If you have a bad credit rating but would still like to buy a used car on finance, it may be more difficult to get approved and will be a higher rate of interest than the rates you will see advertised to customers with a good credit rating. In this article, we explain why that is and what you can do to improve your chances of an approval as well as how to get approved at a better rate of interest.
Can I still get approved for car finance with a bad credit rating?
Yes, you can. There are more than 10 specialist fair and bad credit car finance lenders that actively lend money in the UK right now. All of these finance companies use their own credit scoring system to determine whether someone’s credit file meets their criteria for an approval, they mostly look for:
- No signs of current financial struggles – if you are behind on payments for any loans, or credit cards right now, or if you are over your credit limit, or arranged overdraft, these are signs of someone struggling with their existing financial commitments, and you can expect to be declined.
- Signs that you have affordability to meet the finance payments for the loan you are applying for – if you have paid a similar size loan in the past, or are comfortably maintaining payments on any sizeable credit card or loan right now, this will be looked upon favourably by fair and bad credit car finance lenders.
- Historic issues – if the issues you have on your credit report were over 12 months ago, this will show that you are recovering from the issues that happened and that you are in a better financial position to afford repayments now. Also, if you are able to reduce the default amounts for any historic defaults you have, the finance companies will look upon these more favourably.
As well as credit checks, all the fair and bad credit finance lenders also complete affordability assessments to ensure you have enough disposable income to meet the finance payments they offer. They do this by taking all of your income into account and then deducting your expenditure, which will include:
- Any active credit you are currently paying.
- Any historic defaulted credit.
- An assumed cost of living which takes into account your rent, bills and general expenses.
If you are declined on affordability only, we will reach out to you to ask whether it is possible for you to make a joint application.
What can I do to improve my chances of a bad credit car finance approval?
Here are our top 5 tips that should improve your chances of a car finance approval, as well as improving the rate you get offered, and increase your credit score.
- Register to vote. All finance companies check the electoral register to tell them whether you are registered at the address you say you are. If you are not on the ‘Voters Roll’ then certain finance companies may decline your application on this alone!
- Make sure your active credit is all registered to your current address. Similarly to the above, finance companies are looking for proof of your address, as well as indicating whether you will keep changes of address updated with any new finance you take out.
- Register with Credit Karma to get a copy of your credit report and catch up any current arrears you have. The biggest decline reason that fair and bad credit car finance providers give us is that ‘The credit file shows a lack of affordability’ and current arrears is the biggest factor in that decision. If you allow arrears to continue to get worse, they will eventually lead to a default, which you won’t be able to remove from your credit file for 6 years. If you can’t afford to catch the arrears up in one go, make sure you start making the minimum payment so that these don’t get worse and limit your chances of approval for the next several years.
- Wait 30 days since your last application. Fair and bad credit car finance lenders will automatically decline new applications you make within 30 days of your last declined application with them. If you continue to apply, within this timeframe, you will elongate the length of time for you to have an application that would actually be considered.
- If you can afford to pay off any historic defaults, this will have a big impact on your credit score, especially if you are able to satisfy any in full. These will still remain on your credit file for 6 years, but your credit report shows the original balance as well as the balance owed now.
How can I find a Bad Credit Car Finance Dealer near me?
You can use our bad credit dealer locator to find your closest bad credit car finance dealer by visiting https://www.getabettercar.co.uk/bad-credit-car-finance-near-me/
These dealers have all been checked for their ratings, finance accreditation, their finance process, and their aftersales process to ensure they offer the best service available. This article was written by Duncan Twigg, Director at Get A Better Car Nottingham – Fair and Bad Credit Car Finance Specialists – see https://www.getabettercar.co.uk/ for more details.
