores by doing nothing at all! For a finance company, an empty credit score is almost as bad as a negative one.
Fortunately, though, you’re not out of luck. There are options if you buy a car with a poor credit score. Read on to find out more!