Are you hoping to buy a new car? Do you have a poor credit history? Well, it might affect your chances of getting car financing. Lenders often approve people with the highest credit scores because they are a safe bet to repay the loans on time. On the other hand, lenders are wary of people poor credit histories because they have failed to pay on time before.
As such, if you have a poor credit history, you will not get the best competitive interest rates. Even worse, your loan application might be rejected. However, you can still get car financing even with a bad credit history. Here is what you can do to improve your chances of getting car financing with a bad credit history.
Get A Credit Report
A credit report is a great starting point because you can get the details of your credit history, especially your credit score. You will have an idea of what you have done wrong in the past and how to improve your chances of getting car financing.
You can get a free credit report from Callcredit, Equifax or Experian. There might be a slight difference in the data these companies offer on your credit report. However, it should not affect the overall score.
Register On The Electoral Roll
Have you registered on the electoral roll? If you haven’t, it’s time to do it now. Finance companies often go through this information as they perform credit checks. They need to know whether your name and current address matches with the information provided. Once you have registered on the electoral roll, the lenders will have an easier time doing credit checks. It will not transform your credit rating but it helps with the future credit checks.
Look For Alternative Finance Options
If you have a poor credit history and have been denied a car loan, you can always look for alternatives. If a Personal Contract Purchase loan is not available to you, try out Hire Purchase loan. Here, the car the vehicle is owned by the lender until the loan repayment is completed. However, if you miss out on the payments, they can take away the car.
You can also arrange for a guarantor loan. Here, a friend or relative will co-sign on the financing plan. If you default the payments, the guarantor will be liable and the finance company will get the payments from them. You can take out pay as you go car finance. There’s also a secured personal loan which you can arrange through the bank. It is signed against one of your assets, especially your home. Defaulting on the loan means that the bank will repossess your home or any other asset.
Finally, there’s non-status leasing. It’s a loan for people with poor credit. Here, the lender will look at the overall situation instead of the bad credit. Non-status leases are more expensive than any financing options available. At the end of the contract, you will not own the car.
Keep The Loan Applications To A Minimum
If you have more loan applications or hard searches, you will have a huge negative impact on your credit history. Therefore, you need to reduce these applications or searches.
Rather, you can do a soft search or an eligibility check than doing a formal application for the loan. You will not be certain whether or not you will get a loan from the company but you can have an idea of how much you can get. Even better, it will not be listed on your credit history.
Pay Off Your Debts
It might be obvious but if you have a poor credit history, you need to start paying off your debts. It will not remove the bad credit report but your lenders will know that you have made a positive effort. Keep in mind that people with the best credit history have a great history of paying off their loans on time. It’s what you need to be doing if you want to improve your credit rating.
Stop Associating With People With Bad Credit
If you have a financial association with another individual with a bad credit rating, it might be affecting your credit history too. For instance, you might have a mortgage, a joint bank account or any other association that is affecting your chances of getting car financing.
Of course, it might be unavoidable especially if it’s your spouse. However, if you are only tied to that individual because of a joint bank account and don’t really need it, you can disassociate effortlessly to improve your credit scores.
Increase Your Deposits
If you deposit larger amounts, the finance company will give you a lower amount to reduce the overall risk.
With these tips, you can work towards improving your credit rating effortlessly.