What is a credit score?
So, everyone is always saying that it is important to keep your credit score as good as you can, but what is a credit score? Well, to put it simply, your credit score is essentially your financial footprint. It looks at your financial history, to help lenders assess how safe you are going to be to lend money to. What we mean by ‘safe,’ is how likely it is that you’re going to pay it back based on your financial history. It’s not possible to see whether you’re going to be able to make the specific repayments, but your history will give them a good indication of whether or not you’re reliable.
Your credit score is going to be influenced by a number of different factors. Some of these can include whether you have gone bankrupt at any time if you’ve made late payments on your bills, missed loan payments, and so on.
The difference between a bad and good credit rating
A good credit rating means that you are more reliable. In the past, you have likely paid all of your bills on time, you don’t pay late or not pay at all. If you have a poor credit rating, you are probably someone who misses payments quite a bit or pays them late. Now, we’re not saying that this is entirely your fault, sometimes things happen, and they are beyond our control, but your credit score won’t take any of that into account. As far as it’s concerned, if you make your payments regularly and on time, your credit score will be far better than if you don’t.
How to get car finance if you have poor credit
So, if you’re going to try and get car finance even though you have poor credit, how do you go about doing this?
The first thing that you can try is to get a guarantor loan. This means that if you don’t make the payments, your guarantor is going to be liable to pay what you don’t. This makes the risk for the lender significantly smaller, meaning they are more likely to accept you.
Increase your deposit
Something else that you can do is to increase your deposit. If you have a good credit rating, then the deposit required is going to be around 10%. But, if you have a poor credit rating, then increasing the deposit will greatly increase your chances of being approved for the loan. This is because there is less money to lend, and then from the lender's point of view, less money for them to lose.
Careful of your loans
Also, make sure that you don’t have too many loans, or you haven’t applied for too many. Other lenders can see where you have applied for another loan, and if they think that you are applying for too many, they might come to the conclusion that you aren’t going to be able to pay it back. That’s why, if you’re going to be applying for car finance, it’s a good idea to try not to apply for anything else while this is being considered. If you do want to apply for another loan and you’re confident you can pay it, just wait until you’ve been approved for your car finance.
You can still get car finance with poor credit
The important takeaway from this is that even if you have poor credit, you can still get car finance. It doesn’t have to be the end of the road for you, there are still some options. Try to build up your credit score as much as you can because this is going to help a lot, but if you can’t, don’t worry, there are things that you can do to get you that dream car.
Improving Your Chances Of Acceptance
There are things that you can do to boost your chances of getting accepted for car finance.
Identify Problems with your credit score
The first thing that you can try is to identify problems in your credit score. Get a full copy, go through it and figure out where things have gone wrong, and how you can improve on them. You’ll want to check that there are no mistakes because this can happen, and it can be a negative impact on your score where it shouldn’t be. Once you’ve done this, try to start making repayments where they’re due, and this will help to sort out your credit score.
You also need to think about whether you have any current repayments that you should be making. If you do, then try to make sure they are all paid on time. If you do this and keep up with them, you are showing the new lender that you can be trusted to keep up payments when they are due. This will increase your chances of being accepted as reliability is important when it comes to lending money.