When applying for credit, if you have a poor credit history, or perhaps no credit history at all, you may start looking into no credit check loans. But these sorts of loans don’t really exist. All regulated lenders will at least carry out soft credit checks, and it’s likely that they will undertake a full credit check.
Lenders carry out these checks because they need to ensure that they are lending responsibly, and that you’re able to make the due repayments. An affordability check will be carried out alongside these credit checks, for the same reason.
All this may sound a bit intimidating if you know that you have a low credit score. But you shouldn’t be put off applying for a loan – there are many lenders out there who will consider your application, even if you have a poor credit history. There are even specialist bad credit lenders, who will take lots of additional factors into account when making a loan decision.
What is a Credit Check?
As you can probably guess from the name, a credit check is where a lender or broker will have a look at your credit history. This information can be found on your credit file, or credit report, which is held by the three main credit reference agencies in the UK – Equifax, Experian and TransUnion. You can request to see a copy of your credit report from any of these agencies. Details on your credit file include:
- Your full name
- Your date of birth
- Both current and previous addresses
- Outstanding loans and credit cards, as well as those from the last six years
- Your bank accounts
- Any bankruptcies, insolvencies, and County Court Judgments (CCJs)
- Any financial associations you have (people you’re linked with through joint credit)
- Utility payments, such as electricity, gas and water
Most information stays on your credit report for around six years. This means that late payments on a personal loan from a few years ago could still be impacting your credit score today. It’s therefore important to regularly check your credit score, and see if there is anything you can do to improve it.
Soft and Hard Search Credit Checks
There are two different types of credit check – a soft search, and a hard search. A soft search is less comprehensive, and won’t be recorded on your credit report. This means that it won’t impact your credit score.
A hard credit check is a thorough search into your credit history, and will be reported on your credit file. Too many searches in a short period of time can actually impact your ability to take out credit, which is why it can be helpful to check your eligibility before applying with a lender. You can use our handy car finance calculator to see how much your repayments would be, and making an application with us can match you with a lender that’s likely to approve your loan.
The Benefit of a Credit Check
While it may seem like a daunting prospect, credit checks are actually very important. When you apply for a vehicle loan, the lender needs to find out more about your financial history. Essentially, they need to know how you manage your money, and whether you’ll be able to make the loan repayments. The easiest way to do this is to look at your credit history – how reliable you have been at repaying credit previously.
Credit checks also ensure that you’re not borrowing more money than you can realistically afford. Making instalments that are too large can put you into financial difficulty, and will likely mean you’ll default on the loan.
And if you are concerned about getting a credit check done, you can rest assured that vehicle loans tend to be more accessible than some other forms of credit. As they are secured loans, there is less risk for the lender. However, if you were unable to keep up with repayments, you would be at risk of having the vehicle repossessed.
How Can I Check My Credit Score?
Your credit score is a number that’s calculated from the information on your credit file, and is meant to give lenders a good indication of your creditworthiness. Things like CCJs and IVAs can lower your credit score, while making repayments on time can help improve it. Overall, the higher your credit score, the better chance you have of obtaining credit.
You can check your credit rating for free using sites like Experian and Credit Karma. You’ll also be able to find helpful information on their websites, outlining ways in which you can boost your credit score. For instance, something as simple as registering on the electoral roll could improve your credit rating.
Bad Credit Car Finance
Even if you have really bad credit, there’s still a chance that you’ll be eligible for vehicle finance. Many lenders will look at more than just your credit rating when making a loan decision. They will also consider things like your employment history, as well as your monthly income and expenditure. Your credit score isn’t always a great indicator of how you manage your finances – some people have a low credit score due to factors outside of their control.
As mentioned above, car finance is a type of secured loan, which means that the value of the loan is secured against an asset – in this case, your vehicle. This gives lenders additional piece of mind, as they’ll have the option of reclaiming the asset should you default on the loan. The advantage for the borrower is that you’re generally more likely to be eligible for a secured loan than an unsecured loan, despite having a poor credit history. The interest rates tend to be better too.
How to Apply for a Bad Credit Vehicle Loan
Although there is no such thing as no credit check car finance, we work with a number of lenders who will consider your application, even if you have a low credit score. Simply complete our short online application, and we’ll do our best to find you a suitable lender.
If your loan is approved, we can then help you track down your dream car, which can be purchased from any reputable UK dealer. The lender will then cover the cost of the vehicle, and you can drive away happy! Click the ‘Apply Now’ button below to get started.