Credit History: Car Finance Jargon Busters

Are you wondering what your credit history has to do with financing a car, and does it sound like one of those jargon terms to you? 🤔 Well, it's really important to have a good credit history to get a good car finance deal. For many young drivers, it’s hard to get car finance with little or no credit history. And there are also some car buyers who are finding it difficult to finance cars because their credit histories are poor. So just how important is your credit record when it comes to securing car finance, and what are the ways you improve it? Let’s learn more about how crucial your credit history is when applying for car finance. 

What’s a Credit History?

Whenever you borrow money, the lender extends you a certain credit. So when you use your credit card, finance a car, or get a loan from a bank, the money that has been loaned to you is what’s called “credit.” In car finance, you may choose to buy a used car, or a brand new vehicle through a Personal Contract Purchase deal or a Hire Purchase agreement. In all cases, when you finance a car, the lender has to be sure first that you are capable of paying back the loan plus interest. 

How do these lenders know that you’re a good payer? What they do is check your credit history, which records debts and loans you’ve previously had from financial institutions, and how well you serviced your loan - in other words - did you keep up with the repayments ok? Through your credit record, the lender will be able to see if you’ve been diligent in the past at making payments on time if you’ve missed some, or whether you’ve defaulted on others. If you have a good track record of paying back loans, then the lender will be more confident in extending credit to you. And you may be offered a more favourable interest rate too.

What’s on My Credit History?

The major credit reference agencies in the UK are TransUnion, Equifax, and Experian, and they keep records of credit histories. Lenders and other financial institutions make use of these credit reference agencies to check a borrower’s credit history before approving their loan application. Your credit history also includes important details, such as your name, address, past and current credit agreements, and also any public records like County Court Judgments (CCJs). It's really important, therefore, that all the details held on you are correct and up to date. You can use a company like Clearscore to check this for yourself or one of the agencies mentioned above. 

Everyone’s credit histories come with corresponding credit scores. If you’ve been a good payer on your previous loans, you pay your bills on time, and there are no errors on your credit report, you’ll have a high credit score. On the opposite end, if you’ve been in arrears, have missed payments, and your information hasn’t been updated, then you will most likely have a lower credit rating. Lenders and car finance companies check both your credit score and credit history thoroughly before approving your loan application. 

Is It Bad to Have No Credit History?

Some people might think that not having a credit card or not taking out any loans is a good thing because that means they don’t need to borrow money for their expenses. However, this is not necessarily true, especially from the perspective of financial institutions. When you don’t have a credit history, lenders will have a hard time identifying your risk profile as a borrower. How good are you at paying back loans? Without records of your past credit agreements and payments, there’s no way to know for sure if you’re responsible when it comes to handling your finances. 

If you are a young driver who wants to finance a car, start building up a good credit history. Go ahead and use your credit card but make sure to pay your bills on time. Avoid missing payments so you can earn a good credit score. Also, open a bank account and use it for your savings and also for paying your utility bills through automatic debits. If you haven’t registered on the electoral roll, do so because that’s how lenders verify your address. These are some of the things to get you started in building your credit history. 

Can I Get Car Finance With No Credit History?

The short answer to this question is yes, you can still get car finance even if you don’t have enough credit history. However, know that it won’t be easy. Many lenders would be reluctant to give you credit because they don’t know enough about how you handle your finances and whether you’re a good payer. To be on the safe side, it’s much better to establish a good credit history first before applying for any kind of financial product like loans or car financing. 

Can I Get Car Finance With Poor Credit History?

If you’re wondering about how to get car finance with poor credit history, there are actually lenders who specialise in extending credit to certain borrowers, such as those who do not have sufficient credit histories or have subprime credit scores. However, know that most of these car finance deals have higher interest rates compared to those being offered to low-risk borrowers. 

If you want to save money on your car purchase, it’s best to take the time to improve your credit record first so you’ll have the chance to apply for car finance with better interest rates. Remember that whenever a lender performs a hard check on your credit history, it will negatively impact your credit score, pulling it lower than it already is. You may want to apply for car finance only when your credit history and score have been improved considerably so that you’ll have the best chance of getting credit from a good car finance company. 


Your credit history is not just a record of your financial transactions, loan payments or missed payments. It says a great deal about you as a borrower and how responsible you are when it comes to handling your finances, especially in paying back money that has been loaned to you. If you are a young driver who wants to get a good car finance deal, make sure that you build up your credit history by making payments on time every time. This will serve you well when the time comes that you’ll apply for financing products and loans.  You might also want to think about getting a guarantor to underwrite your repayments. Find out more about guarantor finance here

Want to know if you can get car finance with Carmoola? Simply download the app on your smartphone, provide your name and address, and verify your identity using your driver’s licence. You’ll know the result in seconds! Awesome, right? That's how Carmoola works!