How do you Improve your Credit Score for Car Finance? If you’re looking to get a car on finance, you may already be aware that it can be harder to get approved when you have a bad credit score. However if you have a low credit score, it doesn’t have to be the end of the road for car finance. One of the easiest ways to get approved for car finance is to work on your credit score before you start applying. Not only can a better score increase the likelihood of you getting approved, but it can also get you a better car finance interest rate too! So, with this in mind, let’s take a look at how credit scores affect car finance and how to increase your credit score.
How does your credit score affect the likelihood of getting a car on finance?
When you apply for car finance, lenders will want to know your credit history. Whilst it can be possible to get a car on finance with no credit check, it is often provided by lenders who set high interest rates to secure the deal. From a lenders point of view, car finance is all about risk and the likelihood of getting their money back if they offer you a car finance deal. Usually a bad credit score indicates that you’ve had trouble in the past sticking to the rules of your finance agreement, missed payments or have high levels of debt. This can put lenders off and they can offer the best rates to people with better credit score. Whilst it can be possible to get a car on finance when you have a poor credit, it be beneficial to improve your credit score first.
How to improve your credit score
Check your credit score first
The first thing you should do before you apply for any form of finance or credit is to check your credit score. It can be worth knowing how your credit score is looking and also the factors that affect it. Youcan check your credit report for free using one of the top credit referencing agencies in the UK. These are Equifax, Experian, and Credit Karma and each of them use their own scoring system so what one lender sees as ‘fair’ may be ‘good’ to another. You should make sure all the information listed on your credit report is accurate and up to date. This is because incorrect information on your report can be negatively impacting your credit score. If you need to make any changes, you can contact the credit referencing agency who provided your credit report.
Make payments on time and in full
If you currently have any finance or credit to pay back, it’s a good idea to keep on top of your current repayments. By making any payments on time and in full, you can help to rebuild your credit score and show future lenders that you can be trusted to stick to the rules of your credit agreements. If you’re struggling to meet the terms of your current agreements, it’s never a good idea to miss any payments. Instead you should speak with your lender and see how they can help you.
Register on the electoral roll
The UK electoral roll is a list of all the people who are eligible to vote. Being on the electoral roll doesn’t usually increase your score but it can be a good idea to get on it if you aren’t already. Potential finance lenders sue the electrical roll to cross reference the information on your application and can instil more trust in the lender This can be especially helpful if you are struggling to get approved for car finance with poor credit.
Reduce any existing debt
Your credit score is also calculated based on how much of your available credit you’re using and how much you owe. Having high levels of existing debt can lower your credit score and where possible you should try to clear as much debt as you can before you apply for car finance. Not only will this help to increase your score, but it can also make any future finance more affordable as you will have less debt.
Don’t open any new accounts
Whilst your working on your credit score it can be a good idea to avoid opening any new accounts or taking on any new credit. Making multiple applications for finance or credit in a short space of time can negatively impact your credit score. When you apply for finance, a credit check is performed on your credit file and hard search credit checks give lenders access to your full credit report and they can harm your score.