What is car loan eligibility?
Applying for a car loan can be stressful. You may wonder whether you’ll be accepted and, if you are, what sort of interest and loan duration you’ll be offered.
Car loan eligibility takes some of the guesswork out of this process, as it shows how likely you are to be approved for the loan you want by matching up your information with the lender’s criteria.
This means you can have a good idea of whether you’ll be accepted for a car loan before you even apply.
If you’re considering taking out a car loan, read our guide to help you understand more about how a lender may assess your eligibility, as well as what you can do to make your eligibility rating better.
Is there anyone that isn’t eligible for car finance?
The only people that can’t apply for a car loan or finance are people under 18. If you’re over 18 you can apply. You’ll have to meet the lender’s criteria, but you can still apply.
How is my eligibility rating for a car loan calculated?
Your eligibility rating for a car loan is calculated by taking the information known about you and seeing if it matches the lender’s criteria.
Almost all of your information for an eligibility check will be taken from your credit report. This will include:
- Confirming your identity and if you’re registered on the electoral roll
- How much credit you utilise already
- The type of credit you have and the age of the accounts
- Your credit history, such as whether you make payments on time
- Details of anyone who is financially linked to you, for instance, through a joint account
- Public record information such as County Court Judgments (CCJs) or bankruptcies
The closer match your information is to what the lender is looking for, the better your chances of being accepted for a car loan.
What are lenders’ criteria?
Every lender has a different set of criteria that a potential customer has to meet to approve their car loan.
There could be several different eligibility checks, but some remain the same regardless of the lender. These include:
Your personal details
For example, your date of birth and residency status (homeowner, living with parents etc.).
Your income and employment history
A regular income may give you a better chance of being approved for a car loan.
Your credit history
Your credit score and how you manage your other credit accounts is usually a big factor for lenders, as it gives them an idea of how much of a risk you are to lend to. They’ll look out for whether you’ve applied for credit recently, missed any payments and whether you have a history of managing your finances well.
What do lenders look at to find out eligibility?
Lenders use a few sources of information to see if you could be eligible for a car loan. The main ones are:
- Your application form and any documentation you have supplied
- Detailed information from your credit report along with your overall credit score
- Any other information they have about you if you’ve been a customer of theirs in the past
How can I see my car loan eligibility?
In the past, you may have had to simply bite the bullet and apply for a car loan to find out if you were eligible.
The problem with this is, when you apply for credit, a lender will run a check on your credit report called a ‘hard credit search’ to find out your history of borrowing.
Searching this way leaves a mark on your credit file that’s visible to lenders. Too many of them can actually lower your credit score and ironically reduce your chances of getting credit.
This is the main reason Hippo Motor Finance will only ever use a ‘soft credit search’ to find out if you’re eligible for a car loan.
A soft search gives enough information about you to match it to the lenders’ criteria and see if you’ll be accepted for car finance. Still, it won’t ever leave a footprint on your credit report for other lenders to see or damage your credit score.
What does my eligibility rating mean?
Your eligibility rating shows how likely the lender is to accept your application for a car loan. The higher your rating is, the better your chances are of being accepted.
Although your eligibility rating is never a 100% guarantee of your approval, it can give you a good idea of the deals you’re more likely to be eligible for, so you can feel more confident when you apply for car finance.
What are the benefits of checking your eligibility rating?
One thing that is almost certain to hurt your credit score is multiple applications for credit.
Every time you apply for a car loan, it’ll leave a mark on your credit report, and more marks may lead to lenders questioning why you’re applying for so much credit over a short period of time.
By using our soft credit check to find out your eligibility for a car loan, you can protect your credit score, as well as your chances of being accepted in the future for credit.
How can I improve my eligibility rating?
One sure-fire way of improving your eligibility rating is to take the time to improve your credit score.
Although you can be eligible for some car loans even with a lower credit score, increasing your score will widen your options and improve your eligibility for better deals.
There are several ways you can do this:
- Check your credit report and score regularly for any errors or to see where you can make improvements
- Register on the electoral roll
- Keep your credit utilisation under 50% – ideally even lower
- Make payments in full and on time
- Pay off any loans or credit cards where you can
Find out more about how to improve your credit score
Ready to find out your car loan eligibility? Try our soft credit search for free, and we’ll search for the best deals for you without it impacting your credit score.