Can I get car finance with a bad credit rating?

Approved by the Car Finance Advisory Board

It's certainly possible to receive car finance with a Bad credit rating. There are a number of variables from late payments to CCJs that can contribute to a Bad credit history, and to whether you can obtain car finance when your credit rating is Poor. We discuss this in more detail below, with regards to what impacts your credit rating by highlighting the most common questions around car finance for Bad credit.

I've defaulted on my loan. Will this affect my application for car finance? Will a Bad credit rating be flagged?

If you’ve defaulted on a loan this will leave a mark on your credit history which will result in Bad credit. The first step is to contact your lender as soon as possible. You’ve failed to meet the repayments and may be struggling with other obligations, so there’s a possibility you may be able to enter an arrangement with the credit provider in order to lighten the load.

If you’re struggling with repayments, there’s a possibility we can help you settle your loan and get you onto a new arrangement with more manageable repayments. If you would like to talk to us about this, make an application or speak to one of our Customer Advisors using our LiveChat service.

Time is of the essence and lenders tend to look favourably upon customers who are open and honest about their circumstances. If you’re pro-active and look like you’re really making an effort to pay off your debts, it'll be beneficial in the long term.

If your debt has been turned over to a collections company, things will get much more complicated, as you're likely to have two companies to deal with rather than just the lender. Make sure to contact the collection company in writing and to keep records of your communications with them, otherwise your Bad credit could get worse.

Once you're in a debt management program, it becomes very unlikely that you'll be accepted for further credit from any lender so it’s imperative that you try to avoid getting into this situation.

Even if you manage to come to an arrangement with your lender to pay the debt back, your credit file will be marked with an indication that you've defaulted, and this will stay on your file for six years, resulting in Bad credit. If you're suffering from the effects of Bad credit you can visit our Credit Clinic to find out what your credit rating means for you and discover some tips on how you might improve your credit file.

I'm in an IVA - does this count as Bad credit and will I be able to get car finance?

When you have an IVA and you're considering an application for car finance, the most important question to ask is, “Can I afford it?” You already have debts which you have failed to pay, and have taken steps to make this more manageable. We understand that things happen and sometimes you have no choice but to get a car with finance.

If you’ve worked out that you can indeed afford to finance a vehicle whilst you’re in an IVA, you should be prepared to pay higher interest rates due to your Bad credit being a high risk to lenders. Because of this, the options of products available to you will be limited, and they'll usually require a deposit to be paid as well as other potential restrictions.

If you make the decision to apply for car finance, you should provide your Customer Advisor with all the information you have and then we can help find a product suited to your circumstances.

Please keep in mind that most lenders will only consider your application once your IVA has ended.

I've been made bankrupt - can I still get car finance?

If you've been made bankrupt, it can be difficult to attain credit of any kind. Most lenders will look at your credit file and deem someone in bankruptcy as a very high risk, and most likely result in a rejection.

Once you've been released from bankruptcy, it can still be hard to get car finance. There are however lenders who offer car finance for Bad credit, but at a much higher interest rate than other lenders. They would also usually require proof that you're discharged from bankruptcy, as well as a substantial deposit to offset the risk of lending to someone who is high risk. Though bankruptcy usually lasts for 12 months, it will create a mark on your credit file for 6 years. Most lenders will require proof that you've been discharged from bankruptcy for at least 12 months in order to approve any car finance application.

I have a County Court Judgement (CCJ) on my credit file - can I obtain car finance?

If you have no more than 5 CCJs with a combined value of under £5,000 in the last 2 years, it’s possible that you'll be accepted for finance. But if you're over this the chances are that you'll find it very hard for lenders to loan the money you need due to your Bad credit. This is mainly due to the risk involved in lending to those with Bad credit as it suggests you cannot afford the credit you already have.

County Court Judgements (CCJs) are usually sought by lenders against borrowers who have failed to repay their loans or other debts on time. Once a CCJ is taken out against you, this will unfortunately make it difficult to get credit. Much like having been declared bankrupt or being in debt management arrangements, a CCJ will indicate to lenders that you've had problems with your credit before, and have struggled or failed to repay the debt you owe - resulting in Bad credit overall.

CCJs will stay on your credit file for 6 years, however if the debt has been repaid you can request a 'Satisfied' note be put onto the CCJ which will indicate to any future lenders that you have repaid all that you owe. It’s also possible that a lender would look more positively on an applicant with a 5-year-old CCJ than with somebody who has just been issued a judgement.

As we have stated above, this doesn’t mean that it’s impossible to get car finance with a CCJ on your file. There are lenders who specialise in financing cars for people with Bad credit. Because of the increased risk, the rates available will be higher, and a deposit will usually be required from the customer.

I'm in debt management - will I still be accepted for car finance?

If you're in debt management, lenders will see you as a very high risk to lend to. Your lending options will be incredibly limited and your monthly repayments will be high to offset the level of risk you pose to a lender. Entering a debt management plan doesn’t necessarily mean you can’t get credit, though the reasons you’d go into such a plan would indicate that you have previously fallen into tough financial times and failed to meet obligations to pay back debt you owe.

This has most likely damaged your credit score in some way, and could affect your ability to be accepted for car finance. When you enter a debt management plan with your lender, it will be marked on your credit file and will stay on there for 6 years. Find out what other things could have had an effect on your credit profile by visiting our Credit Clinic Causes page.

Lenders always prefer to see a pro-active approach from potential customers, so seeing that you have come to an agreement to pay off your debts could work in your favour, compared to continuing to struggle to meet your repayments with no agreement from the creditor.

We do have lenders who can finance cars for people with Bad credit. However you should be prepared to pay a substantial deposit, as well as pay a higher rate, due to the increased risk you pose to the lender.

I'm in arrears with my mortgage - can I still get car finance?

Given how major a commitment mortgages are, they can sometimes make the biggest impact on your credit file. Getting into arrears will certainly damage your credit score, and as such would render your ability to get finance much more difficult.

If you can show that you've got your payments back on track, it's somewhat possible that we'd be able to help you with car finance. It’s worth noting that you'll likely have to pay a higher rate than those with good credit.

How can I start to repair my credit file?

If you have a bad credit rating, it can feel like it’s impossible to change your circumstances. This is simply not the case and there are practical steps you can take to start repairing your file. One of your first stops should be our Credit Clinic. In this section, we’ve brought together information on all the different credit ratings, what can cause a bad credit rating, what steps you can take to start improving your file, and a list of resources you can contact if you want professional impartial advice. Visit the Credit Clinic for more information.

Is there anything we have missed? Do you have any more questions? Our Customer Advisors are always happy to answer your questions. Give us a call on 0800 1777 290, or you can talk to one of our knowledgeable Customer Advisors using our LiveChat facility by clicking the LiveChat button at the right of this page. If an Advisor is not online, you can leave a message and we will get back to you as soon as we can.

Published: 16/05/2016
Last Updated:06/03/2018
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