How Bankruptcy Affects Your Car Finance Journey
There are lots of financial hurdles that may stand in the way when looking for a car finance deal – particularly long-lasting events that stay on your credit history for extended periods of time. One such issue is bankruptcy, which many people assume will be a deal-breaker when it comes to being accepted for a car finance deal. Whilst it is true that bankruptcy will have an impact on your credit score and, in turn, your eligibility for car finance deals, there are ways to give yourself a chance of being accepted, as well as car finance companies who specialise in bad credit car finance, enabling those with bad credit or no credit history at all to get on the road.
How Long Will Bankruptcy Impact Your Credit Score?
If you’ve found yourself in a position where you have been declared bankrupt, you’ll, unfortunately, have to deal with this affecting your credit profile for quite a long while. Depending on how your bankruptcy came to fruition, you will see the impacts on your credit profile for either 6 or 15 years. In most cases, you’ll find that your bankruptcy will last for 6 years, which is the standard length that it will appear for. After this 6 year period has elapsed, you can have the bankruptcy removed from your credit profile so long as you have been discharged and you are not deemed to have been reckless in this period. If you have found to have been reckless by breaching the rules of your Bankruptcy Order, the period may be extended to 15 years under a Bankruptcy Restriction Order, or BRO.
After your 6 or 15 year period expires, it’s probably best to wait a little while before you start applying for loans and finance deals – this gives you a period to start building and improving your credit score before you enter another credit agreement. By building up your credit rating, you’ll be able to lower the premiums that you pay on your car, meaning you’ll have to put down less upfront whilst also managing lower monthly payments!
You can build your credit rating by doing a plethora of different things, but the most important thing is to utilise your credit intelligently – you’re trying to prove that you’re capable of being given credit and then being reliable when it comes to repayments. One clever trick is to set up one of your direct debits to be paid from the card, which will mean there’s monthly evidence that you’re able to spend and repay without issue.
Other ways to improve include the following:
- Fixing credit report mistakes: In some cases, you may find that your credit report is showing mistakes such as closed accounts still appearing active, incorrect amounts showing, or other abnormalities. You can appeal against incorrect information that is on your credit file; this will be removed if the investigation finds your appeal to be true.
- Electoral roll: If you aren’t already on the electoral roll at your current address, get added to that – it’s one of the factors that is assessed during a credit check and if you aren’t present it can negatively impact your score.
- Avoid multiple applications: Applying for multiple credit accounts in a short space of time can flag as a potential issue on your credit profile – if you’re trying to build your credit, you’ll want to make sure that you aren’t applying for credit too often or having hard searches carried out on your profile often.
- Pay on time: The best way to build your credit score is to simply keep up regular payments and paying your bills on time – if you’re paying off a credit card, try to pay off more than the minimum amount every month if that’s possible, as this shows a greater willingness on your behalf to get your debt paid off as soon as possible.
Will You Be Able To Get Car Finance After Bankruptcy?
In most cases, bankruptcy will make finding a manageable car finance deal difficult, but by no means impossible. When it comes to finding bankruptcy car finance deals, you may be best served with lenders who specialise in bad credit car finance – these companies have lots of experience in helping people with bad or no credit to structure their lending and payments in a way that’s responsible and manageable.
Here at ChooseMyCar, we’ve got a wealth of options available for bad credit car finance and no credit car finance, as well as online tools to help you get a better understanding of how car finance works and how to determine what you can afford to lend. Before you enter a credit agreement with ChooseMyCar, you’ll be subject to a soft search of your credit history – these searches don’t show up on your profile, but do give the lender and the borrower a better idea of the applicant’s history when it comes to borrowing, repaying, and bankruptcy. If after this soft search you are deemed an eligible applicant, you’ll then be subject to a hard credit search, which takes a deeper look into your credit history to gain a clearer understanding of the position that the applicant finds themselves in. This credit check not only protects the lender, but it protects the applicant too – by conducting this check, you’ll have a better idea of whether you’ll be able to keep up regular payments on your new car, or whether you would be likely to fall into debt.
This 2 step check is a great choice in terms of a bankruptcy car finance, as it allows you to gain an understanding of whether you’re likely to pass a full credit check before you proceed with one. This is useful as it means there is less chance of a negative search appearing on your credit profile. Too many searches on your profile can lead to a lower score, as can rejected credit applications, so if you already have poor credit or no credit at all, it’s best to keep searches to a minimum by using our 2 step system.
During your bankruptcy car finance application, the following things will need to be checked to provide proof of identity and proof of income:
- Passport: Your passport is one of the easiest and most reliable ways to provide proof of identity to a lender, which is why we’ll ask to see yours during the application process.
- Utility Bills: A copy of one of your utility bills or council tax letters will allow you to provide proof of address, which is another important part of the application. By proving your address is valid, you add further credibility to your account and the application. This bill or letter will need to be dated within the last 3 months.
- Payslips: Your payslip will be used as a proof of your income, which will play a major part in deciding whether you will be eligible for the car finance deal that you have applied for. By showing evidence of the money that you are regularly paid over the course of the month, you give the lender a better idea of the amount of disposable income you will have to make your loan repayments. In some cases, you’ll be asked to provide payslips covering a few month’s worth of wages – this is to prove that you have a steady, consistent income that covers the repayment amount regularly.
Will You Be Able To Keep Your Car If You Declare Bankruptcy?
If you’ve previously declared bankruptcy, or are in the process of doing so, you will, of course, be wondering what will happen to your possessions in the aftermath – in most cases, the result is circumstantial and will draw information from many different places before making an informed decision.
For those of you who own your car, the necessity of the vehicle to both you and your household will be considered to determine whether it is something that you all simply couldn’t get by without. You’ll need to bear in mind that a necessity isn’t something that will just make things more convenient to you – it has to be something that makes fundamental tasks impossible if you don’t have it at your disposal. If your home is well connected with public transport links to local schools, shops, and industrial estates, it’s unlikely that your car will be deemed a necessity. In these instances, you are likely to be asked to sell the car in an attempt to pay off your outstanding debt.
In cases where you are paying off your car using a car finance deal, ownership of the car will return to the lender in the event of bankruptcy on your behalf. In these instances, your lender will contact you regarding the next steps – this is usually a repossession of the vehicle.
How To Buy A Car After Being In Bankruptcy
Coming out of bankruptcy can be a tough time to start looking for a car, but as an important part of your life, it’s often something that you need to ensure you have. For those who can’t manage to buy a car outright, this leaves bad credit car finance deals as the only real viable option to use. When coming out of bankruptcy, you’re likely to see that your credit score is low and that most lenders are unwilling to provide you with credit, however, it is possible to contact a car finance company such as ChooseMyCar that specialise in helping people in these situations to get back on the road with a new set of wheels, so they’ll be able to show you exactly how to structure your payments and credit arrangements in a way that’s suitable for you.
Whilst this does limit you in terms of the cars available and vendors to deal with, it does mean that you may be able to get a reliable vehicle at a price that works well for you – something which you may struggle to find elsewhere. ChooseMyCar is a specialist bad credit car finance broker with options to suit every driver’s needs.
To get the application process started with ChooseMyCar, all you have to do is click here; from here, you’ll be guided through the process and credit checks to find out whether you’re eligible for a car finance package, after which you will be able to use our finance calculator to gauge just how much you should be looking to spend on both the deposit and monthly payment to keep things manageable throughout the contract. You will only be subject to a hard credit check once you have passed a soft search, which will minimise the negative effect that multiple searches in quick succession can potentially have on your credit score. Our selection of vehicles is curated to cater to every person’s individual needs, whether that’s family cars to carry the shopping and assist on the school run, or a compact city car for navigating the urban jungle.
After you’ve selected a car, one of our helpful representatives will be able to assist you in getting those final details organised, payment plans agreed, and contract signed so you can get your hands on the keys to your shiny new motor as soon as possible.
Get In Touch
Whether you’re just browsing or seriously looking into purchasing a vehicle using our bankruptcy car finance deals, get in touch with us at ChooseMyCar by phone or online today! One of our friendly representatives will be happy to help guide you through the process, including your soft search credit check so that you can get your approval and start looking for your new dream car as soon as possible.
At ChooseMyCar, we provide car finance deals for people in all situations, ensuring that everyone has access to the vehicle they need to get on with their day-to-day lives. No matter whether you have a poor credit rating , a CCJ, an IVA, or simply no credit yet, we’re here to help get you back on the road with a payment plan that’s suitable for you.
It’s no secret that being handed a CCJ will affect your ability to apply for credit, after all they are only awarded in cases where current debts have not been paid. For an extended period of time, usually 6 years, CCJs may stay on your credit account, so you can expect to feel the impact of their existence for a long time. This means that you might need to look at ways to boost your credit score in the meantime so that you are in a stronger place once the CCJ is cleared.
While a CCJ will probably make it harder to find lenders who are willing to give you credit, it does not make it impossible – specialist providers of bad credit car finance such as ChooseMyCar have excellent programmes in place to help individuals with weak credit or no credit history obtain affordable and manageable financing for a vehicle.
We’re experts in bad credit car finance here at ChooseMyCar, which means that we understand how challenging it can be to find credit when your score is not as healthy as you would like it to be. That’s why we have processes in place that assist our customers in finding an affordable finance plan that helps them to get back on the road as soon as possible. Our process protects both the lender and the borrower, ensuring that everyone involved is protected in the loan plan. A credit file review will be conducted by the lender before credit is offered, but only after an initial soft search of the applicant’s credit file – this helps us to see whether you may be eligible for finance before doing a hard search that will stay on your account and may have a negative effect on your credit score.
Learning more about your credit score is a fantastic first step to building better credit – you’ll know how much work might be needed, as well as the specific factors that are in dire need of improvement. Most credit rating companies offer a free service, but other providers charge a fee; these premium services are usually more in-depth and intelligent, providing more information and recommendations about how to maximise your credit rating. When you have signed up for a credit rating tool, you can generally see a rundown of the different variables that are taken into consideration. This will give you a better understanding of how your score is decided, outlining where you excel, where you don’t do so well, and whether there are any easy improvements that you can make to improve your score quickly. The easiest way to ensure that your credit file is always in order is to be attentive and proactive with your credit – this can include making your payments on schedule, keeping your address up to date with your current home, and ensuring that you are on the electoral roll at your current address.
You are likely to be left very limited in terms of options for applying for new finance offers while you are under a debt management plan – a DMP is put in place to help you handle your current debt, so hopefully, when under one, you wouldn’t be applying for further credit. That being said, in certain circumstances, it is not always possible to go without a car and if a vehicle is considered a requirement, you will still be able to apply for car finance when under a DMP.
For car finance, the credit score needed to be accepted is never a rigid number – there are several moving variables and different requirements that would need to be met in each case. For those with poor credit, this is a good sign, since it means that a low score doesn’t actually mean you’re going to be rejected, you just need to be able to show that you’re going to be able to make your payments consistently and in full for the particular finance plan that you’re looking to enter into.
If you have especially poor credit, or no credit at all, then a low-cost finance plan could be the better option. You will borrow less money by selecting a lower-value car, and the payments will be smaller, making them easier to make on a regular basis. dIf you can also make a deposit that is higher than the minimum deposit required, this will also help you obtain a stronger approval rate, as you will be asking to borrow a much smaller sum of money. If at all possible, it would be highly beneficial if you are able to put a larger initial deposit down on the vehicle, as this will reduce the monthly payments and offer more security for the lender.
Car finance can be one of the easiest ways to start building up your credit credit score – you will be borrowing a significant amount of money and therefore making big monthly repayments, so you have a better chance of raising your credit score if you manage to stick to your schedule and ensure that your payments are on time and in full. Missed payments, however, are likely to have a negative effect on your credit score; skipping a payment is a troubling sign and may hurt your reputation as a loaner severely. A missed payment would still stay on your credit report for some time meaning that if you do forget to pay, you will experience the consequences of a missed payment for a long time.
Your ability to obtain car finance approval may be impaired by a default, but that does not make it impossible to gain acceptance for car finance – many lenders have tailored services that allow people with poor credit or no credit history to get on the road. These finance packages will have interest rates that are slightly above what others may have to pay and may also require a larger deposit, but this will allow you to get a vehicle in a way that is still affordable thanks to the monthly payment structure.
When applying for car financing, inserting a ‘correction notice’ is one way to try to reduce the impact of the default on your credit file. This is a straightforward statement outlining the reasons for the default, and can be used by lenders while evaluating the credit request. In the event of a default, you can also contact the lender and make an effort to settle the debt – no matter how small, the payment is an attempt to reduce the debt owed, which could help you to be judged less harshly by the creditor.