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 lots 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.

There are plenty of benefits associated with strong credit scores, including access to a wider range of products offered by lenders. You can also unlock better interest rates, higher credit limits and other perks. That said, a poor credit score doesn’t necessarily mean you don’t qualify for car finance eligibility.

Read on to find out more about what 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 Credit Reference Agencies (CRAs) to vet applicants. Each agency uses a different scale to assess individuals and assign a credit score. Most people fall within the Fair, Good or Excellent range. Anything beneath Fair is considered Poor.

Below, we take a closer look at the different CRAs 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 for UK car finance? 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.

Minimum car finance credit scores

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 excellent 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 poor credit score

While many Brits enjoy excellent credit ratings, a significant percentage of the population struggle when it comes to financial history. If you’re worried about what credit score is needed 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 UK. Get in touch at enquiries@mycarcredit.co.uk or give us a call on 01246 458 810 to chat with a car finance expert.

Rates from 6.9% APR. Representative APR 13.9%

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 13.9%, annual interest rate (fixed) 13.85%, 47 monthly payments of £201.38 followed by 1 payment of £211.38 (incl. estimated £10 option to purchase fee), a deposit of £0.00, total cost of credit is £2,176.24, total amount payable is £9,676.24.

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.

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 6.9% APR. Representative APR 13.9%

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 13.9%, annual interest rate (fixed) 13.85%, 47 monthly payments of £201.38 followed by 1 payment of £211.38 (incl. estimated £10 option to purchase fee), a deposit of £0.00, total cost of credit is £2,176.24, total amount payable is £9,676.24.

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.

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 Checks Are Done for Car Finance?

Woman on laptop outside a cafe

Car finance is a way of making the process of purchasing a new or nearly-new vehicle easier, allowing you to spread the cost of your car over a series of affordable repayments.

In order to secure car finance, you may need to provide important personal information, so it’s useful to have certain documents and information to hand. Read on as we outline the checks that are usually done for car finance.

What checks are done for car finance?

The most important checks for car finance tend to be a financial assessment, where lenders will ascertain your employment history and income status, including a credit check. But there are other pieces of information that car finance providers will often ask for in order to gauge whether you’re a responsible borrower or not.

Driver’s licence

It’s essential that you have a valid driver’s licence when applying for car finance. Without this, you will most likely be rejected.

The car finance provider may contact the DVLA in order to check the authenticity of the driver’s licence. They will also contact the DVLA if you have lost your licence, and will typically ask for other proof of identity at the same time.

Proof of identity

For some car finance providers, your driver’s licence will qualify as enough proof of identity. Others may require alternative documentation. Typically, this may be a passport, and supplementary information like your full name, date of birth, residential and marriage status may also be requested.

Address and history of address

Your car finance provider needs to ensure that you’re not making a fraudulent application, and that you’re unlikely to attempt to evade repayment. Asking for your proof of address is one step in the process of confirming this, as it makes you traceable.

You’ll usually be asked for your proof of address for a minimum of the past three years. This can be in the form of utility bills, council tax and bank statements. You’ll also need to demonstrate your current address, too.

Employment history and proof of income

Expect to be asked about your employment and provide details of your salary and job title. A bank statement will usually be asked for, but payslips and the details of your employment may suffice. If you’re self-employed, you’ll need to provide further documentation.

If your lender feels that you may miss repayments, then your application will likely be rejected.

Credit score

If you have a history of making repayments in a timely fashion, then you’ll have a better credit history and a higher score. Your application is, therefore, more likely to be greenlit.

That said, there are ways of getting car finance even with a poor credit score – you just need to determine whether your finance provider will do so.

Car finance checks made easy

There are a number of checks that need to be done when processing car finance. But they don’t have to be a hassle. At My Car Credit, we aim to make the process as simple as possible, with fast and easy online applications.

If you have any questions about the application process and documentation required for car finance, contact My Car Credit today on 01246 458 810 or email enquiries@mycarcredit.co.uk.

Rates from 6.9% APR. Representative APR 13.9%

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 13.9%, annual interest rate (fixed) 13.85%, 47 monthly payments of £201.38 followed by 1 payment of £211.38 (incl. estimated £10 option to purchase fee), a deposit of £0.00, total cost of credit is £2,176.24, total amount payable is £9,676.24.

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.

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 6.9% APR. Representative APR 13.9%

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 13.9%, annual interest rate (fixed) 13.85%, 47 monthly payments of £201.38 followed by 1 payment of £211.38 (incl. estimated £10 option to purchase fee), a deposit of £0.00, total cost of credit is £2,176.24, total amount payable is £9,676.24.

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.

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!

7 Factors That Can Affect Your Credit Rating

2 women happy knowing what affects their credit scores

Credit ratings can be complex and at times, extremely frustrating. Even the smallest financial hiccups can leave a lasting footprint on your score. This means that a few missed credit card payments over the years or an outstanding mobile phone debt can compromise your application.

This is why it’s so important to develop a good understanding of your credit rating and the various factors that can affect your score. So, what can affect credit rating? Read on for our guide to factors than can influence your rating, as well as tips on how to boost your score.

Understanding credit ratings

Before we dive in let’s take a look at what credit ratings are and why they matter. Basically, credit ratings are used by prospective lenders to evaluate the overall credit risk of a debtor. Historic financial data is used to predict a borrower’s ability to pay back a debt and calculate the risk of defaulting. A particularly bad credit rating could see some applications rejected. In some cases, it could even rule you out of the lowest rate products.

The latest data from multinational consumer credit reporting agency Equifax reveals just how stubborn credit scores can be. Equifax report that the average Brit is issued with a score of 380. This is considered a ‘fair’ score but is just one point away from the 280-379 category which is considered ‘poor’. The perfect score is 700, suggesting everyday borrowers aren’t necessarily as upstanding as you might think. 

Here’s some of the most common factors that can affect your credit rating:

1. Payment history

Keeping up with your credit card payments is one of best ways to build a good credit score. Even making the minimum monthly payment shows lenders you’re a responsible borrower. It also demonstrates that you can commit to a long-term loan. Missed or late credit payments can tarnish your credit score for up to three years. This is why it’s so important to stay on top of your repayments wherever possible.

2. Hard credit inquiries

Carried out by established financial institutions, hard credit checks dig deep into your credit history. They’re used to help creditors make lending decisions. Hard searches are often carried out when applying for larger loans such as mortgages, credit cards and car loans.

While a hard check or two will only lower your credit score by a few points, frequent checks can damage your score and present you as a higher-risk customer. This is because multiple applications suggest you’re chronically short on cash. It could even indicate that you have an irresponsible attitude towards debt. Hard credit checks can leave a mark on your report for around two years. It’s important to consider if you really need one before authorising a full application.

3. Being registered to vote

Lenders will often turn to the electoral roll as a quick and easy way to verify your name and address. Access to government-certified information is also an effective way for lenders to protect themselves against fraud. Failure to register or update your information can affect your credit score by up to 50 points. This can have a significant impact on finance applications.

4. Mobile phone contracts

While mobile phone contracts may seem like a sundry expense, they can have a big impact on your credit score. Like credit card repayments, staying on top of your phone contract is a good way to strengthen your credit score. This is great way of showing lenders that you can commit to a regular payment schedule.

5. Finances of a partner

If you’re married or in a long-term relationship, the finances of your partner will often be factored into your credit score. In some cases, joining forces can strengthen your application. However, if your partner has a ‘thin’ credit history, it may be best to disassociate yourself from them financially.

6. Borrowing percentages

Credit cards can be a good way to build a strong lending history. However, maxing out your cards can have a negative impact on your application. As a general rule of thumb, it’s best to keep your card borrowing below 25%, unless you plan to pay off the full amount every month. This shows lenders you’re responsible and realistic about the money you borrow, and your ability to pay off debt.

7. Utility bills

More than half of major energy providers are now sharing customer data with credit agencies. This makes is essential to maintain good standing with companies such as British Gas and EDF Energy. Utility bills are another good opportunity to establish a good track record with lenders and boost your credit score.

Factors that won’t affect your credit score

We’ve covered some of the biggest factors that will affect your credit score. Now let’s take a look at some of the things that won’t drag you down.

1. Your salary and disposable income

It’s a common misconception that high salaries translate to better credit scores. In fact, lenders are far more interested in how you manage your debts than how much money you earn. For example, an applicant who earns £35,000 a year and pays off their credit card in full every month is far more appealing than an applicant who earns £100,000 a year and has maxed out their credit card and defaulted on several payments. 

2. Soft credit checks

While hard credit checks can leave a lasting footprint, their soft counterparts won’t affect your credit rating. What’s more, they can still give lenders a good overview of your credit history. They’re also known as ‘eligibility checks’ and are great for establishing the likelihood of acceptance before committing to a hard check.

3. Previous mistakes

Losing sleep over a mortgage you deferred on several years ago? Stressing about a credit card that got out of control in your twenties? The good news is mistakes you’ve made in the past don’t always stay around to haunt you.

For example, County Court Judgments (CCJ) issued when a borrower fails to repay money will stay on your record for up to six years. The good news is that they will automatically be removed after that period.

Black marks like Debt Relief Orders or Individual Voluntary Agreements (IVAs) can also have a negative impact on your credit score but won’t necessarily stay on your record forever.

Buying a car with poor credit

Need help securing a car loan? Whether you’re struggling with poor credit car finance or simply need assistance getting the best interest rates, we’re here to help. At My Car Credit we offer tailored car finance to applicants with all types of credit histories. Thankfully, this includes those with less than perfect scores. Get in touch today by emailing enquiries@mycarcredit.co.uk to find out more. We’ll help you secure the keys to your new vehicle as quickly as possible.

Rates from 6.9% APR. Representative APR 13.9%

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 13.9%, annual interest rate (fixed) 13.85%, 47 monthly payments of £201.38 followed by 1 payment of £211.38 (incl. estimated £10 option to purchase fee), a deposit of £0.00, total cost of credit is £2,176.24, total amount payable is £9,676.24.

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.

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!

Do Credit Checks Affect Your Score?

Woman happy after checking her credit score

Credit checks are a necessary step for all types of credit applications including loans, car finance and home tenancy agreements. But for those who are already concerned about their credit rating, there is an understandable worry that the check itself might do damage to your score.

In this post, we’ll clear things up when it comes to credit checks and how they affect your score in the UK.

What is a credit check?

In short, credit checks are a way of checking your history, behaviour and associations when it comes to credit. They look at:

  • What credit you’ve taken out
  • Whether it’s been paid back
  • When it’s paid back (on time and regularly or late and irregularly)
  • Financial associations – including people with whom you share joint bank accounts or mortgages

Aside from checking your credit score online, credit checks can be broken down into soft and hard credit checks, which refer to the level of detail being assessed.

As the name suggests, soft credit checks take a brief look at your credit report to get an idea of your behaviour. These are typically an initial step in the application process to get a better idea of whether you’ll be successful.

On the other hand, hard credit checks are a comprehensive assessment of your credit history. These will typically be performed later in the process, as a final step to approve your application.

Do they affect your credit score?

Credit checks are one of the many factors that affect your credit score. But it depends on the type of check being done. Soft checks are not visible to other companies, so they won’t affect your credit score going forward. The same is true when checking your credit report yourself.

However, because hard credit checks are only done when companies are considering you for an application, they can have an impact on your score. Hard credit checks will be visible on your report, and too many in a short space of time could reduce your chances of being approved for credit. This is particularly true where your application for credit has been unsuccessful. However, the initial soft credit check should help you avoid this situation.

How we check your credit score

At My Car Credit, we only perform a soft credit check initially, to make sure there’s no impact on your credit score. This gives us a better idea of whether you’ll be successful before proceeding with the application. This in turn enables us to provide poor credit car loans to more people across the UK.

Rates from 6.9% APR. Representative APR 13.9%

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 13.9%, annual interest rate (fixed) 13.85%, 47 monthly payments of £201.38 followed by 1 payment of £211.38 (incl. estimated £10 option to purchase fee), a deposit of £0.00, total cost of credit is £2,176.24, total amount payable is £9,676.24.

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.

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 I get car finance without a credit check? (a complete guide)

Man using phone to check for car finance without credit check

If you want to apply for car finance but suspect you may have a poor credit profile, or no credit history at all, you may be wondering “Can I get car finance without a credit check?”. You may be surprised to know that all regulated lenders perform credit and affordability checks as part of their commitment to responsible lending. However, this shouldn’t put you off applying. There are plenty of finance options for those with less than perfect credit files. It is also possible to check your car finance eligibility using soft search.

No credit check car finance

 If you have bad credit or even no credit, you may be searching for car finance options where you will not get a credit check. The reality is that all lenders will want to check your credit file before they loan you money. However, this is nothing to be worried about and there may still be options for financing a car.

Why do lenders do a credit check?

When you apply for car finance, lenders do credit checks to understand your financial behaviour and assess your history of handling your finances. They will be assessing your ‘creditworthiness’, or your suitability to receive financial credit. This is often based on how reliable you have been at paying back money in the past.

Lenders have an obligation to lend money responsibly. It can be frustrating knowing that your finances and credit profile will be scrutinized. However, this ensures that you are not lent more money than you can afford (called ‘affordability’). It also confirms that the finance product you are sold is suitable for your circumstances.

Whilst there are some payday lenders who will offer finance without a credit check, you will be charged enormous rates of interest to accommodate the increased risk of lending. This is likely to be unaffordable for larger loans, such as buying a car.

By having a credit check done, this makes sure you are offered the correct rate of interest for your circumstances, rather than over-paying.

Soft search versus hard search

When shopping around for car finance, customers can be concerned about damaging their credit profile through multiple hard searches.

To avoid this happening, and to make it easier for you to shop around, we only do a soft search credit check when your first apply. This allows us to do preliminary background checks to establish your eligibility for car finance.

The important thing about soft search is that it doesn’t show on your credit file. The result is that they don’t impact on your credit score, nor do they affect your future chance of securing credit. You can have as many soft searches as you like, and only you can see them on your report.

A hard search happens when you have confirmed that you are eligible for car finance and are happy to proceed with your application.

Be aware that a hard credit check will show on your credit file. It is worth bearing in mind that too many hard credit checks over a short period of time can affect your future ability to secure finance. The reason for this is that they tell lenders that you have applied for credit, and therefore may be a higher risk.

One of the great things about using soft search first is that you can establish your eligibility for car finance before you move ahead with a full search. When you then go on to secure car finance, so long as you keep up your repayments, you may actually improve your credit rating. You can even repair your credit file if it is damaged!

What’s involved in a credit check?

When you apply for credit or a loan, the lender will perform a credit check (sometimes called a credit search). This means that they can look at the financial information held on your credit report.

Your credit report will show information such as:

  • Your name and date of birth.
  • Your current and previous addresses.
  • Whether you are on the electoral register.
  • Your credit accounts, including bank and credit card accounts, outstanding loan agreements or utility company debts. Late or default payments will show and stay on your credit report for at least six years.
  • Financial associations. These are people you are financially linked with through joint credit.
  • Public record information. This covers
  • County Court Judgments (CCJs), bankruptcies and individual voluntary arrangements (IVAs). These stay on your report for at least six years.
  • Banks and building societies. Only your overdraft is shown, not your balances or savings.
  • Any convictions of fraud, or if someone has stolen your identity and committed fraud.

Details such as salary, religion, or criminal convictions (other than fraud) are not included.

How can I check my credit profile?

You may want to check your credit profile before you start applying for car finance. When checking your credit profile, you won’t leave a mark on your file and it can help you understand what lenders will see.

Checking your credit file is also a great opportunity to improve your credit score by ensuring that all information held on you is correct and up to date. For example, ensuring that out-of-date financial associations don’t have a negative impact on your credit file.

Your credit score is an indication of the health of your credit file and is usually scored out of 1000. The higher the score, the better your credit profile.

There are three main credit reference agencies in the UK – Equifax, Experian, and Transunion (formally Call Credit). They hold financial information on you and are governed by the Information Commissioner’s Office or ICO.

Websites like Experian allow you to access your credit score for free.

Who will finance a car with bad credit?

My Car Credit has over 30 lenders on its panel and so the chances of getting you an acceptance are increased (although cannot promise guaranteed car finance). However, even people with really bad credit can get car finance, so don’t lose hope!

We have lenders that specialise in car loans for customers with damaged or poor credit. Where we match you with a lender, you will usually have to pay a higher interest rate, as you represent an increased risk for the lender. Of course, you can pay off your loan faster if you wish, and this can help to repair your credit file.

It can be helpful if you put down as large a deposit as you can afford and keep the repayment term shorter. However, it’s important not to overstretch yourself on your monthly payments.

Using a Guarantor Loan to finance a car

You may find a Guarantor Loan to be a suitable option. This is a loan where a third party that you trust (usually a family member or close friend) guarantees to make the repayments on a car loan if you fail to. Do bear in mind that you do remain responsible for the finance agreement.

Please be aware that if you fail to make the repayments, your guarantor will become liable. If your guarantor fails to make the payments, you could both be issued with CCJs, which would affect both your abilities to obtain credit in the future.

Whilst Guarantor Loans are a great way for someone with impaired credit to get car finance, they should not be taken lightly as they come with great responsibility. You can watch a video and read more about Guarantor Loans.

Here to help

So, hopefully, we’ve shown you that credit checks are nothing to be worried about. It is more than possible to check your eligibility for car finance before you have a hard credit check. What’s more, credit checks simply ensure that lenders loan you the right amount, at the right interest rate for your circumstances.

Whilst there is no such thing as ‘no credit check car finance’, we hope we’ve helped you feel more confident about applying for car finance to buy that car of your dreams!

Rates from 6.9% APR. Representative APR 13.9%

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 13.9%, annual interest rate (fixed) 13.85%, 47 monthly payments of £201.38 followed by 1 payment of £211.38 (incl. estimated £10 option to purchase fee), a deposit of £0.00, total cost of credit is £2,176.24, total amount payable is £9,676.24.

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.

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!

Is there such a thing as guaranteed car finance?

Man signs agreement for buying car on finance

Put simply – no. Just as there are no guarantees in life, there are no guarantees in car finance. As such, we would advise you to be very wary of any company that suggests they can guarantee car finance to you. At My Car Credit, we don’t offer any guarantees. However, we always do our absolute best to get you accepted for car finance, so you can buy the car that you want.

The truth about ‘guaranteed car finance’

The reality is that the ‘guaranteed car finance’ claim is often a marketing ploy. The goal is to make you think that you’ll definitely be able to get a loan regardless of your circumstances.

Guaranteed car finance simply doesn’t exist. In fact, there have been laws in place since 2010 which state that making a false or misleading claim around finance guarantees for consumer credit is an offence. Additionally, advertisements that contain just the phrase ‘loan guaranteed’ are also banned. The advert would need to include terms and conditions regarding the individual’s credit status to be allowed. 

‘Guaranteed finance’ schemes

Watch out for ‘guaranteed finance’ schemes which are designed to catch you out. A common scheme is to ask for a ‘guaranteed finance enquiry’ fee. Usually this fee and the offer it is meant to guarantee are closely attached to complex small print (i.e. legal jargon). In order to decipher it, you’d need to be a qualified lawyer!

Any finance lender suspected of dealing with customers in this way can end up with a full Financial Conduct Authority (FCA) investigation into their conduct. If upheld, this could lead to them being fined or forced to close.

In summary – almost every guaranteed car finance claim is a scam.

How car finance agreements really work

Car finance agreements are purely based on your individual circumstances and your credit profile. This means that there will inevitably be some individuals who aren’t eligible for car finance. We’ll go out of our way to help you get approved for car finance.  However, it’s our lenders that make the final decision after fully assessing your affordability and credit profile.

A credit profile is a document that contains information regarding your creditworthiness and credit history. Your credit profile includes: what types of credit you hold, the length of time your credit accounts have been open for, if you made your repayments on time, and any applications for new credit. Lenders are far less likely to lend you money if they are not convinced you can repay them. This would naturally be bad business for them. In addition, it is not ethical for them to lend money that could push you into financial difficulties.

A more ethical solution to car finance

At My Car Credit, we only carry out a ‘soft search’ when you first apply with us. This means that there will be no footprint or indication on your credit file that a search has been carried out. Once you have made an application with us and a ‘soft search’ has been performed, we’ll know if you’ll get accepted by one of our lenders on our extensive panel.

The benefit of this approach means that should you unfortunately get declined, your credit profile will not be affected.

How to get accepted for car finance

Whilst we cannot guarantee car finance, there are ways you can improve your chances of getting accepted for car finance.

  • Improve and maintain your credit score
    Your credit score is the main factor that is assessed when you apply for a car loan. This means it’s important you keep your score as high as possible. There are many things you can do to improve your credit score. Not only will a good credit score improve your chance of an acceptance but you will also get a better rate. However, don’t lose heart if you have a low credit sore as there are still plenty of options.

  • Put down a deposit on your car loan
    Paying an upfront deposit on your car loan makes you less of a risk to the lender. Not only is the amount owed on the vehicle reduced but your monthly payments will also come down. Once again, don’t despair if you can’t pay a deposit. There are plenty of no deposit car finance options available!

  • Opt for a Guarantor Loan
    A Guarantor Loan is where a third party (usually a family member or close friend) agrees to pay your loan if you are unable to. This lowers the risk for the lender, improving your chances of an acceptance. It can also lower the rate you are offered. Guarantor Loans are a big responsibility for both parties and shouldn’t be entered into lightly. Make sure you are clear on how a Guarantor Loan works before proceeding.

What we can offer

My Car Credit has access to a large panel of lenders. These have all been vetted and approved by the FCA for their trustworthy operations and the quality of their service.

Our large network of lenders increases the chances of you getting accepted, across all credit profiles (from poor to excellent). Our unique underwriting policy prioritises the best outcome for you, the customer. This ensures we give you the best available deal on car finance for your circumstances.

You can trust My Car Credit because we are part of Evolution Funding, the UK’s largest motor finance broker. We are proud to be award-winning market leaders in the industry. We have helped thousands of customers get the car they want; at the price they can afford. We are also regulated and monitored by the Financial Conduct Authority (FCA). In conclusion, you can borrow for your next car safe in the knowledge that we are professional and reputable.

If you have any questions, our Car Credit specialists are here to help. Finally, you can get an instant decision, that won’t affect your credit file, by applying today.

Rates from 6.9% APR. Representative APR 13.9%

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 13.9%, annual interest rate (fixed) 13.85%, 47 monthly payments of £201.38 followed by 1 payment of £211.38 (incl. estimated £10 option to purchase fee), a deposit of £0.00, total cost of credit is £2,176.24, total amount payable is £9,676.24.

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.

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 I Get a Car Loan with a Poor Credit Score?

Car driving bought with a low credit score loan

It’s common for lenders to carry out a credit check on anyone who applies for a car loan. This is usually a ‘soft search’ initially. Credit checks can lead to those with poor credit scores shying away from applying due to the fear of rejection. However, you’ll be surprised how easy it is to successfully obtain a loan by making a few minimal changes.

In this short guide, we’ll explain everything you need to know when applying for a car loan with poor credit. In addition, we’ll cover how to get the best deal by ensuring your credit score is up to scratch.

What is a car loan?

Finding the right car within your price range can be a challenge. But, with a car loan, you can spread the payments out over a course of several months or years. This is a great way of significantly increasing the options available to you.

Two popular forms of car loan are a personal loan and Hire Purchase (HP). A personal loan will see someone borrow money from a lender, bank or building society. This allows them to have instant ownership of a car. In contrast, HP will have the individual pay an initial deposit (not always required) with fixed monthly payments for the next three to five years. They effectively hire the vehicle over the period, with the option to purchase at the end.

At the end of the term, they will be offered three choices; to either return the car to the supplier, keep it, or trade it in for a replacement. However, you must be careful not to miss the repayments before the end of the term. In these cases, the finance company may decide to repossess the vehicle to settle the debt.

How can you improve your credit score?

A lender will perform a credit check to ensure that the person applying can afford the monthly payments. People who obtain an excellent credit score will have demonstrated a firm grasp of their finances. In theory, this makes for a reliable choice for lenders.

Those described as having a ‘thin’ credit history will have a history of missing payments. Alternatively, there may be little concrete evidence of financial security, such as never owning a credit card or bank account. A higher credit score will open more doors. This could include a much more comprehensive range of car loan options. These are often accompanied by much more favourable interest rates.

Here are some simple but effective ways of raising your credit score.

1. Identify the problems in your credit report

Before you apply for a car loan, it will be wise to get a free copy of your credit report. This will give you an idea of any pitfalls that may scupper your loan request. There may be some glaring mistakes you are making in the way you handle your money, damaging the profile. It is also worth ensuring it is up to date and doesn’t contain any errors or inaccuracies which could unfairly affect your score.

2. Apply for a credit card and use it sensibly

Credit cards have a strange reputation of being a poor way to save money. But the truth is that as long as you’re making repayments on time, they will put you in good stead to improve your credit score. Proof that you can budget and regularly meet repayment deadlines will help you secure a more competitive car loan deal.

3. Stay away from bad credit

If you’ve ever been financially linked with someone you know has bad credit, such as a joint account or shared mortgage, it may lower your credit score. If this is the case, it will be a good idea to issue a notice of disassociation. This informs lenders that you are no longer financially linked and should be judged on your own merit.

4. Settle any loans

Now is the time to settle those loans and reduce your debt as much as possible. This is easier said than done, but to get behind the wheel of the car you desire you may need to work at it.

What are my other options for obtaining a loan?

Start by crunching the numbers on a car loan calculator. You may consider making slight changes to the car loan variables to see how it can help. No matter how low your credit score, some changes can ultimately work in your favour to help you get a car with poor credit history.

1. Pay a larger deposit

Simply put, a larger up-front deposit will mean your monthly payments will be reduced. This in turn minimises the risk for the lender in ensuring they are met. It can be frustrating as you’ll be forking out a potentially huge chunk of money. That said, it is often a sure-fire way to improve your chance of getting the deal.

2. Pay a higher interest rate

Someone with a low credit score will often need to accept a higher interest rate than the advertised representative rate. Again, it may seem frustrating on the face of it. However, don’t despair as it tends to mean only a slightly higher monthly payment.

3. Choose a lower annual mileage limit

Opting for a lower annual mileage limit can result in much lower costs month to month. This is because the car will be worth much more to the dealer at the end of the loan. This is usually related to fewer miles on the clock and less wear and tear.

However, you will want to keep the figure realistic. Going over your allowance will end up costing you dearly. You will find that there are harsh penalties that charge you for every extra mile taken.

4. Choose a used car

Opting for a loan on a used car will ultimately see you borrowing less money from a provider. This improves the possibility of obtaining a loan, even with a poor credit score. There is much less risk for the dealer as the car will already have depreciated in value. However, this doesn’t deflect from the fact that used cars are mostly reliable and of good quality.

If you worry about being able to afford to buy a car, this may be the best and most sensible option.

Need help getting a car loan with a poor credit score?

Take the headache out of getting a car loan with a straightforward and simple chat with our friendly specialists. Find out more about how we can find the right deal for you no matter how your credit score may look.

You’re not in this on your own, and we’ll support you every step on the way to get you on the road with the car of your dreams. Give us a call on 01246 458 810 or email enquiries@mycarcredit.co.uk to find out more

Rates from 6.9% APR. Representative APR 13.9%

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 13.9%, annual interest rate (fixed) 13.85%, 47 monthly payments of £201.38 followed by 1 payment of £211.38 (incl. estimated £10 option to purchase fee), a deposit of £0.00, total cost of credit is £2,176.24, total amount payable is £9,676.24.

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.

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!

A Guide to Buying Your First Car on Finance

Man holding keys after buying first car on finance

Alongside graduating from school, college or university, starting work and moving out (bye-bye parents, hello freedom), buying a car is a pivotal moment for any young person. However, without the bank of mum and dad, many struggle to afford the lump sum payment, which is why car finance is an attractive and realistic option.

In this short guide, we’ll explain everything you need to know about buying your first car on finance, from improving your credit score and setting budgets to securing the best possible deals. While we’ve tailored this guide mostly to young first-time buyers, the advice given applies to anyone searching for a more affordable way to get on the road. 

What is car finance? 

Car finance is an accessible means of owning the car of your dreams. Instead of covering the full cost upfront, you can spread payments over several months or years in reasonable, bite-sized chunks. 

A personal contract purchase (PCP) is a popular way of financing a car. Agreements often last between three to five years, and at the end you can either make a final payment to keep the vehicle, return it or use the resale value towards buying something brand-new. 

You can also opt for Hire Purchase (HP) if you prefer the idea of owning the car at the end of the agreement without needing to pay a final lump sum payment.  

To secure a finance agreement, you’ll have to pass a credit check and lender criteria and it helps to make a small deposit upfront (usually 10% of the car’s total cost). 

How to improve your credit score 

Before lenders consider your application, they’ll undertake a thorough credit check to assess your potential risk. The overall score determines who qualifies for a loan, the amount you can borrow, interest rates and credit limits.  

To ensure you’re in the best position possible, you’ll need some active credit history to show you can manage money responsibly (this is especially important for students without full-time employment). Below are three simple ways you can improve your score and bolster your chances of securing finance. 

Check you’re on the electoral roll 

Lenders check whether you’re on the electoral roll to protect themselves against fraud. If you’re a student, you can register at your home address or student address. 

Apply for a credit card and use it sensibly 

Using a credit card is the easiest way to show lenders you can keep track of your outgoings. However, if you’re worried about debt or have a low credit rating, a prepaid card is an alternative option, working similarly to a pay-as-you-go mobile capping your spending. Students may also be eligible for a student credit card with a low credit limit.  

Mobile phone contract  

If you’ve never had credit, a mobile phone contract is a simple way of improving your score. They work much the same as repaying car finance, albeit on a much smaller scale, demonstrating your ability to meet monthly repayments. 

Four things to do before buying your first car on finance 

Set your budget and plan for additional costs 

The most crucial part of buying any car is setting a budget and sticking to it, no matter how tempting a set of shiny new wheels might be. So, before entering a finance agreement, prepare to meet monthly repayments by choosing a realistic model. If possible, negotiate an arrangement that suits your income stream. 

However, it’s not just the initial value of the car you must consider  plan for running and maintenance costs too. These include: 

  • Car insurance (often more expensive for new and young drivers) 
  • Fuel costs, especially if you plan to travel frequently 
  • MOT tests, scheduled maintenance and repair costs 
  • Road tax (there are a few exemptions) 

If you’re not sure how much you can borrow, read this handy guide. 

Decide whether you want a used or new car 

When it comes to buying your first car, a key consideration is whether you should buy new or used. While the decision is ultimately personal, depending on your budget and immediate needs, consider the benefits of both routes before making a final decision. 

The advantages of a used car include affordability (the initial price is often between 30-50% less, meaning lower monthly repayments), cheaper insurance (a massive incentive for new drivers who are already facing premiums) and discounted tax. 

However, there’s more choice when buying a new car and improved safety features, such as automatic emergency brakes, adaptive cruise control and intelligent sensor systems that reduce collisions. Surprisingly, new models are also quite affordable thanks to the range of generous finance deals on offer. 

Find a guarantor 

If you’re a student, you’re still eligible to buy a new car on finance. Although, without a full-time income, lenders may need additional reassurance that you can meet monthly repayments. In these cases, a guarantor will help bolster your application. 

A guarantor is usually a close friend or relative, with a good credit history, who agrees to continue repayments if you’re unable to make them. While they can’t take on the loan (it will always be in your name), they act as a safety net to mitigate risk. 

Entering into a Guarantor Loan is a big responsibility for both parties. It is therefore important that you both understand your obligations, as well as the potential risks. 

Double check the agreement before signing 

You know how the saying goes  it’s better to be safe than sorry. With that in mind, double-check the terms and conditions of your finance agreement to avoid hidden charges and dubious stipulations. 

Things to watch out for include: 

  • Mileage caps which restrict the amount you can travel each year (exceeding the limit incurs charges anywhere between 3p to 70p per mile) 
  • Late payment policies which penalise you for missing repayments 
  • Damage charges and service requirements
  • “Free” insurance policies that sound too good to be true 

Do you need help finding a finance agreement? 

Buying your first car is nerve-wracking at the best of times without worrying about hefty upfront costs, which is why we aim to make the process as straightforward and affordable as possible with the best finance deals anywhere in the UK. 

To learn more, call us on 01246 458 810 or drop us an email at enquiries@mycarcredit.co.uk  one of our friendly specialists will be in touch shortly. For additional information, you can also visit our website where we have hundreds of helpful blogs and articles to browse through. 

 

Rates from 6.9% APR. Representative APR 13.9%

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 13.9%, annual interest rate (fixed) 13.85%, 47 monthly payments of £201.38 followed by 1 payment of £211.38 (incl. estimated £10 option to purchase fee), a deposit of £0.00, total cost of credit is £2,176.24, total amount payable is £9,676.24.

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.

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!