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How Do I Check My Credit Score Before Applying For A Car Loan?

Your credit score is a major factor when it comes car finance, so it’s worth spending some time understanding the ins and outs of how it works before you apply for your car loan.

Here we’ll take a look at why your credit score is so important for car finance, how to check your report and score, what to look out for, and how to ensure you get the best deal.

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

A credit score is a number rating that helps finance companies decide how much of a risk it is to loan you money. The number is calculated by credit reference agencies and is mainly based upon your credit report and history of lending.

Credit Score

The higher your number is, the better you look to a lender. So if you have good credit score, not only are you more likely to have your application for a car loan accepted, you’re also more likely to get a better interest rate on your loan.

Your credit score isn’t the only thing lenders look at, but it’s a big deciding factor.

What are lenders looking for?

Every lender has their own set of criteria when looking at an application for car finance. When it comes to your credit report and subsequent score, these are some of the main points they look at.

Payment history: Finance companies want to be paid back, so they’ll look at your track record for doing just that. Missed payments, defaults or late payments will all bring your score down.

Outstanding debt: Large amounts of outstanding debt can be a significant concern to lenders, as it raises the question if you’re good at managing your finances. Always try to keep your credit utilisation (the amount of credit you actually use rather than your limit) under 50% at least.

Addresses: It’s not really where you’ve lived, but how often you’ve changed addresses that matters to a lender. If you’ve moved multiple times, particularly in a short period of time, stability-loving lenders may class you as more of a risk.

Length of your credit history: Those who have a longer credit history will tend to score better than someone who’s only got a couple of months on file. Obviously, this is something that can’t always be helped, but worth knowing when you need to build up your credit score.

Type of credit: Lenders like to see that you have experience using multiple sources of credits and have been reliable in managing that debt.

What is a good credit score?

There are three main credit reference agencies and all have their own unique scoring system. So there isn’t one magic number to aim for. One thing is the same for all three, though – the higher your score, the better you look to a lender.

Good Credit and Bad Credit signpost

Experian’s credit score ranges from 0-999, with a good credit score faring anywhere between 881 and 960.

Equifax ranges from 0 to 700 and a good score is from 420 – 465.

TransUnion’s score ratings run from 0 to 710 with the ‘good’ range somewhere in between 604 and 627.

Having a good score means that you have a better chance of getting a loan, plus getting a better interest rate. However, as all three have their own criteria for scoring an individual, it’s possible you could lie in the ‘good’ band with one and only hit ‘fair’ with another.

The good news is, though, you can always take steps to better your score.

Should I check my credit score before applying for a car loan and where do I find it?

Yes. It’s a really good idea to check your credit score before applying for a car loan, because it gives you the chance to rectify any mistakes.

If you have a low score, you may want to consider trying to build it before you apply or even speak to a specialist lender who can help those with bad credit ratings.

As mentioned, there are three main credit reference agencies – Equifax, Experian and TransUnion and, if you want to be thorough, it’s best to check with all three.

Checking credit score on mobile phone

It should be possible to see your credit report with them for free, however, they will also offer a subscription service to get regular updates.

Completely free services include: Money Saving Expert Credit Club, who use Experian; ClearScore, who use Equifax; and Credit Karma, who use reports from TransUnion.

What do I do once I’ve checked my credit report?

While it’s entirely up to you what steps you take once you’ve checked your credit report, if you know you have a low credit score, it may be best to try and build it up before applying for car finance.

The unfortunate irony is, with most dealers, if you apply for a car loan and are rejected due to a low credit score, it will show up on your credit report and worsen your score further.

However, that’s not the case at Hippo Motor Finance. As we only use soft searches to find you a lender, it won’t appear or damage your score.

But if you’re keen to improve your score before applying, here are some steps you can take:

  • Speaking to the credit reference agency to let them know about any errors or information that needs updating (even a misspelled address can affect your credit score, so check it carefully)
  • See if there are any balances you can lower or loans you can settle
  • Register on the electoral roll
  • Keep paying bills regularly and on time until you’ve built up a healthy payment history
  • If possible, terminate any financial partnerships that may be bringing your score down (i.e., if you have a joint account with someone who has a low rating)
Lady checking credit score on laptop

All of these actions take time to show up on your report, so patience is key when it comes to building your score. However, we do understand that there are times that you need access to a car sooner, which is where we can help.

Soft search vs hard search

At Hippo Motor Finance, we help customers who are worrying they might struggle to get a deal due to poor credit. One of the ways we do this is with a free soft search that won’t harm your credit score.

Searches, also known as credit checks, are when lenders look at your credit report to see your financial history. There are two types – hard and soft – and it makes a big difference which one is carried out.

With a hard search, a lender will take an in-depth look at your score and report when you apply for credit such as a car loan. That hard search will show up on your credit report, so whenever lenders look at your report they can see when you applied for credit and if you were accepted. If you make multiple applications for credit, these hard searches can lower your score, as it may appear as though you’re struggling or desperate for credit.

A soft search, on the other hand, still gives lenders enough information to decide whether they can help you, but these types of checks are not visible to prospective lenders and will never impact your score.

How do I get a free soft credit check?

It’s usually better to use a broker or lender who can offer you a soft credit check so there’s no impact on your credit rating.

At Hippo Motor Finance, we have a large panel of lenders including specialist lenders for those with poor credit history, and we only ever use soft search in the first instance.

That means you still have all the choice of a large panel of lenders but avoid the potential of damaging your credit score finding the right deal for you.

Try our free soft credit check today and see how we can help.

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

We are a broker not a lender and our registered office is Trident Park, Trident Way, Blackburn BB1 3NU. Our contact number is 01254 919000

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