PCP, personal loan or hire purchase; however you’re spreading the cost of your next set of wheels, you’ll be asked to share your credit history. But don’t worry – no matter if you have an excellent, fair or poor credit score, you should find a car finance deal suitable for you.
What credit score is needed to finance a car?
You could get car finance with any credit score.
So what’s the catch? If you have a poor credit score, you won’t be accepted for the better deals on the market. Car dealerships typically save low-interest rates and 0% finance offers for customers who have excellent credit scores.
Many car dealerships use Experian – along with other credit agencies – to check your credit history. Here’s how Experian ranks credit scores:
961 – 999 – Excellent. If your credit score falls into this bracket, you could be accepted for the best car finance deals.
881 – 960 – Good. A good credit score means you shouldn’t have any trouble getting approved for car finance, but the very best deals may not be available to you.
721 – 880 – Fair. If you have a fair credit score, you should be eligible for car finance deals with decent interest rates – not the best, but not terrible.
561 – 720 – Poor. Got a poor credit score? You might be accepted for car finance deals, but they’ll likely have higher interest rates.
0 – 560 – Very Poor. A very poor credit score means you’ve had trouble repaying debts in the past. This means you could be rejected for the majority of high street deals.
Why do car dealers check your credit score?
When a car dealership checks your credit score, they’re trying to figure out your level of risk. A poor credit score suggests you’ve run into difficulties with debt – which can be a bit of a red flag for car finance.
If you have defaults or unsettled debts flagging up on your credit file, some car dealerships might worry you’ll struggle to meet your payments.
Can I get car finance with a bad credit score?
A bad credit score doesn’t necessarily mean you’ll be rejected for car finance. In many cases, you may be accepted for deals that have higher interest rates. If you know your credit score is a bit worse for wear, it could be a wise idea to look for lenders who specialise in bad credit.
If you have a bad credit score and need car finance, these top tips could help:
- Put down a bigger deposit. The more you pay upfront, the less you’ll need to pay down the line. A big deposit means you’ll pay less each month, even if your interest rates aren’t great.
- Use a car finance broker. If you aren’t sure a high street lender will accept you, an online broker could find car finance that suits your credit score. This will save you from making repeated applications, which could negatively affect your credit score further.
- Choose a shorter repayment term. If you opt for a shorter loan length, you’ll pay less interest overall.
What type of car finance is best for bad credit scores?
Car finance can come in different shapes and sizes. Knowing what’s what can help you make an informed decision in the car dealership.
Personal Contract Purchase (PCP) – A PCP deal allows you to spread the cost of a car over affordable monthly payments. If you choose to keep the car at the end of the contract, you’ll need to pay an additional lump sum. Because the PCP is secured to the car, you could still be accepted with a less-than-perfect credit score.
Hire Purchase – With hire purchase, you won’t own the car until you’ve paid the last instalment. This means that, if you miss a payment, you could lose the car. As the dealership has that added security, you could be accepted – even if you don’t have a good credit score.
Personal loan – Buying a car with a personal loan means you’ll own the car outright, straightaway. If you have a good credit score, this could be an affordable option.
Whichever finance option you choose, your credit score will determine the type of terms you receive.
Want to learn how to improve your credit? Head over to our handy guide.
