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Jul
It can be really disheartening if you’ve been refused car finance. There can be a number of reasons that you’ve been unsuccessful in your application, from a bad credit score to not meeting the eligibility criteria.
In this guide, we look into why you might have been refused car finance and what you should do next if you’ve been unsuccessful in your car finance application.,
Possible reasons you’ve been refused car finance
Bad credit
One of the main reasons people can be refused car finance is due to a poor credit score. This is because people with bad credit are viewed as a higher risk by lenders.
There are many things that can affect your credit score. Missing debt repayments or having a CCJ (County Court Judgement) can all negatively impact your credit score and potentially stop you from getting car finance. Events like these can stay on your credit report for years – so even if you’re currently in a good financial position, historic issues can cause a problem if you’re attempting to get car finance.
GetCarFinanceHere offers bad credit car finance, working with your monthly budget and current circumstances to find the best car finance deal.
You can read more about why your credit score is important when buying a car in our guide.
Age
Your age will affect your eligibility for car finance. If you’ve passed your driving test before you’ve turned 18, you’ll find that you get refused car finance, as agreements can only be given to those who are 18 or older.
Some lenders might refuse to give car finance to people who are aged between 18-21. This is due to a number of reasons, but overall, it is because they judge the risk to be higher. If you’re in this age bracket you could find that you get car finance, but with very high interest rates.
Employment
When assessing your eligibility for car finance, most lenders will look at your employment status. Those who are in full-time employment and have been in the same role for a long time, are seen as less risk than those who aren’t.
If you’re unemployed, you will have to find another way of showing that you will be able to cover the monthly payments. If you can’t do this to the lender’s satisfaction, you will be refused. You can read more about getting car finance when you’re unemployed in our guide.
If you’re self-employed, you might also have a problem with getting approved for car finance. Usually, you will have to show three years’ worth of income, to prove you can cover the payments. If you can’t do this, you may be refused car finance.
Affordability
Car finance lenders will look at your financial situation to ensure you will be able to make the monthly repayments. If they believe the payments are too large for you to be able to cover each month, they will refuse you car finance.
If may be that the car you’re looking at is too expensive, and finding car finance for a cheaper alternative model will be successful. Paying a larger initial deposit will also reduce your monthly payments, which could mean you get approved for car finance.
Driving licence
You’ll only be able to apply for car finance when you have a full licence. So, if you only have a provisional licence and planned on applying for car finance to get a car to learn in, you’ll be refused.
If you need to get a loan to get a car to learn to drive, you can do so with a personal loan. However, you should also look carefully at your options for financing a car to ensure you find the best one for your circumstances. You can read our guide on the best way to buy a car for more information about your options.
Does being refused car finance affect my credit score?
When you apply for car finance, the lender will carry out a hard check on your credit report. This will leave a mark on your credit report and can negatively affect your score if you have too many hard checks.
Future lenders won’t be able to tell if you’ve been approved or refused for the finance, but they’ll see that you’ve applied for finance. If you do this a lot, it can suggest that your finances are in bad shape.
It’s best to only apply for car finance once you’re happy with a deal and you’re confident that you’ll be accepted. You should check your own credit score before applying and make sure you meet the eligibility requirements put forward by the lender.
Some lenders will be able to carry out a soft check on your credit report before offering you car finance. This won’t show them all the information they need, but it can give them a good idea of whether they’ll be able to approve you for car finance or not. Soft checks won’t leave any mark on your credit report.
What to do if you’ve been refused car finance
If you’ve been refused car finance, you should first try to work out why you were refused. If it was due to your credit score, you might need to take some time to build up and improve your score. Make sure all your details are correct and ensure you’re paying back any debt on time.
You can also see if you need to disassociate yourself from anyone that you share a financial history with that might be affecting your credit score. If you’ve opened a joint bank account or applied for a joint loan with someone who has a bad credit score, this can impact your own score. If you no longer share finances with this person, you can ask for them to be removed from your report. This can help to improve your score.
If you’ve been refused car finance, it’s important to not repeatedly apply. The more you apply, the more hard checks will be on your report, which will negatively impact your score. Take the time to assess why you were refused and try to fix the problem before applying again.
Every lender will have different eligibility criteria, so it may be that a different lender will be able to approve you for car finance. Make sure to research the lender to ensure that you fit their requirements before you apply again.
At GetCarFinanceHere, our team will work to find you the best car finance deals from our network of lenders, helping you through the whole process. You can apply online today or contact us for more information.