How to get car finance with poor credit rating
If you’ve experienced payments problems in the past, whether it’s missing an occasional payment or a bigger issue like bankruptcy, then you could have a bad credit history. You may still need a car however and might be wondering how to get car finance with a poor credit rating. The simple answer is to rebuild your credit history before making your next application.
Read on for some simple steps you can take to improve your rating, and some useful advice in cases like bankruptcy.
Get your timing right
Every time you apply for credit, your history will be searched and this information will show to other lenders and car dealers you attempt to get finance from. These searches will stay on your credit history for a certain period of time depending on whether they are hard or soft searches, typically up to 12 months.
This means it’s a good idea to stagger your applications for credit so that your history isn’t negatively affected further whenever possible.
Get on the electoral register
Make sure your name is on the electoral register and you are listed at your current address. This simple action can help you to enhance your credit score.
Proof of paying
You can show lenders you can pay on time by setting up direct debits for your monthly outgoings like utility bills. Direct debits will ensure that you don’t miss any more payments and in a short period, you can show a record of reliable paying to potential lenders.
Responsible borrowing and spending
You can improve your credit report by using “rebuilder cards”. These credit cards are specifically designed to improve your credit history. Offering a smaller sum of credit than most cards, your likelihood of being accepted for the card in the first place is increased and if you use them to pay small affordable amounts that are easy for you to repay, you can build a history of responsible borrowing.
Defaulted loans
If you’ve defaulted on payments and have outstanding unpaid debts, it’s worth getting in contact with your lender and arranging a payment plan. No matter how small the monthly repayments are, it will show other finance companies that you are making good on your commitments and they may be more willing to lend.
Notice of correction
It’s possible to add an up-to-200-word statement to your credit file explaining your circumstances when you defaulted on payment – this is called a notice of correction. Lenders will have the option to read in your own words the details of your circumstances and may be more understanding of your situation as a result.
Bankruptcy
If you’re currently bankrupt, you will not be able to get a car finance agreement. However, if you’ve been discharged and your term of bankruptcy has ended, you can make an application.
It’s advisable to give your credit history at least one year to recover from bankruptcy and rebuild it as best you can using the methods discussed above.
Attempts at immediate borrowing after bankruptcy will negatively affect your chances of securing finance, and the best interest rates will not be offered to you. Take your time and bolster your score before applying for further credit.
CCJ
If you’ve paid off a County Court Judgment (CCJ) within a month, you can get the judgement taken off the register. If you paid it after a month, you can get it recorded as ‘satisfied’. To do this, you’ll need to contact the court and issue proof of payment. This usually costs £15. Paying the full amount of your CCJ and making sure this is recorded will help to improve your credit rating.
Finance advice
At Car.co.uk, our panel of lenders will consider car buyers in different circumstances. For further advice on how to improve your poor credit history, you can contact our specialist team.
