A good credit score can feel like a gold star on your financial history report. But unfortunately, a good credit score doesn’t guarantee approval when it comes to car loan applications. If you’ve been denied a car loan with good credit, this article is for you.
Below, we go into more detail about why a good credit score isn’t the be-all-and-end-all for car loan applications. We also take a look at how to overcome the hurdle, and what you can do to increase your chances of securing finance with a trusted lender.
What is a credit score?
Before we start, it’s important to define what a credit score is and why it matters. Basically, a credit score measures the overall health of your financial situation. A high score presents you as a reliable and trustworthy borrower, while a low score indicates a higher level of risk and an increased chance of defaulting on your loan. The higher your score, the more appealing you are to lenders.
Scorecards are used to calculate your credit score and create an overall picture of your borrowing behaviour. Information like your credit card repayment history and previous credit applications, as well as factors like your electoral roll status and address history, can affect your credit score. That said, your credit score isn’t the only factor considered by lenders when assessing car loan applications. This means you may be denied a car loan with good credit.
Equifax vs Experian vs TransUnion
In the UK, three major platforms are used to calculate credit scores – Equifax, Experian and TransUnion. All use a different number system, so don’t worry if your credit score varies between platforms.
- Equifax: 0 – 1000
- Experian: 0 – 999
- TransUnion: 0 – 710
What doesn’t affect a credit score?
Credit scores are used to assess your financial history and give lenders an idea of your reliability when borrowing money. They’re not designed to reflect your overall wealth or purchasing power. The following criteria aren’t considered when calculating your credit score, however they may help explain why you were denied a car loan with good credit.
- Student loans
- Savings account balances
- Employment history
- Parking tickets or driving offences
- Criminal record
- Medical record
Reasons why you may have been denied a car loan with good credit
If you’ve been denied a car loan with good credit, here are some common reasons to consider. They don’t affect your credit score directly, but they can have an impact on the final decision of the lender.
It’s important to understand that you’re not necessarily the only person assessed when applying for car loans. Financial connections to irresponsible borrowers, such as partners, family members or flatmates, can have an impact on your success rate and may help explain why you’ve been denied a car loan with good credit.
For example, if your legal partner has a lacklustre borrowing history and a poor credit score, this can impact your chances of a successful application. Even if you’re no longer together, they’re still considered a financial risk. Similarly, if you once shared utility bills with an irresponsible ex-flatmate, their borrowing behaviour can have an impact on your car loan application.
These types of financial links won’t affect your personal credit score, but they may be considered by lenders when assessing applications and calculating the overall risk factor. Lenders may check the credit reports of these individuals and use data to make a final decision on whether to approve or deny your application.
Check the Financial Associations section in your Credit Report to find out if you have any links. Depending on whether the connection is still active, it may be possible to submit a disassociation request and remove the person from your Financial Associations list.
Employment status and salary
The ability to repay your loan is a major factor considered by lenders. They won’t hesitate to follow up on employment and salary information stated in your application, and if the numbers don’t match up, your loan may be declined. This means that even with a stellar borrowing history, you may be denied a car loan with good credit if your employment status and income can’t be verified.
Inconsistency in applications
Lenders don’t just check your current application. They may also cross-reference it with previous applications. Inconsistencies can raise instant red flags and may explain why you’ve been denied a car loan with good credit. For example, an application that states a £100,000 salary preceded by an application that states a £30,000 salary may be flagged.
Current debt isn’t factored into your personal credit score. However, it may be considered by lenders when assessing car loan applications. Ultimately, they want to be sure you can repay the amount you borrow. For example, if you apply for a £50,000 car loan but have credit card debt of £10,000 and a home mortgage of £300,000, your application may be flagged as high risk. It doesn’t necessarily mean you’re ineligible for a car loan, but it is something to consider when investigating why you’ve been denied a car loan with good credit.
The final word on car loans and good credit
At the end of the day, no application is guaranteed, regardless of how high your credit score is. Lenders will always scrutinise applications and consider a variety of criteria. It’s important to understand exactly what goes into the decision making process to maximise your chances of success.
Denied a car loan with good credit? We can help!
Being denied a car loan with good credit is frustrating. The good news is, we’re here to help. At My Car Credit, we have access to one of the largest and most diverse lending panels in the UK. This helps us to match your application with a wide range of trusted lenders, instead of the usual high street banks.
My Car Credit is fronted by a dedicated team of experts who can help you understand more about car finance eligibility and get to the bottom of why you’ve been denied a car loan with good credit. It’s this commitment to success that helps our customers get behind the wheels of their dream cars faster.
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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!