Finding out that you have been lumped with a bad credit score can be a very worrying time. Since lenders use your credit score to assess your eligibility for loans – and since repaying loans on time is an excellent way to improve your credit rating – having a bad score can feel like a stalemate situation.
The good news is, there are lenders who look at more than just a number when you apply for car finance. What’s more, a car finance arrangement can help you as you begin rebuilding your rating.
Credit scores are a convenient way of lenders using your past behaviour to assess whether or not you are likely to repay future loans on time. This is sometimes referred to as your ‘rate for risk’. Your credit score varies depending on what model the lender uses to assess your history but, broadly speaking, a bad credit score is considered to be one that falls below 700.
There are a multitude of possibilities for your credit score being low, from late payment or defaulting on a loan, to having no previous credit history. There are also many different things you can do to gradually improve your credit score, such as taking on an affordable car finance loan.
Your payment history constitutes 35% of your overall credit score. It is a calculation of all sorts of repayments, such as credit cards, personal loans, mortgages; if you have made a late payment, or missed one altogether, then this will have had an effect on your credit score.
Car finance, like any other loan, needs to be repaid on time. When you apply to finance a car, then your repayment period will be predetermined before you accept the loan with a monthly amount that fits with your budget. If you are able to keep up to date with your car finance repayments each month, then this will demonstrate that you are able to keep on top of your loan repayments.
Remember that improving your credit score is done incrementally, and that repaying a car finance loan is a great way of building upon bad credit.
Often, buying a car with bad credit can seem like an uphill struggle. Although there are plenty of opportunities for bad credit car finance, the prospect of being rejected and lowering your score further can be off putting.
A car finance company that offers a no credit check car finance application will be able to ensure that your credit score is unaffected until you have been guaranteed car finance.
When you apply for car finance, it is crucial that you only take on what you can comfortable afford to pay each month. Set yourself a budget, and make certain that the monthly payments are feasible. Successfully repaying a loan is a great way to demonstrate that you are able to keep on top of debt, and will help you to work on improving your credit score.