If you've applied for car loans in the past and have been declined, you will know how disheartening it can be. And if you've been refused car finance, you may think you won't get accepted anywhere else. However, not all hope is lost! If you're applying for car finance with bad credit, there are a few easy ways in which you can increase your chances of being approved.
Check your credit score first
Your credit score plays a massive part in your chance of getting approved for bad credit car finance. Your credit score is based on your financial history of borrowing and lending and can determine whether you can be trusted to repay any other loans or credit. Potential lenders use your credit score as a factor in getting you approved. If you have a history of making late payment or completely missing them all together, lenders may think you are too much of a risk for new credit. You can check your credit score for free online using a reputable credit refencing agency such as Experian, Equifax or Credit Karma. Checking your credit score first before you start applying can be really helpful.
Increase your credit score
There are many easy ways in which you can increase your credit score to improve your chances of being accepted for a car loan.
Pay your bills on time
This one may seem really obvious ad you may struggle if you've had trouble in the past making repayments However, even just a few months' worth of paying all your bills on time and in full can start to rebuild your credit score. It can also indicate to lenders that you are better at managing your money and they may be more favourable towards you.
Register on the electoral roll
In the UK, the electoral roll holds information on all the people in the UK who are eligible to vote. Even if you don't care about voting, being on the electoral roll can help increase your credit score and also enables lenders to verify that you are who you say you are. The electoral roll holds information such as your full name and current address. Whether you are on the electoral roll or not is listed on your credit file.
Fix any mistakes on your credit file.
When you check your credit file, you should make sure all your information is accurate and up to date. Even the wrong address can harm your score. You should also look for any fraudulent activity or any activity that you do not recognise as someone could take out credit in your name. You should also sever ties with any financial partners if you no longer need them. If you have taken out a joint application with someone in the past, this will be recorded on your credit file and their low credit score can be harming yours. Contact your credit reference agency if you need to make any of the above changes.
Put down a deposit
Whilst there are many no deposit car finance options, having a deposit can increase your chances of being accepted for a car loan. The bigger deposit you put down the less you'll have to borrow from the lender and can in some cases reduce the amount of interest you will pay.
Consider a joint application
A joint application can be beneficial if your financial partner has a better credit score than you. It can help strengthen your application. However, if your partner has a lower credit score, it may not be a step in the right direction. A joint application is where two people are responsible for keeping up with making the financial repayments each month, on time and in full. If either of you miss these payments, both credit files can be negatively impacted.
Consider a guarantor application
Many car loan applications can add a guarantor to strengthen the application. A guarantor is usually a third part friend or family member who can cover the repayments if you cannot fulfil your agreement each month. A guarantor is giving the lender more confidence that you can be trusted to meet all your repayments but if you fail to do so, they will be responsible for making that payment themselves.
