Very Low Credit Score Car Finance Options
If you have a very low Credit Score it can be harder to access easy Finance. This can be tough for smaller purchases like credit cards but when you’re buying an expensive object like a car it can feel especially daunting.
A very low Credit Score isn’t the end of the world, however. You have options.
By working with a specialist Low Credit Lender, you can apply for a Guarantor Loan, for example. This allows a friend or family member with better Credit to guarantee your repayments by making them on your behalf if you miss one. This gives the lender more confidence in your ability to repay any finance and can be enough to turn a No into a Yes.
You can also apply for a Joint Ownership Car Finance Agreement. Like a Guarantor Loan, this allows you to pool your Score with someone who has a better Score. The difference is that the other person becomes the co-owner of the vehicle once the finance is paid off.
For a lender, Car finance is a complex matter of risk: the less risk they see in lending to you, the easier their decision becomes and the less they will charge in fees. If you can afford a big deposit, your lender can see that you’re financially solvent and they are likely to reward you with lower fees due to your lower risk. It can also help you to secure the finance in the future.
The quickest and most effective way to hitch your Credit Score and improve your chances of securing Car Finance is to check your Credit Report for errors. As the owner of the original data, you have a right to see what information a Credit Agency holds on you and can request to see it. If there are errors or explanations that can make your Credit History look better, let them know!
Other simple tricks include requesting that they add in your phone payments and other small, routine payments that you have never defaulted on. You can also add yourself to the electoral register, which should have an immediate effect.
If you want to gradually improve your Credit Score, your best option is to reduce your debt levels by paying back more on any loans or credit cards you have. You don’t need to pay them off entirely but if your debt is reducing substantially then your Credit Score should improve.
Cancel any Credit Cards you no longer use, too: clean finances are better finances. Wherever possible, ensure that the amount you place into your current account is equal to or more than the amount you take out every month.
A lender needs confidence in only one thing when they’re deciding on a loan: can this person pay this loan back? That is what they’re assessing in your application.
If you’ve a poor Credit Score then they may assume that you’ve had trouble paying off debts in the past. If they don’t think your income is high enough to add in another debt then they’ll also say no. Improving either of these is key to improving your chances of securing car finance.
It depends on where you are right now. If you have no credit history at all – if you’re young or have never really taken out any loans or credit before, you can establish a Credit Score within 3 – 6 months, according to Experian. Improving your Credit Score if one already exists can take this long.
If you already have a good Credit Score and you can clearly afford the finance, you shouldn’t need to build it much further before applying. Keep in mind, however, that taking out Car Finance might impact your chances of obtaining other finance, like a mortgage, so you might want to boost your Score for that reason.