There are many myths surrounding bad credit and the ability to get car finance. Many people think it’s impossible to get approved for car finance with bad credit. However, that isn’t strictly true.
Whilst it can be a little trickier to get approved for bad credit car finance, there are many car finance lenders who can help you. Many finance lenders now take other factors into account such as affordability and personal income to get you approved. Ok, so how do you get approved for car finance with bad credit?
Check your credit file
Before you start applying, you should perform a personal credit check to see your credit score and fix any mistakes. You can check your credit for free using an online credit referencing agency. You can easily increase your credit score by fixing any mistakes on your credit file, this can include any credit that you did not take out (e.g. fraudulent applications), making sure your address is up to date and disassociating any financial links you no longer need.
Register to vote
Registering on the UK electoral roll can work in your favour with potential lenders. Whether you are on the electoral roll or not is registered on your credit file. The electoral roll confirms your name and living address and makes it easier for lenders to verify that you are who you say you are.
Never miss a payment
This may be hard if you’ve had trouble in the past making repayments. However, even just a few month’s worth of evidence that you can pay all your bills on time and in full can help to improve your credit score. It also shows lenders that you can be trusted to make repayments.
Increase your deposit
There are many no deposit car finance deals available. However, having a deposit to put down can be beneficial in the eyes of a lender. Having a deposit can show your lender that you have a little more to put down and are more likely to make your payments on time.
Consider a joint car finance application
If you’re struggling to get approved for car finance with bad credit, you could consider a joint car finance application. A joint application is when two people apply for finance on the same vehicle. Having a person such as a friend or family member to support your application can increase the chances of you getting approved. For example, if you have a good income and a low credit score but your partner has a good credit score, the two credit files can be used to get you approved. Both people are also responsible for meeting the repayment schedule, which puts more confidence in the lenders.
Reduce the number of applications you make
It’s good to shop around for the best car finance deal for you. However, making multiple car finance applications that provide a hard search on your credit file, can decrease your score. A hard search is recorded on your credit file, can harm your score and shows other lenders the outcome of that application e.g. approved or declined. Making multiple applications in a short space of time is not recommended. If you want to shop around, make sure you stick to soft search applications only.
Cut ties with people with bad credit
As mentioned above when you check your credit file you will see names of any people who you are financially linked with. You become financially linked when you take out credit with someone else. If you no longer have active credit with someone who has bad credit, its best to disassociate yourself from them. Their low credit score could be negatively affecting yours. You can contact your credit referencing agency who provided your credit report to sever these ties.