Bad Credit and Getting Car Finance

Poor credit scores happen, life can get tricky, and despite our best endeavours we can end up with black marks on the credit history, but this doesn’t always mean you will not be able to get car finance when you need a new vehicle.

Unsurprisingly, with so many people struggling with poor credit there are many lenders out there who specialise in this issue, but it does generally mean that you will have to put up with higher interest rates. Understanding the process makes it easier to navigate, so here is a quick lowdown on car finance with bad credit.

What Does Bad Credit Mean?

Our credit file runs as a log of money we owe to anyone as a credit agreement, your mortgage, mobile phone, credit cards and more. If you miss payments or are late making an agreed payment you get a negative mark on your file. If you are declared bankrupt or have County Court Judgements, you also get negative marks.

When considering a new credit agreement, your lender will look at the risk, based on their own criteria which is broadly similar for all, but there will be differences. The higher the value of the loan, the higher the risk so while you might be turned down for a mortgage, you may well find a car finance agreement is approved because the value of your vehicle is substantially less than the value of a house.

Apply Carefully

You might think the best thing to do is apply for as many loans as possible and hope someone says yes, but this is actually the worst thing you can do. Every time you apply for credit, it is recorded on your file along with an acceptance or rejection. It shows what other lenders think of your application so lots of declined applications will serve as a danger flag and may well lead to others steering clear.

Apply sparingly, do not put applications in all at the same time but instead spread them out, and only apply to a few that you think might be viable, over a more extended period of time.

Look for High-Risk Lenders

If you know you have a bad credit score and absolutely have to get a car on finance, then you need to look for lenders who specialise in high risk. As mentioned above, just applying to one mainstream lender after another when the answer is almost certainly going to be no is just causing further damage to your credit rating.

Most car finance websites will have a section for poor credit history, so speak to them first. A subprime credit agency might be your only option, but you can shop around before you proceed to the stage where they will make a hard credit check that leaves an impression on your file. Price comparison websites can help here and again there is normally a section dedicated to bad credit loans so you can find what you need without having to feel mortified with a constant barrage of rejections.