how buying a car affects your credit score: A guide

Introduction

You can spread the cost of buying a new car by getting a car on finance. But if this is your first time, you should be aware of how it impacts your credit score. Having a bad credit score can affect your chances of getting the car of your dreams. This blog will outline the ways that buying a car will affect your credit score.

How buying a car affects your credit score

When buying a car you are asked for proof of your identity and if you make sure your credit card is in good nick, then you’ll be in a strong position to acquire a loan for a vehicle.

However, if you have a low credit score, or don’t even have one, getting car finance can prove really difficult. You’ll also need to provide proof of residence and residence address. If you provide any out-of-date or inaccurate documents, this will affect how quickly you will get accepted for car finance by lenders.

You are making a big purchase and lending requires a lot of checks, so make sure everything is up to date that you are required to provide. Luckily, when you first apply for car financing, there will typically be no trace on your credit score. 

If you do apply, you can rest assured that it won’t affect your credit score. In contrast, as soon as you are about to join an agreement with a finance company, the lender will conduct a hard credit check. It will evaluate the entirety of your credit history and will usually leave a mark on your credit score. This is because you are making an application for more credit and so it looks like you are in some form of financial trouble. But by being accepted for finance and making repayments on time, you can rebuild your score.

Will I be accepted for car finance?

There is no one-size-fits-all process when it comes to car financing. Your car finance approval, and options, will depend on your credit score. If you keep on top of knowing your credit score, this will help you understand what car finance options will be available to you.

Your credit score is determined by the information on your credit history file. You can find information about how much debt you have, whether you have missed payments, and what type of loans or accounts you have in your file. The higher your credit rating and score, the easier it will be for you to get approved for car finance.

You could expect lenders to reject your application if you have bad credit – they won’t want to take any risks with someone with a bad credit rating because they will see you as a risk. Suppose a lender decides not to reject an application from somebody with bad credit but meets all the other requirements (such as having enough income). In that case, they may increase certain charges compared to someone with a better credit score. In order to prevent losing money themselves, they want to offset any risk they may face.

What is a bad credit score?

Having a bad credit score means a credit reference agency has looked at your credit history and had made a negative assessment of your finances.

A bad credit score could cause you issues when getting approved for getting a car on finance. You are likely to be rejected if you have a bad credit score, or have to pay a higher interest rate if you do get approved. 

Even with bad or low credit scores, it is possible to get car financing. At Bad Credit Motor Finance, we have brokers who could help you secure a car finance deal with bad credit. Take a look at our site to see how we could help you, today!

What is the cheapest way to buy a car?

There are a few things to be aware of when buying a car. First, you need to know how much money you have available to purchase a vehicle. Second, you need to decide whether or not the car itself is suitable for your requirements. Lastly, if you are unable to purchase outright and then finance the remainder with a loan from a lender, consider one of the financing options on our website.

Best cheap cars to buy

  • Families. Families usually always need cars! If you’re looking for something safe, dependable, and affordable for all of your family members’ requirements, we could help you find your perfect car with a simple phone call.
  • Students. Buying a car can be pricey, but with some smart shopping, you could still find an affordable car that fits your budget. We recommend buying cars that are cheap to insure, and smaller because they are great for city driving. 
  • First-time buyers. It’s important to choose a car that’s easy to drive, easy to park, and good value for money, especially if it’s your first car or it’s been a while since you bought one.

Our brokers at Bad Credit Motor Finance are industry experts and could help you find your ideal car to suit you. Use our tool to get a quote to see how we could help you.

If you’re considering getting a car on finance, it’s worth understanding how this will affect your credit score.

  • Check your credit score before applying for a loan. This is the best way to make sure you know what you could be accepted to get. It’s best to do this before jumping into any decisions that could negatively affect your credit score in the future.
  • Credit checks are common in the application process. Dealers typically perform their own checks on potential applicants and this could lower your credit score for a brief period of time. If you make multiple applications to lots of different lenders, this could lower your credit score significantly, so be careful and listen to the specialists.

Conclusion

Purchasing a car can affect your credit score, as we have outlined in this guide. If you choose your financing carefully and ensure that you can afford the monthly repayments comfortably, this shouldn’t be a problem. Most circumstances considered, here at Bad Credit Motor Finance, we could help you to secure the car of your dreams. Our trusty team will take all the stress away from you when you apply, all the way until you are driving your car off into the sunset. Giving you peace of mind. Contact us today today to see where we can help take you!