Thinking of applying for car finance? Not sure if you’ll get approved or not? Read our guide on how to get approved for car finance! If you’ve already been refused car finance then you’ll know how disheartening it can be. But don’t worry, there are a few ways in which you can increase your chances of getting approved for car finance.
Check your credit file
The first thing you should do before you start applying is to check your credit score. Your credit score plays a big part in getting approved for car finance. However, if you are applying for bad credit car finance you may struggle but don’t worry, there are options available too! You can check your credit score online for free using a reputable credit referencing agency such as Experian, Equifax or Credit Karma. Potential lenders can use your credit file to determine whether or not you can be trusted to pay back any credit, loan or finance. If you have had trouble making repayments in the past, you may find yourself with a low credit score.
When you check your credit file you should look out for a few things that could be negatively impacting your credit score. First, you should make sure all your information is accurate and up to date. Even having an incorrect address can harm your credit score. You should also take a look at your credit applications and make sure they are all correct. If not, this could be fraudulent activity. Also, if you have taken out credit with someone else in the past you could still be finically linked. If you no longer have an active credit account with a financial partner, its best to dissociate yourself from them. If they have a bad credit score, their score could be dragging yours down too. You can fix any mistakes on your credit file by contacting your selected credit referencing agency.
Save up for a deposit
Some lenders may be more favourable if you have a deposit for car finance. A deposit is a great option, even just putting aside a little bit of money for a couple of months can help your chances of being approved. When you put down a deposit, you don’t need to borrow as much from the lender. In some cases, it can also lower the interested rate offered, so you won’t have to pay as much back. If you’re struggling to save up for a deposit, there are many no deposit car finance options available also.
Don’t make multiple applications in a short space of time.
Whilst it’s a great idea to shop around for the best rates from different dealerships and online brokers, making multiple applications can harm your credit score. When a credit check is performed on your credit file, there are typically two types. A hard search is when a lender takes a full look at your credit file and it is recorded on your file that a hard search has been made. A potential lender is able to see when you have applied for credit in the past and whether or not you were accepted. Multiple hard searches on your credit file in a short space of time can negatively impact your credit score. If you are shopping around for car finance and want to compare quotes, its best to stick to softs searches only. Most websites and online applications will make you aware if they are going to perform a hard search on your credit before you submit your details.
Register on the electoral roll
In the UK, the electrical roll lists all the names and addresses of all the people in the UK who are registered to vote. Potential lenders can use the electoral roll to verify that you are who you say you are and prevent any fraudulent activity. Some lenders may decline you if you aren’t on the electoral roll. You can it online for free and it only at least 5 minutes! Also, registering on the electoral roll doesn’t mean that you have to vote.
Consider a guarantor loan
A guarantor loan can be really beneficial if you are struggling to get approved. Guarantor loans can be good for young drivers, applications with no credit history and bad credit car finance applicants. A guarantor loan is a type of car loan where a third party, usually a friend or family member, who agrees to meet the repayment schedule if the main applicant fails to do so. From a lenders point of view, it is giving them more confidence that the loan will be paid back each month as you essentially have two parties responsible for making repayments.