Refused Car Finance
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Why are people refused car finance?
Being refused car finance can be disheartening and frustrating, often leaving you wondering what to do next. Below are some reasons you may have been declined car finance and ways in which you can improve your chances of being accepted:
Having bad credit is usually the most influencing factor when it comes to anything that includes finance and having a low credit score will mean you are most likely to be refused car finance. It could be that you’re in a debt plan, or have been discharged bankrupt. Also, having things such as County Court Judgements (CCJ’s), defaults and missed repayments on your records will reflect badly on your credit score and therefore, increase your likelihood of being refused car finance.
If you are self-employed
Being self-employed has its benefits, but not having a guaranteed income that demonstrates your ability to make repayments is unattractive to lenders and means you may be refused car finance.
No credit history
This is when you have nothing on your credit report and you have not borrowed any money previously. Lenders have no previous records to go by and therefore, do not know how eligible you are for finance.
No presence on the electoral roll
Being on the electoral roll naturally means lenders can trace your address and helps them determine your identity. If you aren’t on the electoral roll, lenders cannot determine whether can finance is suitable and therefore, you may be declined.
You may have been refused car finance if you have no deposit. Many lenders look for a deposit to be put down so you’ve already invested in the vehicle you want to buy. There are lenders that will offer 100% finance however, if you can’t get a deposit together.
How to check your credit score
Checking your credit score regularly is wise as you can monitor whether you score is increasing or decreasing and the reasons for doing so.
You can check your credit score by going to a credit reference agency, this gives you an idea of the likelihood of being declined and whether you need to do something to improve it.
It’s also wise to check your credit score and see if you can see any errors or fraudulent activity on your account. If there are, you can contact the necessary people and changes can be made accordingly.
How to improve your credit score if you are refused car finance?
If you have recently been refused car finance, there are a few things you can do to make sure it doesn’t happen again. It’s important to note that these resolutions don’t happen overnight, so patience is key.
Building your credit score – if you have never taken out a loan or used a credit card, you may think you would have a great credit score and it’s a positive thing that you’ve never had to borrow money. However, it actually hinders the process of getting finance because lenders have no repayment history to go from. The people who will most likely need to build their credit score are those who are below the age of 18 or have just moved to the UK.
Improve your credit history – if you already have a credit score but it is low, making all of your repayments on time and in full means your credit score will be improved and you will show lenders you are a reliable customer.
Don’t max out your credit – if you already have a credit card, then keeping the percentage you use of your credit card as low as possible will work in your favour when it comes to applying for car finance. Whilst it’s healthy to use credit responsibly, if you’re borrowing up to your credit limits it can look like you’re over-reliant on finance.
Keep your address up to date – ensure you are registered on the electoral register under your current address, this means lenders can trace any information they may need.
Check you’re not linked to another person – having a spouse or other family member on a joint account can affect your credit score, especially if it’s considerably lower. If they are hindering your score, get them removed so you can only be judged on your personal credit rating.
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