Having a poor credit score can mean it’s more of a challenge to take out further credit. But there are bad credit vehicle finance options out there, which allow you to borrow money for a vehicle, and then make monthly instalments to cover the cost.
What is Bad Credit?
When people say they have bad credit, they are referring to their credit score, which is a number calculated using information from their credit file. So the question is, what is your credit file? This is a report held by the three main credit reference agencies in the UK, Equifax, Experian, and TransUnion.
Your credit file contains details of your credit history. This includes any past and current personal loans, credit cards, mortgages and vehicle finance agreements. Your credit file also has things like your mobile phone bill and utility bills listed.
Your credit score is calculated by looking at your repayment history and amount of open credit agreements. So whether you have made your payments on time, and the total value of your current loans. Any CCJs or reports of insolvency or bankruptcy will also impact your score.
Do You Have a Credit Footprint?
Some people may have a low credit score, not due to late or missed payments in the past, but because they have not taken out a lot of credit previously. If you don’t have much of a credit footprint, lenders are unable to see how you manage your money, and thus may be hesitant to lend to you.
Not all lenders ask that you have a large credit footprint when you take out a loan, but it’s something to be aware of.
Bad Credit Vehicle Finance
If you’re looking into bad credit loans, there may be vehicle finance options available. Many UK lenders understand that to most people, a vehicle is an essential part of life. They therefore try to provide a number of options, whether you have good or bad credit.
Some people choose to take out a personal loan to buy a car, as that way they’ll own it from the start. But if you have a low credit score, you may not be able to get a personal loan, as unsecured loans tend to be less accessible than secured loans.
When it comes to secured loans, the two main vehicle finance options are Personal Contract Purchase (PCP) and Hire Purchase (HP) deals. With a PCP agreement, you would make payments towards the depreciation of the vehicle, and then choose whether to buy the vehicle, enter into a new deal, or walk away at the end of your contract. Hire purchase works like any other form of loan, in that your repayments are going towards the outstanding balance of the vehicle, plus any interest applied.
Get Vehicle Finance With Bad Credit
As mentioned above, having a low credit score can make taking out credit more difficult. But there are a number of lenders who will consider your application even if you have a poor credit history, and many even specialise in bad credit vehicle finance. One of the best ways to find such lenders is to use a broker service, like that offered by Vehicle Finance Today. We may be able to put you in touch with a lender that can help, even if you’ve been turned down previously.
It’s also important to note that if you apply through Vehicle Finance Today, we only undertake soft credit checks. This means that the search won’t be reported on your credit file, and your score won’t be impacted. The lender you’re matched with may choose to undertake a full credit check after this, though you can rest assured that you’d need to give consent before this happened.
Another way to improve your chances of approval is to try and boost your credit score. There are a few ways you might be able to quickly improve your credit rating, such as checking to see if there are any mistakes on your credit file. You can request to see copies of your credit report through each of the three main UK credit reference agencies.
Is My Credit Score Too Low for Vehicle Finance?
Some people may be concerned that their credit score is too low to be eligible for car finance. But there is no lower limit when it comes to a credit rating – it will be up to the individual lender to decide whether someone meets their eligibility criteria. Most lenders will have slightly different requirements, and many will look at more than just your credit score.
Your affordability should be just as important as your credit score. So things like your employment history, as well as your income and expenditure, will be looked at when lenders make a loan decision. Therefore even if you have a low credit score, Vehicle Finance Today may be able to help you find a suitable lender.
Does Applying Impact Your Credit Score?
When you apply for car finance with Vehicle Finance Today, we only perform soft credit checks, so your credit score won’t be impacted. However, a hard check may then be undertaken by the lender, which would be reported on your credit file.
It’s also worth noting that making lots of applications in a short period of time can damage your credit rating. So if you were to apply with lots of different lenders, without using a broker service, you may end up with a lower credit score than when you started.
Apply for Bad Credit Vehicle Finance
If you’re looking to apply for vehicle finance, our online application shouldn’t take more than a few minutes to complete. You’ll be asked for a few personal details, some information about your employment, as well as details of your monthly budget. You’ll also need to let us know how much you wish to borrow, and what type of vehicle you’re funding.
If you’d like to learn more about the sort of loan you’re eligible for before applying, you can use our vehicle finance calculator. This can be particularly useful for people with bad credit, as they can get a good idea of how much they can borrow and the monthly repayment amount. Try it today and see if you could get a new set of wheels!
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Applying for finance with us should only take a few minutes, and won’t impact your credit score. So what are you waiting for?