ad collaborative post // If you’re looking to get a car on finance, you may be wondering what your options are when it comes to no credit history. If you haven’t had a chance to build a credit history yet or if you have never had finance before, you may find yourself with a low credit score.
It can be harder to obtain finance with no previous credit but there are ways in which you can prepare for your car finance application. The guide below has been designed to help you increase your chances of car finance approval.
Why is credit history important for car finance?
Many lenders will require you to undergo a credit check before you can get accepted for car finance. They do this to get an idea of what type of borrower you have been in the past and predict if you will pay back your finance or not.
Many people assume that having no credit history means that you will have a good credit score. However, credit scoring is all about future prediction and if you don’t have a credit history, lenders can’t know if you’ll be able to handle credit.
How to build a credit history: If you are looking to get a car, it is possible to get car finance no credit history but there can be many benefits to building a credit history before you start applying. Increasing your credit score can help with easier acceptances, lower interest rates, and help make your finance deal more affordable.
- Open a UK bank account: If you don’t have one already, a UK bank account can help to show your earnings and verify your details. You can improve your credit score with a bank account by showing that you can manage your incomings and expenditure. You may also need to provide bank statements in order to get approved for finance.
- Set up direct debits: A direct debit is a great way to automatically meet payment deadlines. Setting up direct debits for things such as your mobile phone contract or gas and electricity bills can help to stay on top of your payments. When setting up direct debits, you should always make sure you have enough money in your accounts to cover the amount or it can negatively impact your credit score and lead to other financial consequences such as defaults on your credit file.
- Consider a credit building card: Credit building credit cards can be used to help increase your credit score. This type of credit card gives you a small credit limit each month which you use to make purchases and pay them back in full and on time. The goal here is to show lenders that you can be trusted to meet financial deadlines and help to increase your credit worthiness.
How to increase your chances of getting a car with no previous credit history:
It’s worth remembering that guaranteed car finance doesn’t exist and in some circumstances you may be refused car finance simply because you don’t meet the lenders criteria. However, there are ways that you can help to increase the likelihood of getting a car with no credit history.
Never miss a payment
If you’re starting to build a credit history, you should make sure you meet all your repayment deadlines on time. Missed or late payments can have a detrimental effect on your credit score and affect the ability to get approved in the future. Showing evidence of being a responsible borrower can help to get you a car and a better finance deal.
Choose the right lender
There are many car finance lenders to choose from and each have their own criteria that has to be met before you can get an approval. There are specialist lenders who can help people with bad credit or no credit history to get a car on finance. These types of lenders usually look more at affordability rather than past credit. If you can prove you can pay your finance back, you could be in with chance of an approval.
Check your credit file
The information listed on your credit file is really important. Lenders also use your credit report to verify the information provided on your car finance application. If this information doesn’t match, they may be worried it is a fraudulent application.
When you check your credit file, you should make sure all your information is accurate and up to date. If you need to make any changes, you can contact the credit referencing agency who provided your credit report.
Save up for a deposit
It’s worth noting that some car finance agreements require a deposit contribution at the start of the agreement. Even if you can get a car with no deposit, having a down payment for car finance can sometimes help to get you approved. A deposit can show good financial management and it means that you don’t have to borrow as much from the lender.
Get a guarantor
A guarantor car finance deal is when a friend or family member agrees to pay your repayments if you fail to do so. It can be easier to get accepted with a guarantor as the lender essentially gets two opportunities for the loan to be paid back. However, if you and your guarantor both fail to pay, both your credit scores can be negatively impacted and can lead to more serious consequences.
[…] score usually means you’ve missed payment in the past, have a default on your credit file, have no credit history or have high levels of […]