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Having a poor credit score can make it more challenging to get approved for car finance from traditional lenders. If you’re looking for car finance with bad credit, there are still options available to you. Specialist lenders understand that setbacks happen and are willing to work with borrowers to get them in the driving seat.
In this article, we’ll explain what having bad credit means when applying for car finance. We’ll help you understand the options available from lenders who offer bad credit car finance. You’ll learn tips for improving your chances of approval, what types of car finance are available with bad credit, and understand the reasons why your finance application could be refused.
Even if you have CCJs, defaults, or missed payments in your credit history, car finance can still be accessible under the right circumstances. We’ll guide you through the process of getting the keys to your next car despite a less-than-perfect credit score. Read on to find out more…
Bad credit generally references a person with a poor credit history that negatively impacts their ability to borrow money or easily access financing options. Credit scores below 580 (out of a possible score of 1,000) are generally considered an indicator of bad credit by most mainstream lenders. In most cases, a score of at least 600 or above is adequate for most finance companies.
Having a history of missing repayments, delayed payments or defaulted debts frequently puts you in bad credit territory in the eyes of lenders assessing risk. County Court Judgements (CCJs) against you for unpaid debts totaling over £500-£1,000 can also signal bad credit and are likely to put lenders off. It goes without saying that being declared bankrupt puts you firmly in the bad credit group too.
While having one or two instances of financial issues or struggles does not necessarily make your credit situation dire, most lenders will put people in the bad credit section and view you as high risk when it comes to future defaults and late repayments.
Getting approved for car finance in the UK with bad credit may seem difficult, but is certainly possible if you take the right steps. Here we share our top tips and tricks to accessing finance deals if you have a poor credit score:
Before applying for car finance, obtain copies of your credit report from one of the three leading agencies in the UK which are Experian, Equifax, and TransUnion. Review your report carefully and ensure no errors are dragging down your score unfairly. If you find mistakes, you can file a dispute to get these rectified and your score improved.
In the months leading up to your car finance application, work on improving your credit by paying all bills on time, settling any debts, and avoiding further missed payments. A period of sustained incremental improvements can help to boost your score.
You can check your eligibility for car finance by getting pre-approved from specialist subprime lenders that will be recommended by your local dealership. This will give you a better idea of your chances before you formally apply.
While zero deposit finance deals are available to borrowers, choosing to put down a deposit of at least 10% or more signals you are serious about repaying the car loan to lenders.
A guarantor is a third-party person (such as a close family member or friend) who agrees to be responsible for any debts that occur if you can’t meet repayments. Adding a guarantor with stronger credit to your finance application, or putting up an asset like property can give lenders security, increasing your chances of being approved for car finance.
Proof of income and length of employment can make a positive difference to your car finance application. You can provide proof of recent payslips, bank statements, and your employment contract.
The key is to only apply for the amount of financing you can truly afford every month and stick within these limits.
By following these tips and tricks, those with poor credit scores can set themselves up for success in being approved for car finance.
While you won’t find lenders openly advertising the option of car finance for bad credit, there are deals to be had for those with less-than-perfect credit scores. The types of car finance options available for people with bad credit include:
Specialist subprime lenders offer car finance options to those with bad credit, although it is worth bearing in mind that interest rates are higher and down payments are larger in order to achieve this. There are two main types of finance deals available:
As the name suggests, zero deposit car finance means that you won’t put down an upfront deposit before your monthly payments start. However, bear in mind that your regular repayments will be much higher.
Adding a guarantor with good credit improves your chances of approval and secures you a lower interest rate on the loan. The guarantor will need to understand they are liable for payments if you default.
Subprime car finance allows people with poor credit histories to access vehicles through financing deals, such as hire purchase (HP) agreements. Specialist subprime lenders provide credit to higher-risk borrowers who may not qualify through more mainstream sources.
The top benefit of subprime car finance is being able to access a loan to buy a vehicle, but the perks don’t stop there; taking out and repaying a subprime car finance deal responsibly can actively contribute to positively enhancing your credit score over time. This is because it demonstrates you are capable of fulfilling a regular financial commitment.
While subprime lending costs more to the borrower upfront and requires discipline to avoid repossession of a vehicle, it provides a crucial credit pathway and flexibility many people with bad credit desperately require.
At a glance:
| Advantages of Car Finance : | Disadvantages of Car Finance : |
| Access to Better Vehicles | More Expensive Overall |
| Ownership Flexibility | Risk of Repossession |
| Cash Flow Maintenance | Limited Ownership |
| Available to All Credit Profiles | Mileage Limits |
In more detail:
For most car finance applications in the UK, you will need to provide a standard set of documents as part of the paperwork. This includes - but is not limited to:
Failure to provide the key documents required often leads to delays or instant rejection of your car finance application. If any documents seem difficult for you to access, discuss alternative evidence with your lender. For example, they may accept a signed letter from an employer rather than official payslips.
Being refused for car finance can be disappointing, but understanding why it was declined is important to improve your chances of success next time. Here are the top six reasons car finance applications are refused in the UK:
Do you have a poor credit score? If so, here are some of the best ways you can actively improve your credit score:
Review your actual credit reports for free from agencies like Experian and Equifax to understand which factors are hurting your score.
Set up text, email, or app alerts for all of your credit commitments so payments are always on time. Even payments made a few days late can negatively impact your credit score.
Try to keep credit card balances under 30% of their limits each month by paying more than just the minimum amounts due.
If you have too much available credit that you don’t need, it can make it all too tempting to overspend. Close unused accounts or credit cards if they aren’t needed.
Every application you make for finance will trigger a hard check on your credit file which can lower scores temporarily, so only apply for what you truly need.
Update your electoral roll registration as not being registered can actually damage your credit score in some cases - always keep it updated.
We hope the FAQs below help you make informed decisions about using car finance to your advantage, even if you are classed as a borrower with bad credit:
Yes, it is possible to get car finance in the UK even with very bad credit. Shop around specialist subprime lenders and consider guarantor financing to help get you across the line. Securing a car loan with bad credit takes more effort and leads to higher interest costs, but it is achievable with the right approach. Partner with understanding lenders able to accommodate high-risk borrowers.
The lowest credit score that most lenders in the UK require to receive approval for car finance is typically around 500-550 (out of a possible 1,000). However, some lenders that specifically finance high-risk borrowers may approve car loans to those with credit scores as low as 400-500. Approval is based on affordability rather than just the credit score.
Yes, it is possible to get car finance if you are receiving Universal Credit (UC) benefits. Choose subprime lenders that specialise in financing people on benefits or less stable incomes.
Black box car finance refers to a type of vehicle loan that uses telematics tracking technology to monitor a borrower's driving and mileage during their finance term. It is particularly common for younger drivers who have higher risk profiles without proven track records, but having a black box can help those with poorer credit access affordably priced car finance deals, as it helps lenders manage risks more actively. Responsible drivers could even receive discounted rates over time by proving they are a low risk to lenders by demonstrating driving behaviours through data.
To be accepted for car finance in the UK, there are several key criteria lenders will typically assess your application on, these include your credit score, understanding your income versus debt, years in employment, residence status, and the initial deposit. Meeting all these parameters is no guarantee of 100% approval but gets you well ahead of the curve in showcasing creditworthiness and gaining a lender's trust in your ability to handle repayments.
The minimum credit score needed to qualify for most standard car finance deals in the UK is typically around 500 to 550. A score of 600+ is generally the score needed for preferred car finance interest rates from prime lenders.
Start by checking your existing credit score to see if it needs improving. Increase your deposit contribution towards the new car which will make lenders more confident in your commitment to repaying the remaining loan balance. Always choose an affordable car model that fits within your budget. Lower credit card, loan, and existing finance balances ahead of applying to free up your disposable income. Select longer loan terms as plans over 3-4 years or more keep monthly repayments lower and often fit easier into household budgets.
Yes, putting down a sizable deposit can significantly improve your chances of successfully getting approved for car finance in the UK. While mustering large deposit sums can be challenging for those with existing financial struggles or thin credit files, placing a large deposit upfront can make or break your car loan application's success depending on the lender's criteria.
Yes, lenders that specialise in bad credit understand defaults happen and are willing to work with you. The key is showing you now have a steady income to afford repayments. Provide documents supporting this and reasons for your past struggles.
Lenders do charge higher rates to offset risks so allow for this depending on your current credit profile. Take time to compare rates from multiple bad credit lenders which can end up saving you hundreds, if not thousands of pounds.
No, while it can be tempting to accept the first lender willing to work with you, taking time to compare rates across two to three prime or subprime lenders is wise.
It can be more challenging to get approved for finance when purchasing a brand-new model of car. Those with bad credit should instead opt for a slightly older used or nearly new model of car.
Here at Wilsons Epsom in Surrey, we understand that setbacks can happen to anyone, which is why we offer a range of bad credit car finance options to get our customers driving in a car to suit their needs.
We partner with leading lenders - including those that specialise in subprime finance - and we have extensive experience specifically helping those with adverse credit histories, including CCJs, defaults, or previous repossessions.
Whether you have your eye on one of our brand-new premium cars or an approved pre-owned model, our team will explore every available bad credit finance option to secure the car of your dreams. Get moving with Wilsons Epsom today!