Getting a car on finance is a really exciting time. You’ve seen the car you want, worked out your budget and applied for the finance, great! But what happens if you get decline for finance? It can be really inconvenient especially if you need a new car quickly! However, not all hope is lost. There are a few ways in which you can help to increase your chances of getting approved for finance.
Avoid making multiple applications for car finance
You may be tempted to apply with other car finance companies, but this can harm your credit score even more! Making multiple applications for finance in a short space of time can negatively impact your credit score. A hard search credit check is recorded on your credit file and allows a lender to complete a full check of your credit file. They can also see what applications for finance you have made and what the outcome was. Applying to multiple car finance companies can indicate to potential lenders that you are desperate for credit and keep getting rejected.
Increase your credit score
One of the main reasons why applicants are refused car finance is because they have a low credit score. It can be harder to get approved for car finance with bad credit as you may have trouble in the past meeting your repayment deadlines. Lenders want to be reassured that the money they lend you will be paid back on time and in full. Improving your credit score is all about showing good financial responsibility and there are a few ways in which you can improve your credit score easily.
Make your payments on time and in full
Any forms of credit or finance should be paid on time and in full. If you repeatedly miss payment or make late repayments it can negatively impact your credit score. Potential lenders may think that you can handle anymore credit. You can set up direct debits or payment reminders to make sure you never miss a payment.
Check your credit file
You can check your credit file for free using a number of credit referencing agencies. Your credit score is calculated by the information that is listed on your credit report. Of your information is inaccurate it could be holding your score back. You should make sure all your personal information and also account data is up to date, for example if an account appears as open but it is now closed. You can contact the company who provided your credit file to make any changes.
Get your name on some bills
Many people who haven’t taken out finance or credit in the past can find themselves with bad credit. Your credit score is calculated on your financial history so it makes it hard for lender to determine what type of borrower you will be if you have no credit history. You can increase your chances of getting approved for car finance with no credit history by getting your name on some bills. A utility bill or a mobile phone contract can count as forms of credit, just make sure you pay them off on time and in full!
Keep your credit utilisation low
Many people aren’t aware of the credit utilisation ratio and how it impacts your credit rating. Having available credit such as a credit card or store card isn’t a bad thing, as long as you pay the money off each month. However, you should also be aware of how much of your credit you are suing. For example, a good credit ratio is using under 50% of your available credit an if you want to really impress lenders, you should aim to only use around 30% of your credit limit.
Save up for a deposit
Having more money to put in for a bad credit car finance agreement can help you get approved. It shows good financial responsibility to lenders and also means that you don’t have to lend as much from them. Having a larger deposit to put down can lower your interest rate which means you won’t pay as much in the long run.
Consider a guarantor car finance deal
If you’ve had problems in the past meeting your repayment deadlines and your family and friends are aware of it then it can be hard to secure a guarantor. However, if you can get approved for guarantor car finance it can be really beneficial! A guarantor is a close friend or family member who supports your finance application and agrees to pay the finance if you fail to do so. You are still responsible for meeting the repayment schedule but having a guarantor gives the lender extra confidence that the finance will be paid back each month.