In recent years, car finance has become more accessible for people with different circumstances. It used to be hard to get approved for a car loan if you had bad credit, are self-employed, receive benefits or don’t have a guarantor to support your application. Nowadays, there are many options for people to make car finance open to everyone but always remember that if you’re looking for guaranteed car finance you won’t be able to find it. That’s because lenders can’t guarantee that anyone will get accepted for finance. Let’s take a look at how you can increase your chances of getting approved for a car loan with bad credit.
Soft vs hard search checks
This may seem obvious, but many lenders will require a credit check to be performed on your credit file before you can get accepted for car finance. However, some bad credit card finance specialists also look at affordability to get you approved. Most lenders will perform a soft search credit check on your credit report which doesn’t harm your credit score or is recorded on your credit file. If you’re shopping around for finance, a soft search credit check is much more beneficial. You may also come across hard search credit checks too. A hard search credit check is recorded on your credit file and multiple hard searches ina short space of time can negatively impact your credit score – not feat if you already have bad credit!
Check your credit score regularly
It is recommended that you get into the habit of checking your credit score on a regular basis. A recent survey by refused car finance showed that 18% of their customers said they have NEVER checked their credit score in their life! But these customers applied to the bad credit car finance specialist, assuming that that did have bad credit! When you check your credit score you should make sure all your information is correct and up to date. Even having the wrong address or incorrect name can negatively affect your credit score. If you see anything on your credit file, which can be an application for finance that you don’t recognise, you should let your credit referencing agency know. You may be the victim of a fraudulent application for finance in your name.
Increase your credit score
There are a few ways in which you can easily increase your credit score to help you get approved for car finance.
- Pay all your bills on time and in full to show potential new lenders that you have good financial responsibility
- Register on the UK electoral roll to help lender verify that you are who you say you are and speed up the finance approval process.
- Consider a credit building card or get your name on some bills if you haven’t taken out any form of credit before
- Disassociate yourself from any financial links if you no longer have any credit with them. Their bad credit score could also negatively affect yours.
- Keep your credit utilisation low by only using below 50% of the credit available to you. Maxing out credit cards etc can make lenders think that you can’t handle any more credit than you have now.
Save up for a down payment
Having a car finance deposit or down payment can also help you to get approved. Even just sabing up for a few months for a car deposit of a few hundred pounds can make you more attractive to lenders. It shows that you are good with your finances and also means that you don’t have to lend as much from your potential lender and lower your monthly payments. It will also mean you pay less interest overall so can save you money in the long run.