Credit Checks and Scores for Car Finance

When you're thinking about financing a car, understanding credit checks and scores is crucial.

These two elements play a big role in determining whether you're approved, and the interest rate you are offered.

In this guide, we'll break down what they are, why they matter, and how they relate to your car finance journey 👍

What Is a Credit Score?

A credit score represents how trustworthy you are financially. It is calculated using various factors including your borrowing history and how well you have paid off your debts.

A high score suggests you are responsible with your finances, while a lower score could indicate you struggle to manage your debts.

Lenders typically look at your score to determine whether to approve a loan application and what interest rates to offer.

How to Check Your Credit Score

Understanding your credit score is an essential step in making informed financial decisions. The good news is it’s easy to check your score online.

Credit agencies like Experian, Equifax, and TransUnion offer easy access to your credit score. Here’s how to do it:

Step 1: Sign up with one of the credit reference agencies on their website.

Step 2: Enter your personal information to gain access to your score

Step 3: Check your score and detailed credit history

Is Checking Your Credit Score Free?

While at one time, major credit agencies in the UK required a subscription to view your credit report, these days it’s completely free.

However, you may need to pay extra to receive alerts and other additional features.

As well as credit agencies, you can also view your report for free on independent platforms like ClearScore. Banks have also started letting you view your score free of charge.

How Your Credit Score Affects Car Finance Options

Your credit score makes a huge difference to the car loan options available to you.

A high credit score generally gives you access to a range of favourable car finance options, including low interest rates and flexible repayment terms. It also improves your chances of getting accepted.

On the other hand, a lower score may narrow down your options and result in slightly higher interest rates or stricter terms.

However, many car finance providers cater to a variety of credit histories. So, regardless of your score, there are options available that can suit your individual needs.

You can get a rough idea of how much it will cost you on finance before you apply.

Tips to Improve Your Credit Score for Better Car Finance Deals

Improving your credit score can help you get accepted for more car finance deals at better rates.

Here are some tips to help boost your score:

  • Always make payments on time: Consistently paying your bills on time demonstrates financial responsibility.
  • Reduce Existing Debts: Focus on clearing outstanding balances, especially those with high interest rates. A lower debt-to-income ratio can positively influence your score.
  • Limit New Credit Applications: Each new credit application can temporarily decrease your score. Instead of applying for several credits at once, spread them out over time.
  • Review Your Credit Report: Regularly check your credit report for any inaccuracies. If you find errors, ensure they are corrected promptly.
  • Build a Credit History: If you don't have a credit history, consider options like a 'credit builder' card to establish one.

With an improved credit score, you're in a stronger position to secure better car finance deals.

You can also check your eligibility prior to applying for car finance.

At Carmoola, we perform a soft eligibility check that won’t have an impact on your credit rating. We only perform a hard check during the application process.

You can learn more about how we operate, or get in touch with our expert team if you have any questions.😀

Read more about credit checks and scores in car finance:


FAQs About Car Finance Credit Checks and Scores:

If I Apply for a Car Loan, Will it Affect My Credit Score?

Yes, applying for a car loan usually involves a hard credit check, which can temporarily impact your score. However, you can take advantage of soft credit eligibility checks. These carry out a soft search that won’t impact your score.

What Affects My Credit Score for Car Finance?

Factors that affect your credit score for car finance include:

  • Payment history
  • Credit utilisation
  • How far your credit history dates back to
  • Recent credit inquiries.

Does Buy Now Pay Later Affect Credit Score for Car Finance?

Yes, missed payments on Buy Now Pay Later schemes can negatively impact your credit score. This would make it more difficult to secure car finance.

Can I qualify for car finance with a low credit score?

While it's more challenging, there are lenders who offer finance to those with lower credit scores. You’ll just need to be prepared to pay higher premiums.

How often should I check my credit score for car finance?

You should check your credit score before you apply for car finance, and again if you plan on refinancing. If you currently have a poor score, taking steps to improve it will help your car finance application.

Do multiple car finance applications harm my credit score?

If you make multiple applications in a short period of time, it can have a temporary negative impact on your score. During the application, a hard search is carried out on your credit report, which can harm your score.

What's the minimum credit score for no-deposit car finance?

This varies depending on the lender. Some may only offer no-deposit deals for those with an excellent score.

How can I improve my credit score before applying for car finance?

To improve your score before applying for car finance, follow these simple tips:

  • Make bill payments on time
  • Reduce any outstanding debts
  • Check your credit report for errors