How to improve your low credit car financing chances

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If you have been refused car financing in the past or are you currently working on an application with a less than perfect credit file, then you have surely wondered if and how you can improve a poor credit score. The good news is that you absolutely can and there are many ways to do it, from simple and immediate solutions, to profitable changes in long-term financial behaviors.

improve your low credit car financing chances

Read on to understand why it’s important to improve poor credit, as well as the ways it can be done.

Why should I try to improve bad credit?

Before we talk about how to improve a poor credit score, it is important to understand why you would want it. The answer is simple: it could make the important financial aspects much easier.

The better your credit history, the less risk you are perceived to a lender. This means a greater chance of your application being accepted, but it also offers additional benefits such as lower interest rates, higher credit limits (subject to affordability), and potential access to a wider range of offers during the loan.

How do credit scores affect car credit?

Just as they would with a mortgage application or any other form of loan, your lender will usually use your credit history along with their internal scorecards to decide whether they want to offer you a car loan or not.

Your score can be used when a lender reviews while reviewing your credit file. It is also helpful for you as a borrower to have an idea of ​​how your application is likely to appear.

What is a good credit score?

As there are numerous credit reference agencies (CRAs) out there that use different scoring systems, there is no definite answer to this question. We can, however, get an idea of ​​what the top three CRAs (TransUnion, Equifax, and Experian) might think is a good enough credit score for car financing.

Remember, regardless of the agency: the higher your score, the better.

  • TransUnion score from 0 to 710. A “good” score is considered 604-627, while a “fair” score is 566-603.
  • Equifax score from 0 to 700. A “good” score is considered 420-465, while a “fair” score is 380-419.
  • Experian score between 0 and 999. A “good” score is considered to be 881-960, while a “fair” score is 721-880.

How can I increase the chances of getting a car with bad credit?

If the numbers above seem a little daunting to you, don’t worry – they’re not the essential. There is no denying that car finance accessibility can become more difficult with a bad credit history.

Bad credit car finance specialists may be better suited as their approach is to look at the bigger picture and understand the context of your credit history. With this in mind, there are a number of moves you could take to show tangible improvements in your financial behaviors. These will not only potentially improve your chances of getting a car in the near future, but they could also lay the groundwork for improving your credit file to a desirable level in the future.

Address problem areas in your credit file

One of the first things you may want to address. You can access your full credit history via one of the three major CRAs previously mentioned: MoneyHelper offers a detailed guide on how to check your credit report in the sources below this article.

Once you gain access, you will be able to understand and identify problem areas in your report and from there you can consider how to make improvements. In fact, virtually any CRA you have an account with will also give you advice on how to improve your poor credit areas. While you are there, make sure there are no errors and that everything is up to date.

Make refunds on time

If you’re keeping up with scheduled repayments for another loan, show a potential car lender you can trust to meet your credit obligations. Just keep in mind your current financial obligations and the budget you can afford when it comes to a new financial deal.

Increase your deposit

If you can afford it, increasing the amount of the initial deposit on your car loan agreement will show a lender that you have a little more capital to play with upfront, and so perhaps they are more likely to stick to the rules in the future. monthly repayments.

Register on the electoral roll

An often forgotten and very simple help, make sure you are registered on the electoral roll. When your lender comes to check your credit file, they will need to check your name and address. If they can get it off the electoral roll, it will make things a lot easier for them,

Avoid links to others with low credit

Do you have financial connections with others you no longer need? For example, an old joint account or a mortgage from a previous relationship? If you do, and the other party involved has poor credit, it may have dragged you down too.
You may be able to remove these black marks from your file by issuing an opt-out warning. Your CRA will need to perform some checks first, but once authorized you may no longer be financially linked to a negative connection.

Review your loan options

Below are a couple of options that may be available for those struggling to find conventional and competitive financial deals:

  • Guarantor loan: a guarantor is usually someone in a stable financial position who acts as a lender for the life of the loan. If at any time you are unable to make a repayment, the debt will go to your guarantor.
  • Rental purchase: your car will be owned by the lender in a purchase in installments, which means they can take it back at any time if you don’t make a payment. This reduces the risk to the lender, potentially increasing your chances of being approved

This article was published by: Hayley O’Connor by title: How to improve your low credit car financing chances


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