How to Improve Your Credit Score for Car Financing

Credit cards

Although there are ways of securing car finance with a poor credit rating, when considering your car finance eligibility, a good indication of your viability as a candidate is the health of your credit score. Don’t panic if yours is less than ideal, though, as there are steps you can take to improve it.

Don’t forget that you can get a free credit score with Experian. Use this to gauge where your credit rating is and improve it if it’s on the lower side – bear in mind that different credit rating agencies (CRAs) use different numerical scales to adjudicate your credit score.

Improving your credit score for car financing

These are a few of the best ways to improve your credit score if you’re trying to secure car finance. A better credit score will mean you are a more favourable candidate for a finance agreement, and may result in lower interest rates overall, so it’s worth improving your overall rating if you can.

Double check your report

Some of the best ways to improve your credit report are the easiest. Double checking your credit report for any small mistakes – like a mistyped name or wrong address – is one of the best ways of improving your overall score.

If you do notice a mistake, contact your provider and ask them to amend it.

Register to vote

Exercising your right to vote is essential in many ways, not least because registering on the electoral roll at your place of residence is an easy way of improving your credit score.

Even if you live with your parents or are in shared accommodation, this is a critical step you can take towards improving your rating.

Pay your bills in a timely fashion

Hitting your regular payments on time and in full is a sure-fire way of improving your credit score. In fact, your payment history is arguably the most important factor that impacts your overall rating. Late payments or those not made in full will impact this history, and in turn effect your score.

Even making the smallest payments on time – for example, repaying your monthly phone bill – adds up, so stay on top of these as far as possible.

Lower your credit utilisation ratio

Your credit utilisation – typically expressed as a ratio – indicates the percentage of total available credit that a borrower is currently making use of. After your payment history, it’s the second most important factor in determining your credit score.

A low credit utilisation indicates that you’re only using a small percentage of any credit available to you. As such, you’re a less risky candidate for a loan. The higher your credit utilisation ratio, the riskier you are, and you might face higher interest rates as a result.

As such, if you’re looking to improve your credit score for car financing, you should aim to avoid taking on any new debt right before applying, as existing credit card debt will increase your credit utilisation ratio. It’s good practice to avoid maxing out your credit cards every month generally, but particularly important if you’re applying for a finance agreement.

Avoid frequent hard credit checks

When you apply for a loan or credit, you’ll face a hard credit check at some point. This will lower your credit score. Although this bump is only temporary, lasting a few months or so, if you have a number of these hard credit inquiries registering on your report in a short period of time, you’ll be a riskier borrower.

By submitting multiple applications for the same kind of loan or finance agreement within a certain period of time, you can avoid having multiple hard enquiries register on your report, as these will all be considered one hard inquiry. For example, FICO will group applications for a similar kind of loan if they are made within a 45-day period.

Practice good security habits

Unfortunately, identity theft is a threat of modern life, and if someone is pretending to be you and taking out credit in your name, this could negatively impact your credit rating.

Being savvy with your security helps to avoid this – don’t repeat passwords, and check your bank account frequently for fraudulent activity.

Find car finance today

My Car Credit can help individuals from all walks of life to secure affordable, accessible finance – and our initial credit check is only ever soft. Find out how we can work with you no matter your credit score by emailing enquiries@mycarcredit.co.uk.

Rates from 9.9% APR. Representative APR 12.4%

Evolution Funding Ltd T/A My Car Credit

My Credit Rating

Excellent

  • You are a home owner
  • You have been on the electoral role for a long period of time
  • You have current credit arrangements and mortgage with no defaults
  • You have no CCJs, credit arrears or missed payments
  • You rarely apply for credit
  • You are employed or self-employed

Good

  • You are on the electoral role
  • You are a home owner or long standing tenant
  • You have a stable employment history
  • You have current credit arrangements with occasional missed payments
  • You have no CCJs

Fair

  • You are or have recently been on the electoral role
  • You may have recently changed address
  • You may have occasional missed payments
  • You may have an old CCJ
  • You may have regularly applied for credit

Poor

  • You may have had frequent changes in address
  • You may not be traceable on the voters roll
  • You may have exceeded credit card limits
  • You may have missed payments on current agreements
  • You may have had a CCJ in the past

Bad

  • You may not be traceable on the voters roll
  • Your credit cards are over their limits
  • You have recent CCJs
  • You may have been refused credit elsewhere
  • You may be in a debt management plan
£

X monthly repayments of
£X

Typical rate

Loan amount

Total payable

X% APR*

£X

£X

*for illustration purposes only

No impact on your credit score*

Representative Example

Borrowing £7,500 at a representative APR of 12.4%, annual interest rate (fixed) 12.36%, 47 monthly payments of £196.44 followed by 1 payment of £206.44 (incl. estimated £10 option to purchase fee), a deposit of £0.00, total cost of credit is £1,939.12, total amount payable is £9,439.12.

Evolution Funding Limited, trading as My Car Credit, is a credit broker and not a lender.

Please ensure you can afford the repayments for the duration of the loan before entering into a credit agreement.

*Initial application is a soft search. Should you progress, some lenders may perform a hard search on your credit file.

Require more help?

Got a question you can’t find the answer to, or need some advice and guidance around taking out car finance? Our Car Credit Specialists are friendly, experienced, and here to help so get in touch today!

What Does ‘Finance’ Mean When Buying a Car?

Woman on phone sat on some steps

When it comes to car finance, there’s a lot of jargon and acronyms, and it’s easy to find yourself questioning what each finance agreement really means.

This post aims to help you get to grips with what different types of finance actually mean when buying a car, and how they work. Once you’ve understood the different kinds of agreements available, you’ll be on your way to securing a car loan quote that will work for your circumstances.

So, what does ‘finance’ mean when buying a car? Read on to learn more…

What does ‘finance’ mean when buying a car?

In essence, car finance makes the purchase of a car more affordable. It’s a credit agreement between you and the lender, allowing you to make full use of the vehicle whilst paying it off in cost-effective monthly instalments according to a pre-agreed schedule. The amount you pay off will also include additional interest on top.

What are the different kinds of car finance?

The right car finance for you will depend on the kind of agreement and terms that you’re looking for, as well as your own driving preferences and needs.

Car loan

A car loan is a type of personal loan but is specifically designed for use on vehicles.

With a car loan, you borrow the money from either a bank or building society. Once you’ve bought the car, you are its outright owner. You’ll repay the car loan over time via instalments, with added interest. Typically, a car loan is more likely to be granted to those with a good credit score – there are other kinds of car finance available for those with poor credit ratings.

Personal Contract Purchase (PCP)

Do you like mixing up the vehicles you drive? Are you happy sticking to mileage caps or paying excess fees for any vehicular wear and tear? Would you like flexibility in choosing whether or not to own the vehicle at the termination of the agreement? Then PCP is potentially the car finance for you. In fact, PCP is the most popular kind of car finance because of its low monthly repayments and flexibility.

With PCP car finance agreements, you’ll pay a deposit and monthly instalments (plus interest). The larger your deposit is, the lower these payments will be. These payments are typically lower than other kinds of car finance as you’re only paying for the car’s depreciation in value during the time that you’re using it.

You can also choose whether or not you want to own the car once you’ve fully paid off the finance. If you do, you’ll pay a final balloon payment to make up the remaining value of the car. If not, you can hand the car back to the dealer with nothing more to pay. Be aware that you won’t own the car unless you opt to do so at the agreement’s termination.

Hire Purchase (HP)

Hire purchase car finance is similar to PCP, but a little more straightforward. You’ll typically make a deposit of around 10% with HP finance, then make fixed monthly payments according to a pre-determined schedule. Repayment terms can be relatively flexible, and there are often competitive interest rates with HP finance.

Like with PCP, you won’t own the vehicle until you’ve made the final repayment of your agreement, but you can opt to do so with a final balloon payment. After this, you can choose to part exchange, sell or keep the car. However, unlike PCP, you won’t usually face mileage caps, so HP finance may be preferable for you if you’re regularly making long journeys.

Personal Contract Hire (PCH)

PCH car finance is when you lease the car, which is why it’s also known as a car leasing agreement. You will never be its outright owner – you’re essentially hiring it until the end of your finance agreement. In this way, PCH differs from either HP or PCP. Though it’s technically not car finance, as you’re not borrowing money, you’ll still see this term frequently used when discussing car financing options.

With PCH, you’ll typically pay a non-returnable deposit as well as your monthly repayments. At the agreement’s end, you’ll hand the car back. If you’ve gone over the mileage cap or have made unreasonable vehicular wear and tear, you’ll pay a penalty fee.

Find the right car finance for you with My Car Credit

Shopping around for car finance can seem stressful, but it needn’t be. My Car Credit aims to make the process of securing your dream deal stress-free and streamlined. Contact our expert team today on enquiries@mycarcredit.co.uk to start your car finance journey.

Rates from 9.9% APR. Representative APR 12.4%

Evolution Funding Ltd T/A My Car Credit

My Credit Rating

Excellent

  • You are a home owner
  • You have been on the electoral role for a long period of time
  • You have current credit arrangements and mortgage with no defaults
  • You have no CCJs, credit arrears or missed payments
  • You rarely apply for credit
  • You are employed or self-employed

Good

  • You are on the electoral role
  • You are a home owner or long standing tenant
  • You have a stable employment history
  • You have current credit arrangements with occasional missed payments
  • You have no CCJs

Fair

  • You are or have recently been on the electoral role
  • You may have recently changed address
  • You may have occasional missed payments
  • You may have an old CCJ
  • You may have regularly applied for credit

Poor

  • You may have had frequent changes in address
  • You may not be traceable on the voters roll
  • You may have exceeded credit card limits
  • You may have missed payments on current agreements
  • You may have had a CCJ in the past

Bad

  • You may not be traceable on the voters roll
  • Your credit cards are over their limits
  • You have recent CCJs
  • You may have been refused credit elsewhere
  • You may be in a debt management plan
£

X monthly repayments of
£X

Typical rate

Loan amount

Total payable

X% APR*

£X

£X

*for illustration purposes only

No impact on your credit score*

Representative Example

Borrowing £7,500 at a representative APR of 12.4%, annual interest rate (fixed) 12.36%, 47 monthly payments of £196.44 followed by 1 payment of £206.44 (incl. estimated £10 option to purchase fee), a deposit of £0.00, total cost of credit is £1,939.12, total amount payable is £9,439.12.

Evolution Funding Limited, trading as My Car Credit, is a credit broker and not a lender.

Please ensure you can afford the repayments for the duration of the loan before entering into a credit agreement.

*Initial application is a soft search. Should you progress, some lenders may perform a hard search on your credit file.

Require more help?

Got a question you can’t find the answer to, or need some advice and guidance around taking out car finance? Our Car Credit Specialists are friendly, experienced, and here to help so get in touch today!

Car Loan Early Repayment – Is It Worth It?

Woman repaying her car loan early online

There are many reasons why people consider paying off their car finance early. But whether you are eligible to do so depends on your personal circumstances, as well as the details of your car finance agreement.

You should expect to pay a settlement fee if you opt for early repayment of your car loan. As such, whether or not early repayment is worth it will vary from person to person, but you do need to think hard about whether you can afford to do so.

What is an ERC?

An ERC (early repayment charge, also known as a settlement figure or resettlement fee) is a penalty charge that you’ll likely have to make if you opt for early repayment of your car loan. This charge typically amounts to two months’ worth of interest, depending on your lender. Whether or not your car finance lender will charge you an ERC, depends on their policies and the type of car finance agreement you have.

Before you decide on an early repayment, it’s essential to know whether you may be liable to pay an ERC, so check with your finance provider first. Once you’ve asked them for this figure, you usually have around 28 days to decide if you want to proceed with the early repayment of your car loan.

How does car loan early repayment impact your credit score?

You may think that making an early repayment of your car loan would improve your credit score, but this isn’t necessarily the case.

If you pay off your car loan early, the account will show as closed within your credit report. It’s only open accounts that have an impact on your credit score, and other lenders sometimes like to see these accounts, so they can gauge how timely you are with repaying your debt. However, once your car finance account is closed, any benefit on your overall finance management won’t be evident on your credit report.

If you need your credit report to work in your favour – for example, if you’re applying for a mortgage or re-mortgaging – then you may be better off keeping your car finance open on your credit report.

Is it worth early repayment of a car loan?

Whether or not the early repayment of your car finance is worth it depends entirely on your situation and the terms of your agreement. You need to ask yourself whether you can truly afford the early repayment or settlement fees, and whether it might be beneficial to stay in the finance deal for the sake of your credit score.

Other factors to consider include whether you’re in negative equity. Essentially, if the settlement figure that you’ll have to make for early termination is higher than the value of the car, it’s probably worth waiting out your car finance term in full until you’re in positive equity.

Similarly, if you’re already close to the end of your finance term, it’s likely cheaper to stick to your current finance deal and finish all of your repayments, rather than face the settlement (ERC) fee.

Returning the vehicle

Another factor to consider if you’re on either HP or PCP finance is whether you want to return the car at the end of the finance term. Under the Consumer Credit Act of 1974, you can opt for ‘voluntary termination’ of the agreement, provided you’ve already paid half the cost of the car or will make up the difference between what you’ve paid and that number. However, if you do so, you won’t be able to return the car to the finance provider – you will be its legal owner.

This may be beneficial if the car’s value is higher than that of your remaining payments, as, once you’ve paid any settlement fee, you can then sell the car on and make a profit. But you may still be charged by your lender if you opt for voluntary termination. This amount is capped by law, but it’s still worth considering. Companies may also react badly to frequent voluntary terminations on your credit file, too.

Discuss your car finance needs today

If you want to get a car finance quote, discuss early repayment of your car loan, or have any further questions about the process, you can email My Car Credit on enquiries@mycarcredit.co.uk today.

Rates from 9.9% APR. Representative APR 12.4%

Evolution Funding Ltd T/A My Car Credit

My Credit Rating

Excellent

  • You are a home owner
  • You have been on the electoral role for a long period of time
  • You have current credit arrangements and mortgage with no defaults
  • You have no CCJs, credit arrears or missed payments
  • You rarely apply for credit
  • You are employed or self-employed

Good

  • You are on the electoral role
  • You are a home owner or long standing tenant
  • You have a stable employment history
  • You have current credit arrangements with occasional missed payments
  • You have no CCJs

Fair

  • You are or have recently been on the electoral role
  • You may have recently changed address
  • You may have occasional missed payments
  • You may have an old CCJ
  • You may have regularly applied for credit

Poor

  • You may have had frequent changes in address
  • You may not be traceable on the voters roll
  • You may have exceeded credit card limits
  • You may have missed payments on current agreements
  • You may have had a CCJ in the past

Bad

  • You may not be traceable on the voters roll
  • Your credit cards are over their limits
  • You have recent CCJs
  • You may have been refused credit elsewhere
  • You may be in a debt management plan
£

X monthly repayments of
£X

Typical rate

Loan amount

Total payable

X% APR*

£X

£X

*for illustration purposes only

No impact on your credit score*

Representative Example

Borrowing £7,500 at a representative APR of 12.4%, annual interest rate (fixed) 12.36%, 47 monthly payments of £196.44 followed by 1 payment of £206.44 (incl. estimated £10 option to purchase fee), a deposit of £0.00, total cost of credit is £1,939.12, total amount payable is £9,439.12.

Evolution Funding Limited, trading as My Car Credit, is a credit broker and not a lender.

Please ensure you can afford the repayments for the duration of the loan before entering into a credit agreement.

*Initial application is a soft search. Should you progress, some lenders may perform a hard search on your credit file.

Require more help?

Got a question you can’t find the answer to, or need some advice and guidance around taking out car finance? Our Car Credit Specialists are friendly, experienced, and here to help so get in touch today!

Refused Car Finance – What to Do Next

Frustrated person using laptop

Car finance can be a fantastic way to secure the keys to your dream ride. However, it’s not uncommon to be refused the first time around. There are all kinds of reasons why you may have been refused car finance, some easy to overcome and others a little more complicated.

The good news is, there are always options. If you’ve been refused car finance but believe you’re a reliable and worthy borrower, this guide is for you! Read on as we cover everything you need to know about how to deal with a rejected car finance application, what to do next and the steps you need to take to get behind the wheel of a new car.

Step 1: Understanding why you were refused car finance

The first step is to get a better idea of why you were refused car finance. Understandably, most lenders are strict about who they approve for finance. After all, a car finance loan is a big commitment and lenders want to make sure they recoup their investment. Here’s a few of the most common reasons why you may have been refused car finance:

  • A bad credit score

A bad credit score is one of the most common reasons applicants are refused car finance. Most lenders use consumer credit reporting agencies such as Equifax or TransUnion to assess the suitability of car loan applicants. Equifax issues scores of between 0 and 700, with the average Brit clocking in at around 380. TransUnion rates borrowers on a 0 – 710 scale, with averages in the UK sitting at around 610. Experian is another popular agency and ranks you on a scale of 0 – 999.

Why do you have a low credit score? It’s due to poor credit history. Credit reference agencies keep track of bad credit activity, such as missed payments on utlity bills, outstanding debts on finance or a lack of steady income. Hard searches on your credit file typically display this for up to six years before the date you’re applying.

It’s not always easy to maintain a glowing credit score, as many Brits know. If you’ve ever missed a payment on your credit card, you’re not alone. The latest YouGov research revealed around 15% of UK adults have defaulted on credit card payments, which can knock a decent amount of points off your credit score. The figure is even higher in London, where 19% of credit card holders have missed a payment.

  • An ambitious budget

In other cases, your budget may be too ambitious for car finance lenders to approve. When assessing your application, lenders will consider personal circumstances, such as your employment status, income and ongoing life expenses to determine if you can afford the loan. If there are any doubts, your application may be refused.

Let’s say you want a hire purchase deal that costs £500 a month and you have regular income of £2,000 from your monthly salary. You might think applying for car finance is a sure-fire thing. But once you factor in mortgage or rent payments, utility bills and other typical outgoings, you might only just have enough left to make the payment to your finance company.

Even with a good credit score, it might be too much. But pair that with a less-than-perfect credit score, and many lenders won’t want to take the risk. As well as risking missed or late payments for themselves, mainstream lenders have to lend responsibly to avoid finance agreements leaving customers worse off. So, without the right affordability, lenders could refuse your car finance.

  • Incomplete application

Your application doesn’t just offer lenders insight into your borrowing history but also your competency and organisational skills. Incomplete applications can be an instant turnoff for lenders, so it pays to give your documents a thorough once over before hitting send.

When you apply online, it can be tempting to send old documents that are stored on your computer or phone, for example. Maybe you have recently changed address, meaning you’ll need different documents to apply for car finance. That’s often the case for younger customers who have just moved out having passed their driving test!

Finance companies have their own criteria, so every little error could negatively impact your chances of securing that dream car.

Now you have a better idea of why you were refused car finance, let’s take a look at what to do next…

Step 2: Enlisting the help of experts

Car finance can seem complicated but with the help of experts, it doesn’t have to be. At My Car Credit we specialise in getting Brits into the driver’s seat of their ideal car, no matter what their credit score. How do we do it?

  • A large lending panel

With access to one of the largest lender panels in the country, we take a wide-reaching approach to car finance. Instead of considering just a handful of preferred lenders, we reach out to dozens of finance companies across the country. This drastically improves your chances of being approved for car finance, no matter what your circumstances, borrowing history or credit rating.

If your credit profile doesn’t meet one lender’s criteria, you still have a chance of being approved by one of our other lenders. That’s how we secure finance agreements for young drivers, self-employed applicants and more.

  • Award-winning technology

We’re part of Evolution Funding, one of the largest and most trusted car finance brokers in the UK. Our service is backed by their award-winning technology, making it faster and easier for us to match your loan application with the right lender. 

  • A personalised approach

There’s no one-size-fits-all approach at My Car Credit. We assess every car finance application individually, meaning you’re matched with the best possible lenders for your unique circumstances. If you’ve had previous rejections due to a poor credit rating, that doesn’t mean you can’t get car finance with us.

For more information, check out our guide on car finance explained.

Step 3: Improve your chances of a car finance agreement

After you’ve developed a good understanding of why you were refused car finance and have enlisted a team of experts to help with your application, it’s time to start improving your chances. Here’s how:

  • Boost your credit score

There are lots of ways you can boost your credit score, some easy and others requiring a little more time and dedication. Registering on the electoral roll and keeping on top of regular payments such as a credit card repayments or your phone bill are both great ways to improve your credit score. If your credit score is lacking due to a lack of financial history, applying for a basic credit card can be a good way to develop a positive paper trail that establishes you as a reliable borrower. 

  • Pad out your deposit

A small deposit suggests you’re just scrimping by and can be a red flag for lenders. Saving cash where you can and using it to pad out your deposit is a foolproof way to improve your status as a borrower and show lenders you can commit to a regular savings regime.

If you can afford a larger deposit sum upfront, it’s always worth putting it towards your new car. It will reduce the total loan amount, making car finance less of a risk for the lender. It will also reduce your monthly repayments, so you can soon save back the money you added to your deposit.

Securing car finance with poor credit history

Just because you have a less-than-perfect credit history, it doesn’t mean you’re out of the running for a loan. With the right approach, your chances of securing car finance with poor credit are high. If you’re struggling with other barriers such as being self-employed or a lack of credit history, we can help.

At My Car Credit, we understand the difficulties you face with a poor credit rating. Not least that a hard search will stay on your credit file. That’s why we only use a soft search initially to get an idea of your credit profile before moving onto the next steps.

Whatever information we receive from the credit agency, the search won’t appear on your credit report. But even if we find you have bad credit, we can still work to get your application approved if repayments are affordable.

Ready to get the wheels moving on your application? Get in touch by emailing enquiries@mycarcredit.co.uk or give us a call on 01246 458 810 to find out more about how to proceed after being refused car finance.

Rates from 9.9% APR. Representative APR 12.4%

Evolution Funding Ltd T/A My Car Credit

My Credit Rating

Excellent

  • You are a home owner
  • You have been on the electoral role for a long period of time
  • You have current credit arrangements and mortgage with no defaults
  • You have no CCJs, credit arrears or missed payments
  • You rarely apply for credit
  • You are employed or self-employed

Good

  • You are on the electoral role
  • You are a home owner or long standing tenant
  • You have a stable employment history
  • You have current credit arrangements with occasional missed payments
  • You have no CCJs

Fair

  • You are or have recently been on the electoral role
  • You may have recently changed address
  • You may have occasional missed payments
  • You may have an old CCJ
  • You may have regularly applied for credit

Poor

  • You may have had frequent changes in address
  • You may not be traceable on the voters roll
  • You may have exceeded credit card limits
  • You may have missed payments on current agreements
  • You may have had a CCJ in the past

Bad

  • You may not be traceable on the voters roll
  • Your credit cards are over their limits
  • You have recent CCJs
  • You may have been refused credit elsewhere
  • You may be in a debt management plan
£

X monthly repayments of
£X

Typical rate

Loan amount

Total payable

X% APR*

£X

£X

*for illustration purposes only

No impact on your credit score*

Representative Example

Borrowing £7,500 at a representative APR of 12.4%, annual interest rate (fixed) 12.36%, 47 monthly payments of £196.44 followed by 1 payment of £206.44 (incl. estimated £10 option to purchase fee), a deposit of £0.00, total cost of credit is £1,939.12, total amount payable is £9,439.12.

Evolution Funding Limited, trading as My Car Credit, is a credit broker and not a lender.

Please ensure you can afford the repayments for the duration of the loan before entering into a credit agreement.

*Initial application is a soft search. Should you progress, some lenders may perform a hard search on your credit file.

Require more help?

Got a question you can’t find the answer to, or need some advice and guidance around taking out car finance? Our Car Credit Specialists are friendly, experienced, and here to help so get in touch today!

What Credit Score is Needed for UK Car Finance?

Man using his mobile phone

Your credit score is one of the most important tools used by lenders to assess car loan applications. So, what credit score is needed for UK car finance? There’s no black-and-white answer, however, there is a lot to learn when it comes to credit scores.

Using information like your payment history, current debts and used credit vs. available credit ratio, lenders will assign you a unique credit score. They’ll also factor in financial faux pas such as a history of missed payments, excessive credit card applications and failure to join the electoral roll. Data is combined to create a financial footprint that helps lenders determine your ‘riskiness’ as a borrower. Higher scores establish you as responsible and low risk while lower scores suggest you’re more likely to default on your loan.

Plenty of benefits are associated with a good credit score, including access to a wider range of products lenders offer. You can also unlock better interest rates, higher credit limits and other perks. A poor credit score doesn’t necessarily mean you don’t qualify for car finance eligibility.

Read on to find out more about what specific credit score is needed for UK car finance and how to navigate the industry.

Meet the ‘Big Three’ UK credit agencies

In the UK, most lenders use three main CRAs (Credit Reference Agency) to vet applicants. Each agency uses a different scale to assess individuals and assign a credit score and credit history. Most people fall within the Fair, Good or Excellent range. Anything beneath Fair is considered a Poor credit rating on the credit report.

Below, we take a closer look at the different Credit Reference Agencies in the UK and what scales they use:

Equifax

  • Fair: 380-419
  • Good: 420-465
  • Excellent: 466-700

Experian

  • Fair: 721-880
  • Good: 881-960
  • Excellent: 961-999

TransUnion

  • Fair: 566-603
  • Good: 604-627
  • Excellent: 628-710

What credit score is needed to be approved for car finance in the UK? Every CRA uses a different system to assess your credit score. This means you don’t necessarily have a single credit score, however, whether you qualify as Fair, Good or Excellent shouldn’t vary too much between agencies.

As well as your credit score, lenders will assess your application using their own custom eligibility criteria. For example, some lenders may be interested in the size of your deposit while others may prioritise proof of ongoing income. Others might place more weight on your debt-to-income ratio, which is used to determine your ability to stay on top of your instalments. Residential stability can also be factored in, with some lenders viewing a string of different addresses as a red flag.

What credit score is needed for car finance in the UK?

When applying for car finance, it’s important to understand that every lender is different. Just like applying for a mortgage or credit card, all lenders have their own unique criteria and vetting policies. Some use algorithms to assess applications and paint a black-and-white picture of borrowers while others take a more personalised approach. If you’re worried about where you stand and have been researching what credit score is needed for UK car finance, it’s best to look for lenders that take a personalised approach to car finance.

In the UK, there’s no minimum credit score needed to apply for car finance or purchase a vehicle. However, your score will impact what loan products you’re eligible for and what types of terms, conditions and interest rates you can unlock. Generally, higher scores translate to better deals. This is the industry’s way of rewarding you for an excellent borrowing history.

What to expect from your credit score

If you have an excellent credit score and proof of income you should find it relatively easy to secure car finance. You’ll have access to the widest range of products and the advertised interest rates offered by lenders. Borrowers with good scores are still eligible for great products and interest rates, though may enjoy less success than their counterparts.

If you have a fair credit score your chances of securing car finance are still high. You may not be able to unlock the same products and APR rates as applicants with higher scores, but you’ll still have plenty of choice. Poor credit scores can be more difficult to work with but with the right approach, the door to car finance is still wide open.

Securing car finance with a low credit score

While many Brits enjoy great credit ratings and a high credit score, a significant percentage of the population struggles when it comes to financial history. This is due to a poor credit history. If you’re worried about the minimum credit score required for car finance in the UK, it pays to enlist the help of the experts. 

First, you’ll want to look for a broker that doesn’t rely exclusively on automated algorithms to assess applications. For borrowers with poor credit scores, this is the fastest way to have your application rejected. Instead, shop around for a broker that takes a personalised approach to car finance. The option to speak with a human and discuss the unique challenges of your car finance application can drastically improve your chances.

Next, keep an eye out for brokers with access to a wide panel of lenders. Some brokers work exclusively with a handful of lenders, which can significantly limit your options and chances of success. At My Car Credit, we work with a broad panel of car finance lenders, one of the largest panels in the UK. This broadens your horizons and ensures your application is exposed to all kinds of lenders and products.

How to check your credit score

When it comes to checking your credit score it’s best to start with a ‘soft search’ credit check. This gives brokers an idea of your financial history without leaving a permanent mark on your credit score. Too many hard searches can suggest you’re continually on the search for new lines of credit – a major red flag for lenders.

Whether you have an excellent credit score or you’re not quite where you want to be, we can help secure you the best car finance deals from our panel of lenders. We’re available to discuss your options and help you learn more about what credit score is needed for car finance in the UK, including minimum credit score, monthly payments and credit utilisation. Get in touch at enquiries@mycarcredit.co.uk, use our car finance calculator online or give us a call on 01246 458 810 to chat with a car finance expert.

Rates from 9.9% APR. Representative APR 12.4%

Evolution Funding Ltd T/A My Car Credit

My Credit Rating

Excellent

  • You are a home owner
  • You have been on the electoral role for a long period of time
  • You have current credit arrangements and mortgage with no defaults
  • You have no CCJs, credit arrears or missed payments
  • You rarely apply for credit
  • You are employed or self-employed

Good

  • You are on the electoral role
  • You are a home owner or long standing tenant
  • You have a stable employment history
  • You have current credit arrangements with occasional missed payments
  • You have no CCJs

Fair

  • You are or have recently been on the electoral role
  • You may have recently changed address
  • You may have occasional missed payments
  • You may have an old CCJ
  • You may have regularly applied for credit

Poor

  • You may have had frequent changes in address
  • You may not be traceable on the voters roll
  • You may have exceeded credit card limits
  • You may have missed payments on current agreements
  • You may have had a CCJ in the past

Bad

  • You may not be traceable on the voters roll
  • Your credit cards are over their limits
  • You have recent CCJs
  • You may have been refused credit elsewhere
  • You may be in a debt management plan
£

X monthly repayments of
£X

Typical rate

Loan amount

Total payable

X% APR*

£X

£X

*for illustration purposes only

No impact on your credit score*

Representative Example

Borrowing £7,500 at a representative APR of 12.4%, annual interest rate (fixed) 12.36%, 47 monthly payments of £196.44 followed by 1 payment of £206.44 (incl. estimated £10 option to purchase fee), a deposit of £0.00, total cost of credit is £1,939.12, total amount payable is £9,439.12.

Evolution Funding Limited, trading as My Car Credit, is a credit broker and not a lender.

Please ensure you can afford the repayments for the duration of the loan before entering into a credit agreement.

*Initial application is a soft search. Should you progress, some lenders may perform a hard search on your credit file.

Require more help?

Got a question you can’t find the answer to, or need some advice and guidance around taking out car finance? Our Car Credit Specialists are friendly, experienced, and here to help so get in touch today!

Does Car Finance Affect Mortgage Applications?

Woman unloading car and moving into new house

If you have a car finance agreement in place and have also begun a mortgage application, your car finance may affect whether or not that application is approved, and what rates you may be offered.

This is particularly the case if you have missed any of your repayments for your car finance, as this will negatively impact your credit score, and will therefore impact your mortgage application. On the other hand, making all of your repayments can actually improve your chances of mortgage approval. Read on as we take a closer look.

How does car finance affect your mortgage?

When you apply for a mortgage, the lender will scrutinise your finances. Whether you have an active car finance deal, or a previous one that has been fully repaid, will impact their decision for your mortgage application. This is because car finance is a form of debt. As such, your mortgage providers will look to see how conscientious you’ve been in repaying your car finance.

Remember, if you have defaulted on your car finance, or missed any payments, then this will impact your credit history. This will in turn affect your mortgage application, as you will appear less financially responsible and therefore of higher risk to your speculative provider. Thankfully, there are still ways of securing car finance even with poor credit.

On the other hand, a history of timely repayments and problem-free car finance can actually improve your credit score. Put simply, it shows that you are capable of making regular repayments as agreed and staying within your budget – as is required with a mortgage.

Does car finance impact affordability assessments?

The short answer is yes, if you have an active car finance deal in place, this will affect mortgage applications because of the affordability assessments that your prospective provider will perform.

Any mortgage provider will scrutinise your finances before offering a mortgage – this is actually a legal requirement, and involves looking at your credit score, employment status, debt, and history of loan repayment. If you’re currently repaying any loan such as car finance, this will be factored into your mortgage affordability assessment.

As a general rule, the higher the debt remaining for you to pay back on your car, the lower you’ll be lent for a mortgage – though this may vary depending on the provider. The theory is that the more you have to repay on other loans or assets, like your car, the less you’ll have to put towards your mortgage.

As such, if you do have a way of clearing the balance on your car finance before applying for your mortgage, this would be a sensible course of action, as your car finance won’t impact the application to such a degree.

Car finance made easy

At My Car Credit, we pride ourselves on our customer service, and will work hard to find you a car finance deal that suits your needs and circumstances – so you can help rather than harm your credit score and any future mortgage applications. If you’re wondering how to make a car finance application work alongside a mortgage application, talk to us today on 01246 458 810 or email enquiries@mycarcredit.co.uk.  

Rates from 9.9% APR. Representative APR 12.4%

Evolution Funding Ltd T/A My Car Credit

My Credit Rating

Excellent

  • You are a home owner
  • You have been on the electoral role for a long period of time
  • You have current credit arrangements and mortgage with no defaults
  • You have no CCJs, credit arrears or missed payments
  • You rarely apply for credit
  • You are employed or self-employed

Good

  • You are on the electoral role
  • You are a home owner or long standing tenant
  • You have a stable employment history
  • You have current credit arrangements with occasional missed payments
  • You have no CCJs

Fair

  • You are or have recently been on the electoral role
  • You may have recently changed address
  • You may have occasional missed payments
  • You may have an old CCJ
  • You may have regularly applied for credit

Poor

  • You may have had frequent changes in address
  • You may not be traceable on the voters roll
  • You may have exceeded credit card limits
  • You may have missed payments on current agreements
  • You may have had a CCJ in the past

Bad

  • You may not be traceable on the voters roll
  • Your credit cards are over their limits
  • You have recent CCJs
  • You may have been refused credit elsewhere
  • You may be in a debt management plan
£

X monthly repayments of
£X

Typical rate

Loan amount

Total payable

X% APR*

£X

£X

*for illustration purposes only

No impact on your credit score*

Representative Example

Borrowing £7,500 at a representative APR of 12.4%, annual interest rate (fixed) 12.36%, 47 monthly payments of £196.44 followed by 1 payment of £206.44 (incl. estimated £10 option to purchase fee), a deposit of £0.00, total cost of credit is £1,939.12, total amount payable is £9,439.12.

Evolution Funding Limited, trading as My Car Credit, is a credit broker and not a lender.

Please ensure you can afford the repayments for the duration of the loan before entering into a credit agreement.

*Initial application is a soft search. Should you progress, some lenders may perform a hard search on your credit file.

Require more help?

Got a question you can’t find the answer to, or need some advice and guidance around taking out car finance? Our Car Credit Specialists are friendly, experienced, and here to help so get in touch today!

How to Finance a Car with Poor Credit

Man getting finance on phone with poor credit

You don’t need an ‘excellent’ credit rating to take advantage of car finance payment plans. If you have a lacklustre score and want to know more about how to finance a car with poor credit, we have answers.

Read on to find out how to get car finance with poor credit rating in three easy steps:

Step 1: Find your credit score

Your credit score plays an important role in determining how much you can borrow, as well as the terms and conditions of your loan. It offers lenders an overview of your borrowing habits and helps establish the level of risk associated with your loan. Credit scores are calculated using a range of factors, including credit card payments, outstanding loans, previous finance applications and direct debits currently in your name. We recommend Experian to find your credit score. 

The latest data from Money Supermarket is a good place to start when looking for a benchmark. The platform uses TransUnion as a credit reference agency, with scores ranging between 0 to 710. Scores of between 566 and 627 are considered ‘good’ while scores of 628 or more get you into the ‘excellent’ category. The average Brit has a credit score of 573, according to a survey conducted in December 2021. This is slightly higher than the 569 average recorded in December 2020, which suggests credit scores are on the rise.

Of course, not all Brits enjoy an ‘excellent’ or even ‘good’ credit rating. If you’re hovering around the 550 or lower range, you could fall into the ‘poor’ category. Don’t worry, this isn’t game over and you’re definitely not alone. Thousands of Brits have poor credit ratings, with the North West and North East of England recording some of the lowest averages.

While poor credit history is often considered taboo, there are all kinds of reasons why you may have a less-than-perfect score. Things like minor mortgage defaults and outstanding bills can bring down your credit rating. You might also be given a flat score if you haven’t built up a credit history yet or you’re self-employed and have difficulty proving your income. Whatever your unique situation, don’t let your ‘poor’ rating drag you down just yet. 

Step 2: Crunch your numbers

After establishing your credit score, it’s time to crunch your numbers. Our car finance poor credit rating calculator is a quick and easy way to do the maths and get an idea of what types of numbers you’re looking at. It’s quick, easy, and most importantly, stress-free. The last thing you want when you’re researching how to get car finance with poor credit rating is a headache. That’s why we’ve created this calculator to streamline the process and give you results in a matter of clicks.

All you need to do is enter your preferred loan amount, repayment terms and finally, your credit rating. There’s no impact on your credit score, so don’t worry about pushing your rating even lower. After you’ve punched in the numbers we’ll generate your expected monthly payments, as well as what typical APR rate to expect.

Our goal is to make your experience as easy and transparent as possible, which is why we also include the loan amount and total payable figure. No blurred lines here. Just simple, easy to interpret numbers. If you want to know more about how to finance a car with poor credit, simply hit the ‘apply now’ button and follow the next steps.

Step 3: Secure a lender

You’ve established your credit score and crunched the numbers. Now it’s time to secure a lender. There are loads of options out there and it pays to shop around and find a lender that suits your unique needs.

Here’s some tips on how to secure the best car loans from top lenders in the UK:

Look for brokers with good connections

One of the best ways to improve your chances of securing car finance with poor credit is to enlist the help of a broker. Working with an established financial services platform is an easy way to browse the market and track down the best deals, without having to do a huge amount of groundwork.

Brokers can be a godsend but it’s worth noting that not all offer the same customer-focused, results-driven services. When you choose My Car Credit, you’re unlocking access to one of the largest panels of lenders in the UK. We’re part of Evolution Funding, the UK’s biggest and most trusted motor finance broker.

In addition to a wide panel of trusted lenders, we use purpose-built technology to track down the best deals. This means we’re often able to secure approval for car finance where other brokers have failed. If you’re researching how to finance a car with poor credit, it’s hard to find a better solution.

Remember, all circumstances are considered

Ruling yourself out too early is one of the biggest mistakes you can make when researching how to finance a car with poor credit. A good car finance platform should consider all circumstances, regardless of how low your credit score is. Often, there’s more to the story than meets the eye.

At My Car Credit, our passionate team of auto finance advisors are here to dig deep into your finances and secure you the best possible loans and interest rates from our panel of lenders, no matter what your credit score. Every case is assessed individually, with zero judgement. Our goal is always to find the best car loan for your unique circumstances. With access to a large panel of trusted lenders with options for all kinds of applicants, we’re well-equipped to do just this.

Want to know more about how to finance a car with poor credit? Get in touch via email or give us a call on 01246 458 810 to discuss your car finance options and learn more about how to get car finance with poor credit rating.

Rates from 9.9% APR. Representative APR 12.4%

Evolution Funding Ltd T/A My Car Credit

My Credit Rating

Excellent

  • You are a home owner
  • You have been on the electoral role for a long period of time
  • You have current credit arrangements and mortgage with no defaults
  • You have no CCJs, credit arrears or missed payments
  • You rarely apply for credit
  • You are employed or self-employed

Good

  • You are on the electoral role
  • You are a home owner or long standing tenant
  • You have a stable employment history
  • You have current credit arrangements with occasional missed payments
  • You have no CCJs

Fair

  • You are or have recently been on the electoral role
  • You may have recently changed address
  • You may have occasional missed payments
  • You may have an old CCJ
  • You may have regularly applied for credit

Poor

  • You may have had frequent changes in address
  • You may not be traceable on the voters roll
  • You may have exceeded credit card limits
  • You may have missed payments on current agreements
  • You may have had a CCJ in the past

Bad

  • You may not be traceable on the voters roll
  • Your credit cards are over their limits
  • You have recent CCJs
  • You may have been refused credit elsewhere
  • You may be in a debt management plan
£

X monthly repayments of
£X

Typical rate

Loan amount

Total payable

X% APR*

£X

£X

*for illustration purposes only

No impact on your credit score*

Representative Example

Borrowing £7,500 at a representative APR of 12.4%, annual interest rate (fixed) 12.36%, 47 monthly payments of £196.44 followed by 1 payment of £206.44 (incl. estimated £10 option to purchase fee), a deposit of £0.00, total cost of credit is £1,939.12, total amount payable is £9,439.12.

Evolution Funding Limited, trading as My Car Credit, is a credit broker and not a lender.

Please ensure you can afford the repayments for the duration of the loan before entering into a credit agreement.

*Initial application is a soft search. Should you progress, some lenders may perform a hard search on your credit file.

Require more help?

Got a question you can’t find the answer to, or need some advice and guidance around taking out car finance? Our Car Credit Specialists are friendly, experienced, and here to help so get in touch today!

Can You Lease a Car with Poor Credit?

Woman sat on car

The need for a gold-standard credit rating to lease a car is one of the biggest misconceptions in the auto industry. If you’re wondering “can you lease a car with poor credit” this article is for you.

Yes, leasing a car is a significant financial responsibility and creditors will do their due diligence to ensure the risk isn’t too big. But that doesn’t mean car loans are reserved exclusively for Brits with good credit. So, can you lease a car with poor credit? Absolutely.

It’s not always as straightforward as leasing a car with good credit and you may end up paying a little more when it comes to interest. But with the right support and a good strategy, it’s definitely possible.

Read on to find out more about how to lease a car with poor credit and stop feeling dragged down by a less-than-perfect score.

Understanding car leases

With the average cost of a new car now sitting at around £20,000, paying cash for a new set of wheels isn’t a reality for most Brits. Even used cars can be pricey, especially in the face of soaring demand and the current semiconductor shortage. This is where car leases step up.

Funded by trusted lenders, these long-term rental agreements boost your spending power and get you behind the wheel of your dream car ASAP. Like other financial loans, such as mortgage and credit card applications, your credit rating can have an impact on how much you can borrow and the terms and conditions of your loan.

The nationwide car finance trend

The latest stats from the Finance & Leasing Association (FLA) reveal more than 93% of all private new car registrations in the UK are purchased using finance from FLA members. No doubt about it, the UK is a nation that’s well and truly embraced the benefits of automotive leases. The good news is, even if you have a poor credit the chances of securing a loan and taking advantage of long-term rental options is still possible.

Why your credit score matters

Your credit score offers potential financers an idea of what to expect when lending you money. For example, missed payments on a credit card or a previous bankruptcy declaration will bring your credit rating down. This suggests you may not be the most reliable borrower. On the flip side, a flawless track record boosts your credit score and implies you’re a reliable borrower.

When you apply for car finance, lenders will check your score using a UK credit reference agency. Results are used to assess your loan and decide if it should be approved or denied. ‘Good’ or ‘excellent’ scores are preferable but not essential.

Why is my credit score poor?

There are all kinds of reasons why your credit score might not be up to scratch. Of course, missed payments on a credit card or outstanding debts can drag down your rating. But factors such as no previous long-term loans can also keep your score in the below-average range. Yes, sometimes being too responsible with money and avoiding debt can hinder your credit score! Your score might also be flawed due to association with a partner with a poor credit rating.

Can you lease a car with poor credit? Here’s a closer look at why your credit score matters:

The amount you can borrow

One of the biggest factors your credit score affects is the amount you can borrow. Your credit rating is used to establish your financial history and determine your risk factor. Results help lenders decide how much they’re willing to lend you. 

That said, your credit score isn’t the only thing lenders will consider when viewing your loan. Your initial deposit can sway the decision and play a role in determining how much you can borrow to fund your new car purchase.

Your interest rate

As well as influencing the amount you can borrow, your credit score may be used to determine your interest rate. Generally, higher credit ratings correlate with lower interest rates. This is good news for applicants with low credit scores who are hoping to secure a car loan. While you may not be able to unlock the best interest rates, poor credit doesn’t rule you out completely. Instead, you may be offered a higher rate than an applicant with excellent credit.

When shopping around for car loans, look for platforms that offer rates starting from 6.9% APR and take note of the representative APR that they advertise. This gives you an indication of the rate that the majority of their customers (at least 51%) will get.

The representative APR is important because it means that nearly half of customers will be given a rate more than the representative APR. This is especially true where you have poor or bad credit.

The length of your loan term

Your credit score may also affect the length of your loan term. This can have a big impact on the size of your monthly payments.

Can you lease a car with poor credit?

You may not be able to secure the same rock-bottom interest rates as applicants with ‘excellent’ credit but with the help of our in-house advisors, the chances of leasing a car with poor credit are improved. Whether you’re in the market for a nearly-new hatchback or a second-hand SUV, we’re here to help.

Ready to jumpstart your car lease application? Use our car finance poor credit calculator to generate a quick online quote, with zero impact on your credit score. Forget the hard sell. We’re all about offering our customers an easy, stress-free experience.

SendSend us an email or give us a call on 01246 458 810 to find out more. We’re always available to answer all your “can you lease a car with poor credit” questions and discuss your car finance options.

Rates from 9.9% APR. Representative APR 12.4%

Evolution Funding Ltd T/A My Car Credit

My Credit Rating

Excellent

  • You are a home owner
  • You have been on the electoral role for a long period of time
  • You have current credit arrangements and mortgage with no defaults
  • You have no CCJs, credit arrears or missed payments
  • You rarely apply for credit
  • You are employed or self-employed

Good

  • You are on the electoral role
  • You are a home owner or long standing tenant
  • You have a stable employment history
  • You have current credit arrangements with occasional missed payments
  • You have no CCJs

Fair

  • You are or have recently been on the electoral role
  • You may have recently changed address
  • You may have occasional missed payments
  • You may have an old CCJ
  • You may have regularly applied for credit

Poor

  • You may have had frequent changes in address
  • You may not be traceable on the voters roll
  • You may have exceeded credit card limits
  • You may have missed payments on current agreements
  • You may have had a CCJ in the past

Bad

  • You may not be traceable on the voters roll
  • Your credit cards are over their limits
  • You have recent CCJs
  • You may have been refused credit elsewhere
  • You may be in a debt management plan
£

X monthly repayments of
£X

Typical rate

Loan amount

Total payable

X% APR*

£X

£X

*for illustration purposes only

No impact on your credit score*

Representative Example

Borrowing £7,500 at a representative APR of 12.4%, annual interest rate (fixed) 12.36%, 47 monthly payments of £196.44 followed by 1 payment of £206.44 (incl. estimated £10 option to purchase fee), a deposit of £0.00, total cost of credit is £1,939.12, total amount payable is £9,439.12.

Evolution Funding Limited, trading as My Car Credit, is a credit broker and not a lender.

Please ensure you can afford the repayments for the duration of the loan before entering into a credit agreement.

*Initial application is a soft search. Should you progress, some lenders may perform a hard search on your credit file.

Require more help?

Got a question you can’t find the answer to, or need some advice and guidance around taking out car finance? Our Car Credit Specialists are friendly, experienced, and here to help so get in touch today!

What Credit Score is Needed to Buy a Car?

Man on his phone checking what credit score is needed to buy a car on finance
An average credit score is generally considered to be 569 or above in the UK. Your credit score is critical to your financial health, and will determine what kind of loans and other services that you’re viable for. But what credit score is needed to buy a car?

We answer this question and detail how My Car Credit can help find the best car finance for you – whatever your score.

How do credit scores work?

Your credit score will fall along a score range, which is generated by a computerised scoring model. The scoring model uses statistical analysis to establish patterns in your credit report data, assigning a three-digit number score. This will in turn reflect on your ‘riskiness’ as a consumer.

Lower scores indicate that you’re more of a risk for lenders. As a result, you may end up paying higher interest rates, fees, and deposits.

The different credit models used by national credit bureaus will calculate and report different credit scores. Below, we list the different categories of credit score based on the Experian average credit score range.

Excellent: Typically, your score would be from 961 to 999 if you sit within this bracket. Having a score this high will streamline your approval process, and you’ll receive the best available terms.

Good: You’ll have a score of 881 – 960 in this bracket, and will likely have better rates offered.

Fair: If your score is in the bracket 721 – 880, you may be considered a subprime borrower, and your interest rates may therefore be slightly higher.

Poor: Between 561 – 720 is a poor score, so you might have loans declined if you sit within this range. Anything lower than this is considered very poor.

Thankfully, there are ways to improve your credit score, so be sure to check these out.

Can I get car finance with poor credit history?

You’ll be pleased to hear that the answer to this question is – yes. There is no specific score required to buy a car. However, as outlined above, the higher your score, the more likely you are to receive a better deal and rates.

That said, we understand that everyone’s case is different, and we treat them as such. We combine a wide panel of over 30 lenders to help you find the right car finance for you.

You can also check your eligibility for credit before you formally apply for car finance. To do so, we’ll carry out what’s called a ‘soft search’ credit check. This involves checking your financial history without exposing the information to lenders. It therefore won’t have any impact on your current credit score.

Contact My Car Credit today

Now you know what credit score is needed to buy a car, you should be feeling much more confident about taking the next steps. However, if you’re looking for car finance but worried about your poor credit, contact our friendly team today to discuss. We aim to address any concerns or queries that you may have about the process – call 01246 458 810 today.

Rates from 9.9% APR. Representative APR 12.4%

Evolution Funding Ltd T/A My Car Credit

My Credit Rating

Excellent

  • You are a home owner
  • You have been on the electoral role for a long period of time
  • You have current credit arrangements and mortgage with no defaults
  • You have no CCJs, credit arrears or missed payments
  • You rarely apply for credit
  • You are employed or self-employed

Good

  • You are on the electoral role
  • You are a home owner or long standing tenant
  • You have a stable employment history
  • You have current credit arrangements with occasional missed payments
  • You have no CCJs

Fair

  • You are or have recently been on the electoral role
  • You may have recently changed address
  • You may have occasional missed payments
  • You may have an old CCJ
  • You may have regularly applied for credit

Poor

  • You may have had frequent changes in address
  • You may not be traceable on the voters roll
  • You may have exceeded credit card limits
  • You may have missed payments on current agreements
  • You may have had a CCJ in the past

Bad

  • You may not be traceable on the voters roll
  • Your credit cards are over their limits
  • You have recent CCJs
  • You may have been refused credit elsewhere
  • You may be in a debt management plan
£

X monthly repayments of
£X

Typical rate

Loan amount

Total payable

X% APR*

£X

£X

*for illustration purposes only

No impact on your credit score*

Representative Example

Borrowing £7,500 at a representative APR of 12.4%, annual interest rate (fixed) 12.36%, 47 monthly payments of £196.44 followed by 1 payment of £206.44 (incl. estimated £10 option to purchase fee), a deposit of £0.00, total cost of credit is £1,939.12, total amount payable is £9,439.12.

Evolution Funding Limited, trading as My Car Credit, is a credit broker and not a lender.

Please ensure you can afford the repayments for the duration of the loan before entering into a credit agreement.

*Initial application is a soft search. Should you progress, some lenders may perform a hard search on your credit file.

Require more help?

Got a question you can’t find the answer to, or need some advice and guidance around taking out car finance? Our Car Credit Specialists are friendly, experienced, and here to help so get in touch today!

Does Getting a Car Loan Hurt Your Credit?

Car driving in the evening
Buying a car is likely one of the largest purchases you’ll ever have to make. This is why so many people are turning to car finance in order to make the process more manageable and affordable. However, occasionally we come across doubts about whether getting a car loan might hurt your credit.

This article will detail the different ways that getting car finance on your new vehicle might impact your credit – both positively and negatively.

What is a credit score?

Whether you know it or not, you will have a credit score. A credit score is used by lenders to understand your financial history. Furthermore, it allows them to make a judgement on whether you’re a good candidate for future loans. As such, lenders will perform credit checks on you to gauge this. These are known as either hard or soft, depending on whether they impact your score.

Credit reference agencies

Almost all forms of personal finance will impact your credit score. This is typically provided by different companies known as credit referencing agencies. Your number will usually be between 300 and 850. Generally, the higher it is, the better your credit rating – but there are variations between the companies who provide your score rating. In turn, this will impact where you sit on the spectrum of credit. A score of 500 with TransUnion would be below average for them, for example, but good for the provider Equifax.

Payment history and your credit score

Your payment history has a huge impact on your credit score, as does your history of applications. This is why if you make payments on time, this will positively affect your score. Conversely, there are things that might indicate to lenders that you’re a riskier candidate for a loan. For example, if your credit report shows missed payments or defaults, if you’re paying off multiple loans, or if you are near your credit limit. Your credit score might not be the singular factor in whether you’re approved for a loan. However, it will have an impact on your chances.

How does a car loan impact your credit score?

As with most things, getting car finance has advantages and disadvantages for your credit score. It will entirely depend on how you manage your repayments. It’s important to realise that when you first get your car finance loan, it will likely make a slight dent in your credit score. This is because it’s a hard enquiry into your credit history. However, if you are regular and on time with your repayments, this will soon bounce back.

Advantages of car finance on your credit score:

  1. If you make your repayments on time every time, this might have a positive impact on your overall credit score. In essence, it shows lenders that you’re a safe bet for future loans. Be aware, however, that this can take time to show up on your credit score.
  2. It diversifies your credit mix. Your credit mix refers to the types of credit that you have on your roster, which is usually divided between revolving credit (like credit cards) or instalment credit (like car loans). Lenders like a mix of both, so adding car finance onto your profile can make you more appealing for future loan applications. This in turn boosts your credit score.

Disadvantages of car finance on your credit score:

  1. If you are late on your repayments or miss one or more payments, your car loan is considered delinquent. You’ll typically be given a grace period to make the payment back. However, if your lender is required to take further action against you then your credit score will be negatively impacted. For example, if a full billing cycle goes by without you making payment. Consequentially, you might find it harder in the future to find good interest rates or a loan.
  2. If you default on the loan, your credit score will also be impacted. Should you continue to not make payments, the car finance lender may involve debt collectors, who could repossess your vehicle. Each of these elements – late payments, default, transference of the account to debt collectors, or repossession – leave a separate mark on your credit report. Furthermore, they’ll stay there for up to seven years, and they have a significant negative effect on your credit score.

Car finance and credit scores: what to know

Before you begin your hunt for car finance, it’s also important to understand the difference between different kinds of credit checks. This is because finance companies may conduct either a hard search or a soft search on your credit score.

Hard searches:

Some finance companies will conduct a hard search or enquiry on your credit report. This is a process that begins when you first apply for credit, and it requires your consent. However, it won’t happen if you’re only looking for pre-qualification to decide whether to apply.

A hard enquiry will take points off your credit score. This is temporary – usually staying on your report for two years – but will be visible on your credit report. It’s therefore best to limit the number of hard searches taking place on your score. You can do this by checking in advance of application whether you’re likely to be approved.

Soft searches:

Soft searches, by contrast, won’t impact your credit score. As such, they can take place without your knowledge. This kind of check is designed to give a ‘footprint-free’ check on your credit score, without lenders seeing any evidence of it. It aims to give you an idea of whether to enter into the terms of a car loan, without negatively affecting your score in the first instance.

Speak to My Car Credit today to find out more

If you want to find out more about whether or not getting a car loan will hurt your credit, speak to My Car Credit today. Our friendly team can help you get a car finance quote with a soft search that won’t impact your score. From there, you’ll be able to discuss your viability for a loan with one of our advisors. Get in touch today.

Rates from 9.9% APR. Representative APR 12.4%

Evolution Funding Ltd T/A My Car Credit

My Credit Rating

Excellent

  • You are a home owner
  • You have been on the electoral role for a long period of time
  • You have current credit arrangements and mortgage with no defaults
  • You have no CCJs, credit arrears or missed payments
  • You rarely apply for credit
  • You are employed or self-employed

Good

  • You are on the electoral role
  • You are a home owner or long standing tenant
  • You have a stable employment history
  • You have current credit arrangements with occasional missed payments
  • You have no CCJs

Fair

  • You are or have recently been on the electoral role
  • You may have recently changed address
  • You may have occasional missed payments
  • You may have an old CCJ
  • You may have regularly applied for credit

Poor

  • You may have had frequent changes in address
  • You may not be traceable on the voters roll
  • You may have exceeded credit card limits
  • You may have missed payments on current agreements
  • You may have had a CCJ in the past

Bad

  • You may not be traceable on the voters roll
  • Your credit cards are over their limits
  • You have recent CCJs
  • You may have been refused credit elsewhere
  • You may be in a debt management plan
£

X monthly repayments of
£X

Typical rate

Loan amount

Total payable

X% APR*

£X

£X

*for illustration purposes only

No impact on your credit score*

Representative Example

Borrowing £7,500 at a representative APR of 12.4%, annual interest rate (fixed) 12.36%, 47 monthly payments of £196.44 followed by 1 payment of £206.44 (incl. estimated £10 option to purchase fee), a deposit of £0.00, total cost of credit is £1,939.12, total amount payable is £9,439.12.

Evolution Funding Limited, trading as My Car Credit, is a credit broker and not a lender.

Please ensure you can afford the repayments for the duration of the loan before entering into a credit agreement.

*Initial application is a soft search. Should you progress, some lenders may perform a hard search on your credit file.

Require more help?

Got a question you can’t find the answer to, or need some advice and guidance around taking out car finance? Our Car Credit Specialists are friendly, experienced, and here to help so get in touch today!