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What is a credit score & how does it affect a car finance application?

What is a credit score and how does it affect a car finance application?

A credit score is a rating – often a number – which shows how creditworthy you are to lenders. 

It’s usually calculated by your credit history – whether you pay loans back or keep up to date with your bills.

The higher your credit score, the more likely your application will be approved. The lower your score, the less likely your application is to be approved. 

Understanding your credit history and your credit score is important if you’re looking to take out car finance. It’ll help you decide when to submit your application, as you may need to improve your score first. And there are a few companies which can help you do so. 

Where can I see my credit score? 

There are several ways you can view your credit score. Some companies charge for the information; others will provide it for free – but you often don’t get to see as much.

Researching on laptop

Some of the better free credit score companies include: 

You can either visit their website or download their apps. After you’ve set up your account and entered a little bit of information, you should be able to view your credit score on demand. 

Your credit score usually updates every month, so it’s worth keeping an eye on it. 

How does my credit score affect my car finance application? 

Your credit score is important if you’re looking to purchase on finance. It can be anything, from a mortgage to a new internet provider or a new car. Your credit score will help determine the outcome of your application.

Lenders will often use your credit score to decide if you’re creditworthy. If they think you are, you’ll be accepted. If not, they’ll decline your application. 

That’s not the only reason why your credit score is important though. It’ll affect various parts of your application outcome, such as: 

  • What type of finance you get accepted for
  • How much you can borrow
  • What the interest rate is on your finance
  • How many finance agreements you can have at once

The effects of applying for too much credit

When looking to buy a new car, it can be tempting to apply for several lines of credit at once to try and get the best deal. 

But be warned, applying for credit too often can damage your credit score. 

The general rule of thumb is not to submit more than three applications in three months. And it can be easy to go over that threshold. 

If, for example, you’re looking to upgrade your phone, switching internet provider, apply for a credit card and need a new car all in the space of a couple of months, that’s four searches. And that may harm your score. 

A way to avoid that when looking for a new car is to make sure the dealership you’re leasing or buying from uses a soft credit check. 

What is a soft credit check? 

There are two types of credit search a lender can carry out before accepting your finance application: a soft search and a hard search.

A hard search is a more old-school version. It appears on your credit file, and if you have too many in a short space of time, it’ll damage your score. While both types of check affect your application, only one has a damaging effect on your credit score.

Credit searches online

Meanwhile, a soft search gives you the same result but doesn’t appear on your credit file or harm your score. That means you can do as many checks as you like without affecting your chances of being approved. 

Here at Hippo Motor Finance, all our initial searches are soft, so you can see if you’ll be accepted by one of our lenders without affecting your credit score. You can do it all online, too, through our Apply Now feature, which will give you a result in 30 minutes.

Can anything else affect my application?

When you apply for car finance, it’s not just your credit score a lender will check – although that’s still important. 

They also carry out other checks before approving or declining your application. 

1. Proof of identity

When you apply for car finance, you’ll need to prove your identity. That could be submitting your driver’s licence or passport. The lender needs to make sure you are who you say you are. 

2. Driver’s licence

The vast majority of lenders will expect you to hold a valid driver’s licence. If you don’t have one, most will automatically reject your application.

3. Current address and address history

You’ll need to provide your current address as well as at least three years’ address history when you apply for car finance. You may be asked to prove this through either your driver’s licence or a utility bill. 

4. Proof of income or affordability

Most lenders will require proof of income or affordability when you apply for car finance. It’s to make sure you can afford to keep up with the monthly repayments. Usually, they’ll be able to confirm this through wage slips and/or bank statements. 

5. Credit score

And finally, they’ll check your credit score to decide if you’re creditworthy. The higher your score and the lower amount of recent applications, the more likely you will be accepted. 

Read: What credit checks are done for car finance and will I get accepted?

What credit score do I need before I apply?

As each lender is different in their criteria, and being accepted is more than just your credit score, there’s no magic number to guarantee you get accepted. 

If you have a higher score, there’s a greater chance of being accepted, but it’s not set in stone. 

Read: What is a good credit score for a car loan?

Can I apply if I have bad credit?

Yes. There are several lenders – some of which we work with – who specialise in helping those with bad credit. And as all our initial checks are soft, there’s never any harm in applying. 

Learn more: Bad credit car finance

Can I apply if I have no credit history?

Again, yes. Having no credit history is similar to having a less than perfect score – as lenders aren’t sure about your ability to pay back a loan because you’ve never done it before. 

But like having bad credit, you can still lease or buy a car on finance with no credit history. And getting a car on finance is a great way to build your credit score. 

How do I apply for car finance without affecting my credit score?

Woman happy at laptop

It’s easy to see if you’ll be accepted for car finance without affecting your credit score. However, if you’re preapproved, we’ll still have to do a hard search, which could affect your credit score. Click the button below, fill out a few quick details, and we’ll let you know within minutes if we’ve found a suitable lender for you. 

And don’t worry, as the check is soft, it won’t affect or appear on your credit file. 

Representative Example of Credit

We expect more than 51% of our customers to achieve this rate.

Loan Amount Total Cost of Credit Representative APR 60 Monthly Payments Deposit Amount Loan Term Total Amount Payable
£7,500 £3831 19.1% APR £188.85 £0 60 Months £11,331

All offers are subject to change at any time, you must be 18 or over and finance is subject to status, vehicle availability and terms and conditions apply. We can introduce you to a limited number of finance companies, a commission may be received. Failure to maintain payments may result in termination of your agreement and the vehicle being returned, this could affect your credit rating and make it more difficult to obtain credit in the future. All prices correct at time of publication.

We purchase a wide variety of vehicles from all over the country to ensure the best quality and value for our customers, all of our cars go through a thorough inspection process and if they do not meet our standards we do not sell them. We endeavour to inform our customers (where possible) the provenance of the vehicle they are buying and as such we will always inform you if the vehicle has previously been either an ex fleet or hire car. Should your vehicle be an ex hire/fleet car please do not be concerned as we would never value this vehicle differently when you come to part exchange it and there is no difference to the CAP valuation either.

You should try and estimate the distance you will travel as accurately as possible to try and avoid excess mileage charges at the end of your contract.

All pictures and/or photos and car descriptions on this site are for illustration and reference purposes only and are not necessarily the vehicle on offer. All offers are subject to change at any time and are subject to finance approval and vehicle availability. All prices correct at time of publication. E & OE.

Hippo Vehicle Solutions t/a Hippo Motor Finance is authorised and regulated by the Financial Conduct Authority. FRN 658076. We are a Credit Broker not a Lender and can introduce you to a limited number of lenders. Subject to status and to UK residents only (excl. the Channel Islands). Individuals must be 18 or over. Guarantees and indemnities may be required. We typically receive a fixed commission calculated by reference to the vehicle model, product or amount you borrow, for introducing you to a lender but this does not affect the interest charged on the agreement, all of which are set by the lender. Images for illustrative purposes only. Hippo Vehicle Solutions t/a Hippo Motor Finance is an Appointed Representative of AutoProtect (MBI) Limited for insurance distribution purposes. AutoProtect (MBI) Limited is authorised and regulated by the Financial Conduct Authority. Its firm reference number is 312143. You can check this at www.fca.org.uk

We endeavour to ensure that all information including the specifications and finance availability are accurate. Whilst we make every effort to display correct information we are aware that errors may occur occasionally. We are not able, therefore, to guarantee the accuracy of all information especially when given to us by third parties. If you do require clarification of some information you have seen on our website, please email us at info@hippomotorgroup.com . This does not affect your statutory rights.

We are a broker not a lender and our registered office is Unit 26 Trident Park, Trident Way, Blackburn, BB13NU.