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What credit score is needed for car finance in the UK?

To get a good car finance deal, a good credit score can work to your advantage

Car finance

When it comes to getting a car on finance, there isn’t a specific credit score you need. Each lender has different criteria for acceptance, so it’ll be based on your individual situation.

Financing a car – what is a credit score?

When it comes to financing a car, a good credit history is preferred to ensure you can get the best deal. Your credit score is a figure generated from your borrowing history and other identity and stability factors. Even something like whether you’re registered on the electoral roll can make a difference.

There are a few different credit reference agencies (like Experian, Equifax and TransUnion) in the UK, and you can check your score for free with all of them by visiting their websites.

If your score isn’t where you’d like it to be, don’t worry, it’s not the only thing that will determine your car finance offer. Your income and outgoings, deposit amount and debt-to-income ratio might also play a part, but all lenders have their own criteria.

How to improve your credit score for car finance

Things like your previous debts, whether you’re employed and your financial association with other people impact your credit score.

You can improve your credit score in the long and short-term, by:

  • Registering on the electoral roll – this confirms your identity to the credit reference agencies and can improve your score.

  • Setting up direct debits, standing orders, or reoccurring card payments to avoid missed payments – one of the quickest ways to damage your score is missing bill payments, so do all you can to avoid this!

  • Joining the Rental Exchange Initiative if you rent – this will ensure your on-time, in-full rent payments contribute towards your credit profile positively.

  • Paying off some debt – your debt-to-income is an important figure for determining how reliant on borrowing you are.

  • Checking your report online for mistakes or errors – occasionally there could be something incorrect on your report that’s lowering your score. If this is the case, report it to the credit reference agency you’re checking and it will look into it for you.

How does your credit score affect car finance?

If you’re applying for car finance and have a low credit score, there are some lenders that may still be able to help you get on the road.

Some lenders work specifically with motorists who have lower scores but still want to finance a car, so there are ways to make it work. It’s important to remember this will be different with every finance company and every person applying for finance.

At cinch, we have a range of finance options that will suit many circumstances. All the vehicles on our site are available with Hire Purchase, while Personal Contract Purchase (PCP) car finance may also be available, depending on the car’s age, mileage and the finance term. You can use the calculator on our car detail pages to find a deal that suits your needs.

Higher interest car finance for low credit scores

One way some lenders make car finance possible for those with lower credit scores is to offer a deal with high levels of interest. This will mean your monthly payments are higher, so bear this in mind when deciding if car finance is the best route for you.

Car finance

Getting a guarantor for car finance with a poor credit history

If you’ve got poor credit history but still want to finance a car, some lenders might give you the option to add a guarantor to your agreement.

A guarantor is there for extra security if you fail to keep up with your payments. This option is not available with all lenders, so you’ll need to do your research beforehand.

It’s also worth noting that your guarantor will be asked to cover your payments if you can’t, so you might want to consider how this will affect the other person. It’s a good idea to carefully consider the consequences on your relationship if this does occur.

The lenders we work with at cinch don’t offer guarantor deals, however.

Offer a larger deposit when applying for car finance with a low credit score

Some lenders can look past a poor credit rating if you offer a larger deposit, as they’ll feel better knowing they’ve had that lump payment upfront. You’ll need to check this with your lender and see if it’s possible in your case, but it’s sometimes a good option.

Does your car finance fit your budget? Thinking ahead

Take a really good look at your budget before you apply for car finance and pick a car you know you can pay for. If it looks as if you might struggle to keep on top of your payments, lenders might be less keen to grant you the finance. We have some great models to suit all budgets on our site.

It’s also important to factor in the future – will you be able to afford this car until the end of the contract? If you’re feeling flush right now and want to splash the cash, think about whether this is sustainable for the long term.

For example, if you’re expecting a child at some point soon then your outgoings are likely to increase. If you’re planning on retiring in the near future or might lose your job unexpectedly, could you still make the finance payments with extra bills to consider?

Is it hard to get accepted for car finance?

How hard it is to get accepted for car finance will be based on your own circumstances, and there are even lenders that specialise in helping those with poor credit history.

Each lender will look at applications on an individual basis, so it’s impossible to know if you’ll be accepted without supplying a few details.

It’s much easier to get car finance in the UK if you have a good credit history, little or no debts, a stable income, and the budget to fit your payments.

Can car finance improve your credit score?

When you first apply for car finance you may see a slight drop in your credit score, but if this does happen it should only be temporary.

Lenders will sometimes run hard credit checks when you apply for finance, and these will be recorded on your credit report. Too many hard searches may put some lenders off, so bear that in mind before going ahead with too many.

After the initial credit checks, keeping on top of your payments will likely see your score improve – as it does with any form of borrowing. Proving to your lender that you’re able to repay your loan and manage your finances is a great sign, and future lenders will love to see this in your credit history.

Bear in mind that missing payments or falling behind on your payment plan will hurt your credit score. In a nutshell, paying your finance as agreed with your lender could help to improve your credit score.

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