A good credit score can make getting car finance easier. A high score usually means you'll have access to better deals, including lower interest rates. But not everyone has an excellent credit score – and some people don't have one at all.
If you've just moved from overseas, it doesn't matter if you earned £10k or £100k; it's unlikely you'll have a credit history in the UK and therefore won't have a credit score. But what does a lack of credit profile mean for your car financing options? Can you still borrow the amount needed for a new vehicle, or is it time to get an annual travel pass?
What is a Credit Score?
We've covered credit scores before here, but in a nutshell, a credit score check is an action that lenders perform to determine if you're eligible to borrow from them. A consistent address history, being on the electoral roll, making payments on time and having a good debt to credit ratio will all help with your creditworthiness and contribute to a higher score.
Why Don't I Have a Credit Score?
If you find yourself without a credit score, you've either just moved to the country or are in your early 20s and haven't had the chance to build it up yet. Credit agencies start building a profile on you from the age of 18, but they can't score you if you've only just moved to the country or don't have much experience with finances.
The theme is becoming more common: people move to the UK for work and have a great credit score in their home country, but it doesn't crossover, and they find themselves unable to borrow. Even if you moved here for a job paying £100k per year, you would still struggle to borrow without a credit profile.
Do I Need Good Credit to Get Car Finance?
The short answer is "no", you don't need good credit to get car finance – but it does help. The majority of lenders use your credit score to decide whether or not they think you'll fit the profile of the type of people they want to lend to.
Without a score, there isn't much for them to judge you on. This can be frustrating, especially if you know you can pay back the monthly payments without any problems. Fortunately, the options available for people without a credit score are improving.
Tips for Getting Car Finance with No Credit
Get a Guarantor
Some lenders will allow a guarantor to co-sign the agreement, with that person becoming responsible should you fail to make payments. Guarantors usually come in the form of family members or friends and will need to prove they can comfortably make your car finance repayments.
They will have a good credit history and add additional security to your application. Using a guarantor could widen the pool of lenders available to you, providing more options in the process. This can improve your chances of getting car finance.
Try to Borrow from Your Bank
Not having a credit score can limit your opportunities with many lenders, but your bank may be willing to overlook your lack of creditworthiness. They know your financial history more than most and, in some cases, might be willing to make an exception.
However, for you to benefit from the bank lending money, you would need to have banked with them for a considerable amount of time. This could prove an issue for people who have recently moved to the UK unless they borrowed the money from a bank in their home country. Again, doing so could prove tricky, as most banks would be unwilling to lend if you're in another country.
Find a Lender that Specialises in Clients with No Credit History
The best option – and by far the most straightforward one – involves finding a car finance lender who looks at more than your credit score. An increasing number of lenders examine the whole picture, rather than solely judging you on a credit report's results.
Here at Carmoola, we take everything into account before making a decision. If you don't have a credit history or have poor credit, it doesn't mean you can't borrow to get your next car. We look at your financial history, as well as other factors, to build a fair profile on you and what you can afford to borrow. Using our app, you can get a decision in seconds online based on your actual affordability.
No Credit, No Problem
Not having a credit score doesn't need to end your car-buying dreams. There are alternative options, and using a lender who looks at the entire picture rather than just your creditworthiness means you can borrow sensibly and still get the keys to your brand new car.