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5 reasons you were refused for car finance and what to do next

5 reasons you were refused for car finance and what to do next

Being refused for car finance is not the best feeling, particularly when you’re eager to get your new car and get on the road.

Take heart, it could happen to anyone and there are quite a few reasons why.

The good news is, once you’ve understood the reason for your application refused, there are steps you can take to make sure you get the car finance you need and want.

1. Poor credit

Poor credit is by far and away the biggest factor why car finance is refused. Having a poor credit score is viewed by finance companies as a higher risk, and they’re therefore more likely to reject an application for car finance.

5 Reasons You Were Refused For Car Finance And What To Do Next - Poor credit file

Credit scores can be affected by a number of things, including missed payments and outstanding debt.

Some instances, such as having a County Court Judgement (CCJ) or defaulting on payments, can stay on your credit file for up to six years, although the older they are, the better for lending purposes.

Other reasons for a poor credit score might not be related to your finances at all. It may be that you have no credit, as there hasn’t been enough activity for the credit bureaus to generate a score.

Or you may not be registered with the electoral roll or perhaps have moved recently – something that affects your score as it’s used to determine identity.

2. Your age

It’s an unfortunate fact that some lenders take your age very seriously when it comes to car finance.

If you passed your test at 17, there’s not very much you can do other than waiting a year, as finance agreements cannot be offered to those under the age of 18.

Learning to drive

If you fall into the 18-21-year-old age bracket, some lenders will refuse your car finance due to their criteria.

However, there are lenders out there who are willing to make an offer to younger customers, so it could be a case of shopping around.

3. Employment status

Each lender has its own set of criteria that borrowers must meet to get car finance. The criteria is usually based on risk levels and affordability.

So, if you’re self-employed, have just started a new job, or are deemed to have an unstable employment history, some lenders could refuse your application for car finance

You don’t necessarily have to be employed to get car finance, but having proof that you’ll be able to pay the monthly instalments will help strengthen your application.

4. Affordability

Lenders must only lend responsibly. Part of that means looking at your income and outgoings to make sure you can afford the repayments on your car finance.

Remember, a larger deposit will lower those monthly instalments and make it more affordable for you to meet your repayments comfortably.

5. Eligibility

Every lender is different and has their own criteria that must be met in order for them to approve finance.

If one lender has refused you car finance, it doesn’t mean they’ll all refuse you. However, it’s wise to check eligibility criteria before you apply and take note of the steps below.

Check your eligibility

What to do if you’ve been refused car finance

If you’ve been refused car finance, it doesn’t mean the end of the road when it comes to owning the car you want.

Here are some steps you can take to help:

Build your credit score

If you’ve been refused car finance due to a poor credit score, there are some things you can do to improve it.

First and foremost, you need to check your credit report. This will give you a better idea of what’s wrong and how to rectify it.

Common ways to boost your score include:

  • Check that all your details are correct on your file. If not, you can contact the credit agency to have them updated
  • Make payments on time
  • Speak to any creditors and agree on an affordable plan to pay them off
  • Register on the electoral roll
  • Pay off or pay down your credit card/loan balances

Don’t make multiple applications

It’s tempting, when you’ve been refused car finance, to immediately reapply with someone else.

However, the irony is this will negatively affect your credit score as some lenders will carry out a hard search on your report.

A hard search gives lenders an in-depth view of your credit history. Through this, they’ll be able to see what credit you’ve had in the past and how you’ve managed it.

They perform this search to analyse what risk you would pose as a borrower. However, it leaves a visible mark on your credit file.

When a lender sees that many hard searches have been performed on your credit file, they wonder why you are making so many applications.

A soft search provides an overview of your credit history to give lenders enough information to say whether you could be accepted, but it doesn’t leave a mark on your file.

This is one important reason why we only ever carry out initial soft searches at Hippo, which won’t impact your score.

Find a more suitable lender

There are many lenders, and all have a unique set of criteria, so it’s important to find someone who will assess your needs and circumstances when applying for finance.

At Hippo, we can help with specialist lenders who recognise that people may have had pressures on their credit rating for a huge amount of reasons, often through no fault of their own such as losing a job or a change in personal circumstances.

We’re on hand to help provide financial solutions so you can get your brand new, nearly new or used car.

Pick the right finance option for you

The type of finance you choose will depend on your circumstances and preferences.

The four main types of car finance are hire purchase (HP), personal contract hire (PCH), personal contract purchase (PCP) and lease purchase (LP).

Find out more about the different types of car finance.

At Hippo, we want to make sure you get the right type of finance to meet your needs.

Our friendly account managers will explain the different types of car finance available to you and how they work.

They’ll discuss the benefits and disadvantages, so you have all the information to make the choice that’s right for you.

Speak to a different dealer or broker

When you apply for car finance through certain dealers or brokers – franchised dealers, for instance – they’ll have a limited lending panel – usually tied to their group’s own finance company.

These lenders tend to take diverse circumstances into account and so it can lead to more refusals.

At Hippo, we have built up a trusted and proven panel of lenders that caters for everyone.

We recognise that everyone has a different financial history, and we don’t believe that it should stop people from getting the car they want or need.

Read: What’s a credit broker and what should I look out for when financing a car?

Next steps

Whether you’ve been refused car finance in the past or are looking to finance your next vehicle, we can work with you to find the best solution to suit your needs.

We’ll look at the eligibility criteria and find the most appropriate lender for your circumstances. And we’ll only ever use soft search when finding you the best finance deal, so when you apply with us, your credit rating will never suffer.

Check now to see if you’ll be accepted for car finance without hurting your credit score.

Get an instant decision

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.