What credit score do you actually need for car finance?

When you apply for car finance, your credit score matters. But what score do you need to be approved?



Many people know that credit scores exist – and most of those people know they affect credit applications.

However, the precise workings of credit scores are often shrouded in mystery. As a result, it's easy to feel like you're playing guessing games when applying for a loan or car finance.

So, what actually is a good credit score? And what credit score do you need to be approved for car finance?

You have credit scores, not a single credit score

The first thing to clear up is the idea that there's just one credit score.

In fact, the three main credit reference agencies (CRAs) each have their own calculations to figure out your score based on your financial past.

This figure is then consulted by lenders before they put money into your bank account.

This means two things:

1. You need to check several credit scores, not just one.
2. There isn't a minimum credit score for car finance.
   
   

Your score is important, but it's not the be-all and end-all. What matters most is your overall credit profile. This is calculated from your ability to meet payments, among other things.

A rough guide to credit scores: what are my chances?

If you have an excellent credit history, your chance of getting car finance is high – and you'll probably be offered the lowest interest rates.

However, as your credit history decreases in quality, your chances of getting car finance decrease and interest payments rise.

Don't worry, though. Even people with poor credit can get car finance. They just need to go through specialist lenders like us.

In fact, you can even get car finance with no credit history. All you have to do is show that you have a stable income and can make the repayments.



What else do lenders look for?

Lenders are never interested in your credit score alone. If that were the case, only people who had never missed a payment would be able to access a loan. That's simply not true.

As well as consulting your credit score, lenders will focus on:

• Your income
• Your employment stability
• Your ability to afford the monthly repayments
  
  

They will also consider your existing debts and financial commitments, as well as missed payments, defaults and county court judgments (CCJs).

Being registered on the electoral roll will help, as will a bigger deposit. Both make you seem less risky to lenders.

In short, it's not always simple. Someone with a fair credit score, steady salary and large deposit might be approved, while someone with an excellent score and no stable income might not.

Can I get car finance with bad credit?

Yes. There's no reason why you shouldn't be able to finance a car with bad credit.

You'll just need to work with a specialist lender, broker or dealership that caters to people with poor credit histories.

How can I improve my credit score?

If you want to improve your credit score, there are a number of steps you can take.

1. Get on the electoral roll

First, you can register to vote at your current address. Being on the electoral roll can boost your credit score and helps show you are who you say you are.

2. Pay on time

Secondly, you can make sure you consistently make payments on time. This isn't always possible for all sorts of reasons. But if it's something you can do, it will help give your credit score a glow-up.

3. Check your credit file for errors

Different lenders check different CRAs, so it's important to review your credit file with all three of the main CRAs:

• Equifax
• Experian
• TransUnion
  
  

There may be errors or links to old accounts – an unused joint account, say. Getting these errors sorted can do wonders for your credit score.

4. Watch your credit card usage

If you have a credit card, try to use less than 30% of your available credit limit. Using more or maxing it out suggests you're struggling to manage your finances and makes you an unappealing proposition to lenders.

5. Don't apply for credit too often

Finally, you should space out your credit applications. Making multiple applications in a short period leaves hard searches on your file.

These hard searches are visible to lenders. If they see too many, it can make you look financially unstable and put them off.

Instead, spread out your applications and use soft-search eligibility checkers before applying.

What else can I do to improve my chances of getting car finance?

When you go to a lender for car finance, they're most interested in whether you can afford the repayments. But there are a few other things you can do to improve your chances of approval.

• Use a guarantor – a close friend or family member with good credit who's willing to cover payments if you can't.
• Go for a cheaper car. This will lower your loan and make monthly payments more manageable.
• Put down a higher deposit. The bigger the deposit, the less risk the lender has to take. This can help you secure better rates.
  
  

Does applying for car finance affect my credit score?

Checking your eligibility for car finance does not affect your credit score. Formally applying does affect your score. The impact, however, is small and temporary.

When you formally apply for car finance, the lender carries out a "hard search" on your credit file. This leaves a mark and knocks a few points off your score.

This is why it's important to avoid multiple hard searches. You can do this by shopping around before applying or going through a car finance broker that will carry out soft searches for you.

Can I get car finance with Zoomo?

If you're in Newcastle and want finance for a car, Zoomo can help.

We can't guarantee you'll be approved. But we specialise in bad credit and work with a wide panel of lenders who look at current affordability more than your financial past. If you can make the payments, we'll lend you the money – no matter how high or low your credit score.



Why not try applying for finance online? It only takes a minute, and because we use soft-search technology, it won't affect your credit score until you formally apply.