Phone lines open today until 7pm
01254 956777
How It Works Apply Now

How do I check my credit score before applying for a car loan?

How do I check my credit score before applying for a car loan?

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

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 on your credit report and lending history.

Credit Score

The higher your number is, the better you look to a lender. So if you have a 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 its own 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 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 matter 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 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 credits sources 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 an excellent 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 applying or 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.

Read: How do I check my credit score before I apply for a car loan?

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 misspelt 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 worry they might struggle to get a deal due to poor credit. One way 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.

A lender will take an in-depth look at your score and report when you apply for credit, such as a car loan with a hard search. 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 credit applications, these hard searches can lower your score, as it may appear as though you’re struggling or desperate for credit.

On the other hand, a soft search 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

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 Limited t/a Hippo Motor Finance are Appointed Representatives of AutoProtect (MBI) Limited for general insurance distribution purposes. Autoprotect (MBI) Limited (FRN 312143) is authorised and regulated by the Financial Conduct Authority. 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.