Have you got a damaged credit history? It could harm your chances of buying a new car.
If you’re thinking of buying a new car, you may be considering a finance package.
Credit deals from motor manufacturers have become very competitive and therefore very popular over recent years.
Rise in sales
In 2014 more new cars were sold that at any point in the previous decade, and figures from the Finance and Leasing Association suggest that the majority were purchased through some form of credit.
This could be a personal loan or dealer finance such as a personal contract purchase (PCP) or hire-purchase agreement.
With interest rates in the wider economy remaining at all-time lows, credit is cheaper than ever at the moment – provided you have a clean borrowing record.
Since the financial crisis, lenders have become much more reluctant to accept loan applications from people who have a history of missed or late repayments.
So if you’re about to seeking credit to buy a new car – or for any other reason, for that matter – it is worth doing a little research in advance.
How to check your credit record
There are three credit-reference agencies in the UK: Callcredit, Equifax and Experian.
Banks and other finance companies check the records of anyone who applies for credit using one of these agencies.
If there are any black marks, for example a loan repayment which was late or missed, it will harm your chances of being accepted.
Your record is not a secret and you can order a copy for £2 per agency – use the links above to request yours.
The agencies will also offer more in-depth services for a monthly fee – usually with an initial free trial.
These services could include fraud monitoring to make sure no one illegally applies for credit in your name, but you are under no obligation to sign up.
Once you have a copy of your report, you need to make sure it is accurate: if there are any records of missed repayments, should they be there?
If there is a mistake on your file or something you don’t agree with, you can try to put matters right.
Generally, the company which has reported the late or missed payment should be your first port of call: if it admits the error, it can amend your record.
If you and the lender disagree over whether there should be a black mark on your file, you can talk to the credit-reference agency.
You can also add a comment explaining what has happened or that the missed payment was the result of exceptional circumstances or an administrative mistake.
Cleaning up your record
If any issues on your credit record are genuine, you need to start getting into good habits and establish a pattern of responsible borrowing.
Credit-builder cards are aimed at people with poor credit histories: they normally charge higher-than-average interest rates, but provided you pay back what you spend quickly you won't incur any interest charges.
Missed payments stay on your credit record for six years, but if you show a pattern of disciplined borrowing, lenders may be more likely to offer you credit even before any black marks have expired.
Register to vote
Making sure you are on the electoral register can help you get credit, says Laura Barrett at Equifax.
"We suggest that anyone applying for credit or a new service or utility contract ensures they are registered on the electoral register," she says.
"The electoral roll is used by many companies for identity verification purposes, in order to combat fraud.
"Consumers should register on the electoral roll at their current address by contacting their local authority.
"It’s an important first step towards giving them the best chance of getting the credit they need."