Can I get car finance if I have bad credit?
Yes, you can still get car finance if you have bad credit, but your options might be limited.
Car finance is how many people can afford a new car. By making monthly payments, they pay off the cost of the car - plus interest - over a few years. The specifics vary depending on what kind of deal you have, whether that's hire purchase, personal contract purchase or a car loan (personal loan).
Car finance, like any kind of borrowing, uses your credit rating when working out how much you have to pay back - or even if you can get a finance deal at all.
Bad credit car finance is a way for those with a poor credit history to still get a car finance deal that suits them.
There are several reasons why someone might need bad credit car finance:
- A poor credit history due to missing payments on other debts
- Having your credit rating damaged by someone that you're financially linked to
- Limited or no history of borrowing, meaning you have no credit rating to begin with
Having a poor credit history might mean you're not able to get favourable interest rates when you look for a car finance deal. You might even find that you're not offered a deal at all. But there are still options available to you.
What are the different types of car finance for bad credit?
There are a few options available to you, depending on how quickly you want to own the car - if at all. The 3 main types of car finance are:
- Hire purchase (HP)
- Personal contract purchase (PCP)
- Car loan (personal loan)
- Hire purchase - you'll pay an initial deposit, and once you've made all of your monthly payments, you'll own the car.
- Personal contract purchase - you pay a deposit, followed by your monthly repayments. At the end of the contract, you can either return the car or buy it after a final, larger payment.
- Car loan - a lump-sum personal loan that lets you buy the car outright and pay back what you've borrowed.
Both HP and PCP car finance deals usually require a deposit - around 10% is typical.
All 3 of these types of car finance should be available to you, even if you have bad credit. But you might find that some lenders charge higher interest, or put certain restrictions on the deal.
How do I get a cheaper car finance deal?
Although having a poor credit rating is likely to impact how good of a car finance deal you can get, there are things you can do to help yourself. This includes:
- Working to improve your credit score
- Increasing your deposit
- Increasing the term of the contract
- Choosing a lower-spec vehicle
Working to improve your credit score means you're more likely to be offered a better deal. You could:
- Register for the electoral roll
- Ensure your information is correct and up to date
- Pay off outstanding debts on time
- Check over those you're financially linked to
Increasing your deposit means you pay more money for the car. This provides less risk for the lender, and they might be able to offer you a better deal.
Increasing the term of the contract gives you longer to pay back what you borrowed. This makes your monthly payments a bit more manageable. But this is also likely to increase the size of the overall debt.
Choosing a lower-spec vehicle could lower your interest rates. The cost of each finance deal is likely to be different depending on the specific model. So if you're able to downgrade your choice of car, this might help keep your costs down.
What our car finance expert says
Having bad credit can be tough, especially in the current climate. But if you’re looking for car finance, we're here to help. Our partner works with a range of car finance lenders, and they'll do their best to find one with the right deal for you. Having bad credit might mean you have to pay more though, so be sure to weigh up the costs carefully before committing.
Matthew Harwood
Car finance expert
Need more help?
Can I finance a car for someone else?
No - any finance agreement must be with the person who's buying the car. Anything else is a kind of fraud.
By all means, you can buy the car outright for someone. Or you can contribute to their repayment, either through the deposit or their monthly payments. But you can't get a car finance deal in your name for a car that's being used and owned by someone else.
Can I finance a car with a 500 score?
Yes, even with a credit score of 500 you should be able to find a car finance deal.
Depending on which credit scoring service you use, 500 could be slightly better or slightly worse. This is because each credit report company has its own maximum credit scores:
- Experian - 999
- CallCredit - 710
- Equifax - 700
Either way, a score of 500 isn't great. But you should still be able to find car finance, even then.
Can I get a car finance deal if I have no credit history?
Yes, you can get car finance even if you have no credit history.
But because car financer lenders use your credit history to determine how much of a risk you are, they have nothing to use. This makes you an unknown risk, so you might find that you're offered to borrow less, or the deals you see have higher interest rates.
Can I get a car finance deal if I’ve defaulted on a loan?
Yes, you should still be able to get a car finance deal if you've defaulted on a loan in the past. But this is likely to be marked on your credit history, which means you credit score is lower as a result.
This means your options are limited when choosing between lenders.
Can I get car finance if I’ve been declared bankrupt?
Bankruptcy can be a devastating hit to your credit profile, and is likely to stay on your report for several years.
Most lenders might not want to offer any kind of finance agreement to you if you've been declared bankrupt. You might have to go to a specialist lender, who may need a larger deposit to consider letting you borrow.
Can I get car finance if I’ve got a CCJ?
Having a County Court Judgement (CCJ) shows lenders that you've had trouble repaying your debts in the past. This means it could be more difficult to borrow from other lenders.
Some lenders offer finance deals to those with CCJs, but they might have specific requirements you have to meet, including:
- Earning over a specific amount each month
- Providing evidence of being able to make the repayments - for example, bank statements or payslips
Does applying for car finance affect my credit score?
Yes, whenever you make an application for a car finance deal, there's an impact on your credit history. These are known as hard credit checks, which are noted on your credit profile. If you make too many applications for finance in a short amount of time, it's likely to affect your score.
Getting a quote for a car finance deal doesn't impact your score though, as this involves a soft credit check. It's only if you choose to go ahead with a finance option that a hard search will happen.
What is the lowest credit score to finance a car?
There's no minimum score when it comes to getting car finance. If you've never had to borrow before, your credit score is likely to be zero. But you should still be able to find a finance deal.
Some lenders might use automated approval systems, and if your score is below a certain threshold, they automatically reject your application. That's why it's useful to get a quote for car finance to get an indication of who may be willing to offer you a deal.
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