When it comes to getting the best possible car finance deal, there is one thing that is quite possibly more important than anything else – your credit score. Also known as your credit file or your credit history, the credit score is used by the finance provider to quickly assess you as a potential customer.
So if you are looking to get the best possible car finance deal, then improving your credit score can be one of the best ways to start. So how do you improve your credit score? In this article, we explain how.
There are many different terms and expressions used in car finance and its easy to get confused. When you apply online or start your research, you will often see a lot of references to your credit score.
A credit score is basically your financial history. This score is compiled by credit agencies, such as Experian or Equifax, who will look at a number of different factors to see how you rate against them. They will then give you a score based on their assessment.
This credit score can come in a variety of different shapes and sizes, but in essence, boils down to five different credit ratings.
You have a spotless financial history with no defaults, CCJs or bankruptcies, and have easily traceable employment and address history.
While you might not have any black marks on your financial history, you may not be able to prove it as accurately as someone with an excellent credit rating.
The majority of consumers will find themselves in this category. You will have had a few missed payments here and there, or used your overdraft often, but nothing too serious.
Your financial history is difficult to trace and you have had some issues in the recent past.
A history full of missed payments, defaults and poor traceability, meaning you have not been able to keep on top of your finances as well as you might.
The good news is that all credit ratings can be changed for the better. So if you do get your credit rating checked, then you will be able to start working on how to improve your credit score.
Top tip - You can check your credit score online for free at a number of different websites and credit agencies. There’s no need to pay for this service as you can find a reputable company online to do the work for you. And you can also contact your bank and see if they can provide a credit check for you too.
One of the factors assessed by credit agencies and financial providers is your traceability. This means your address and employment history over the past 3-5 years. The easiest way to do this is to join the electoral roll as this will register your name and address on a system that can be easily accessed by the finance providers.
You should also consider how often you move house or change jobs. While this is sometimes unavoidable, someone who is always on the move will be a potential red flag to a provider, as they may think you are not in a stable home and so might not have the cashflow needed to meet your finance repayments. The same is the case with work, as they will want to see a history of you keeping a steady employment and thus able to make your payments.
You might be surprised to see that, if you’ve never taken a finance package out before, you are still considered as a fair or good credit rating, and not an excellent rating. This may seem a little unfair as you might have kept on top of your finances well and never had the need to borrow money or take out a finance agreement. But this in itself is a problem that can affect your credit rating.
Finance providers want to see that you can take out a finance package and make the repayments on time without any issue. By not having a finance package before, they can’t see how you might cope with taking out an agreement.
If you have any outstanding credit card debts, CCJs or defaults that you are sorting through, it might be worth consolidating them into a single payment. Being able to clear these black marks on your file is one of the quickest ways to clean up your file. By clearing this debt, you will show finance providers that you are on your way to being a trustworthy customer.
The interest rate your finance package is based on depends on how good your credit rating is. The less of a ‘risk’ a finance provider considers you to be, the more enticing a credit rating they will offer you to secure you as a customer.
You also have more finance options open to you. Some providers will only give a Personal Contract Purchase (PCP) finance package to a customer with an excellent or good credit score. So if you work to improve your rating, you can start towards getting access to the best interest rates and having more options open to you.
Check your eligibility for car finance without affecting your credit score or use our simple car finance calculator to get an idea of what sort of package you can get when you apply with us. Once you have completed our no-obligation application form, one of our dedicated customer advisors will be happy to talk you through any questions you might have around the car finance process.