If you have credit issues and want to get a car on finance, your options may be limited. But there is still hope. How your bad credit rating impacts your chances of getting a car on finance. In a nutshell, your bad credit rating is a score that reflects how good of a borrower you are thought to be. It is possible though – Moolr look at how to get car financing with a bad credit score.
Lenders never see this score – all they can access is your credit history. This will give them an indication of how good you are at managing your money. People with a poor credit history may find that lenders offer them higher interest rates or poorer lending options. Some may refuse to lend to you altogether. Fortunately, there are options available to you if you are looking to finance a car.
This has the best long term benefit but is the most time consuming of all the options here. Improving your credit rating is a good way to show lenders that you can be trusted with repayment. This increases your chances of getting finance with decent rates.
Okay, so you may have a bad credit score. But what does bad actually look like? To get a decent view of your credit history, use a credit check service. This should tell you about any active credit, any missed payments and people who are financially linked to you.
This is a good place to start. Make sure all of your details are correct and up to date. Not only does this help when lenders do credit checks, but it will also reduce the risk of fraud.
When lenders do credit checks, they will check your name and address. Being on the electoral roll makes this process much easier for them, and also helps to reduce the risk of fraud.
You may have an old joint credit account with someone who has since fallen into bad credit. In cases like this it’s possible that the black mark against their name is dragging you down. If you want to sever ties with these people financially, you will need to issue a notice of disassociation. After some checks, credit reference agencies should be able to remove this person from your file.
If you are trying to borrow money, having an already growing debt isn’t going to do you any favours. Keeping up with your repayments is a good sign too lenders that you can borrow responsibly. This will – over time – help to improve your bad credit score.
Also, try not to exceed 75% of your credit limit. Running yourself up to the wire, again and again, could be an indication that you are bad at managing your money. This also applies to late payments and exceeding your credit limit. Keep a close eye on your spending and prove that you can keep on top of your debt. If you are short on time as well as cash, one of these options might be worth considering:
With finance deals like hire purchase or personal contract purchase, you are usually asked to put down a deposit. Normally, this can be around 10%, but it will vary depending on what deal you are after. Putting a little more money down at this stage could help the lender’s confidence in your ability to make repayments. This, in turn, may result in a better interest rate for you.
There are a number of companies that specialise in loans for people with bad credit. The problem with many of these is that their interest rates can be comparatively high. An alternative to this is a guarantor loan, where you get someone who trusts you to act as your guarantor. If you can’t make the repayments for whatever reason, the debt passes to them.
This method poses less of a risk to lenders and so tend to offer better interest rates than short term loan companies. This isn’t something to go into lightly, as being a guarantor is a hefty responsibility. If the guarantor is unable to shoulder the debt, both you and your guarantor could face legal action.
Ultimately, it’s important that you don’t bite off more than you can chew when it comes to debt. It is not worth being thousands of pounds in the red for a new set of wheels. If you are in doubt, speak to a financial adviser.