How to Get Car Finance with Poor Credit
You’re in the market for a car and think financing is an excellent way to get a new vehicle by spreading the cost. However, there’s a problem. When you reach out to lenders you find that your credit score prevents you from receiving finance. Your dream of a new car is over, right? Well, not necessarily.
Many consumers want to know if they can still get vehicle finance if they have a poor credit score? Well, the answer is yes, but there are some caveats. Essentially, you can get car finance with bad credit, but there will be more limitations and you will only have access to specialist lenders. Furthermore, you probably won’t get the best deal and will end up paying more in interest.
What You Need to Know About Credit Score
Lenders conduct a credit check for every customer who requests finance for a vehicle purchase. Consumers with a good credit score will be accepted and get good interest rates. However, the eligibility of customers with poorer credit ratings is varied and many will be rejected by most lenders.
Your credit score is perhaps the most important financial tool in your life. It is used to determine your eligibility for borrowing money, such as for loans, mortgages, credit cards, and car finance. Your score is presented in a credit report, which is a financial footprint that details all the lending through your life.
If you took out a credit card three years ago, it would show on your credit report. Lenders access your report anytime you make a request for finance. They do this to ensure you can be trusted to pay back the money you want to borrow. Needless to say, a history of non-payments or legal action tells the lender you are a risk and can lead to your application being denied.
How a Poor Credit Rating Affects Vehicle Finance
If you have a poor credit score and have black marks on your report (missed payments, defaults, etc.), it can sometimes feel like there’s no way out. You feel like a pariah in the financial world and lenders won’t touch you. Here’s the good news… it won’t be that way forever, and there are specialist lenders who deal with customers with poor credit.
Still, at the moment you will need to accept most lenders won’t grant your application for car finance. Simply, your low credit score tells the lender you are a higher risk and may not pay back what you owe. That is sometimes an unfair assessment of the situation, but it protects the lender.
Whether you borrow from a specialist poor credit lender or just want to improve your financial wellbeing, trying to improve your credit score is worthwhile. Importantly, it’s relatively easy to do and you can start today:
Find errors in your credit report: The first step to fixing your credit score is understanding where there are problems. Download your credit report and check where the bad credit issues occur. Formulate a plan to make changes, such as reaching out to those you own money to.
Get up to speed with your payments: A poor credit score almost always means the customer has missed payments or defaulted on debt. Perhaps the best way to start repairing your score is to pay all existing and future payments on time. If you can start fulfilling your debt obligations, lenders will see you are a trustworthy customer.
Don’t apply for credit too much:One of the biggest mistakes people make is to apply for credit or finance too much. If you applied for a loan and was denied, don’t head to another lender immediately and apply for another. Doing this suggests to the lender you are desperate for money and will make you less attractive as a borrower.
Get Vehicle Finance Through a Specialist Lender
So, under most circumstances it will be difficult to receive car finances if your have a poor credit rating. That said, there are specialist lenders who work with bad credit clients to ensure they can remain part of the financial world.
Companies that provide vehicle finance to customers with limited credit history don’t only use your credit score as a determining factor. They also look at your current financial situation and your ability to afford repayments in the future. Even for customers with major credit issues, such as defaults or court actions, it may be possible to get financing on a vehicle.