When you apply for car finance, one of the most important factors in assessing your suitability will be via a credit check. This can be off-putting to some motorists, whose first concern might be ‘can I get car finance with bad credit?’
While your chances of being accepted for car finance greatly increase with a good credit score, and you’re liable to get terms which are more lenient, if you have a bad credit score there are still options open to you.
Getting car finance with bad credit can be a challenge, and being accepted may bring with it higher interest rates for a longer term, but it is still a possibility.
Even then, there is work which can be done in the background to improve your credit score and therefore your chances of being approved on better terms. We’ll look at some of the causes of bad credit and what you can do to improve it to increase your chance of being accepted for car finance.
What causes bad credit?
Bad credit reveals your risk to lenders, with any examples of bad credit staying on your report for anywhere up to six years. This can be caused by any number of things including:
- Making a late payment
- Missing a payment
- Being tied into too many finance agreements
- Multiple credit applications in a short period
- Outstanding County Court Judgements
These items will all be highlighted when a credit reference agency assesses your history to ascertain how you deal with credit, helping them to inform how you will be scored. The more bad credit, the lower your score and the less finance options will be available to you.
This can be improved though. We’ve previously offered five tips to boost your credit score as well as nine things that don’t affect your credit report which all offer advice on how to make the most of your situation and reduce your credit utilisation score.
Can I get car finance with bad credit and will I have to pay more?
While car finance may still be an option even with bad credit, you are likely to have to make some compromises. This is likely to be in the amount of credit offered to you to borrow and/or at a higher interest rate than normal.
While this might seem unfair, it is due to your risk factor for repaying the amount back to the lender.
Whereas personal contract purchase and leasing are likely to be out of the question for funding your next car using car finance, hire purchase is likely to be your best option as it is essentially a secured loan using the asset, in this case the car, as security against repayments.
Who offers car finance with bad credit?
If you’ve received your credit report and know you have a less-than-stellar credit history, Hippo Motor Finance might be able to help. We believe that everyone should have an opportunity to finance a car regardless of their credit history.
Some lenders won’t accept people with bad credit or financial difficulties, but it doesn’t stop dealers from putting applications through. We increase your chance of acceptance by working with specialist lenders.
On top of that, our eligibility checker discovers whether you’re likely to be accepted for car finance by performing a soft search on your credit history. This ensures if you do have bad credit you’re not affected.
Whether you have bad credit from missed payments or defaults, or other financial problems such as bankruptcy, DROs, DMPs, IVAs or CCJs; we can help you determine whether you’re eligible for car finance.