How to get a car loan if you have bad credit

One of the reasons why people often struggle to secure good car finance deals is because they have a poor credit history. Even if you are eligible for a deal, your interest rate may be higher than others with better credit scores. Here’s how to improve your credit score for car finance.

Check your credit score

There are many credit rating agencies, but the three main ones are Equifax, Experian and Callcredit. You can request a copy of your individual credit file by phone or online through each company.

If you see any mistakes in your report you can also contact them directly to dispute this information. This process will take time though as responses may not be immediate. Be aware that if you find credit errors on your report it may affect your credit score, so it’s important to get this fixed as soon as you can.

Get up to date on your existing debt obligations

If you’ve missed credit or loan payments in the past, this information will be recorded on your credit file. However, as long as you’re up to date with repayments now, any negative entries should fall off your report after six years. So if you have a bad payment history and want to improve your score before getting finance for a car, make sure that you start paying your debts back on time, and in full. You can help your cause by showing that you’re financially responsible in other ways, such as by taking out a household utility bill in your name. The more reliable payments you have on record the better, which will demonstrate to lenders that you are likely to repay car finance if you take it out.

Avoid applying for too many credit agreements

If you apply for too many credit agreements in a short space of time this will reduce the amount of ‘credit scoring points’ you have available. So if lenders don’t know much about you or your financial history, they may decline your application as they’ll be concerned that you’ve tried to borrow more than is appropriate. If possible only apply for finance on the car you want when you’re ready, and if you do need to apply for other credit then space it out.

Go online

Many people find it easier to find better deals on car finance by searching via an online comparison site. There are many available so be sure to shop around for the best rates. One great option is to check out Driva Perth car finance.

Check your driving record

Lenders may check that you have a clean driving licence, so if there are any points on your licence this will affect your score. If you’ve had problems in the past make sure you mention it upfront, as once again, if you can show that you’re making an effort to improve this will go in your favour.

If you know that there are mistakes on your report or have another issue with poor credit history, but feel that lenders won’t take you seriously because of the way it has been recorded, consider contacting a credit repair service for assistance.

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