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Oct
Buying a car will be a big decision. From the make and model, the engine size, the fuel efficiency, and even the colour, there’s a lot to consider. But there’s one thing that many won’t always think to check before they buy a car – their credit score. If you’re buying a car on finance, your credit score can influence what deals are available to you and how much you pay. Buying a car can also affect your credit score, both negatively and positively, depending on what happens during your payment period. Read on to find out more.
Why is a Credit Score Needed to Buy a Car?
Your credit score will help to determine whether you are eligible for a car loan. Your credit score will be low if you have failed to make repayments on loans in the past, so having a poor credit score could suggest you would default on payments again – at least, that’s how some car finance lenders will interpret it. Of course, everyone’s situation will be different, which is why we at GetCarFinanceHere can help you to find a great deal for bad credit car finance. We’ll find the best car finance option and the most affordable package for your individual situation, even if you have a poor credit score.
Your credit score will also determine your interest rate. Those with a poor credit score are likely to be offered higher interest rates. This is because they’re seen as more of a risk by lenders. In some instances, it can be better to improve your credit score before you buy a car, so you can benefit from better interest rates. If you’re not able to wait to buy a car, GetCarFinanceHere will work with you to find the best deal that’s available.
Can I Buy a Car with Bad Credit?
It is possible to buy a car on finance with bad credit, as long as you know where to look. GetCarFinanceHere works with leading lenders and compares packages to find the best rates and deals for our customers, including those with poor credit. Whatever your past financial situation, our expert team will take into account your specific circumstances to find the best car finance for your budget. We have a great acceptance rate, providing car finance that’s based on what you can afford, not on your credit score.
How Can I Improve My Credit Score Before Buying a Car?
You may be in a position where you can take some time before you buy a car to improve your credit score. In that case, there are a few steps you can take:
- Pay off any outstanding or over-due payments: bringing any loans or accounts that are past-due up-to-date and current can help to improve your credit score
- Reduce your revolving debt: revolving debt can be, for example, credit cards, where you make a minimum payment every month but there is an amount of debt that is moved on to the next month. Paying off some of your credit card balances can help to improve your credit score.
- Pay your bills and loan repayments on time: this is one of the most important parts of your credit score – payment history. Ensuring to pay all your required payments on time will help to maintain a good credit score.
- Review your credit report information: you should take some time to ensure all the information on your credit report is correct and up to date, including the type of credit accounts you have and your payment history and personal information.
How Does Buying a Car Affect My Credit Score?
Your credit score can affect your package when you buy a car but buying a car can also affect your credit score.
How buying a car can improve your credit score
Buying a car on finance can improve your credit score if you make all your repayments on time. This will factor into the payment history part of your credit score. Making your payments in full and on time will have a positive impact on your payment history.
In addition to this, buying a car can improve your credit mix. Your credit mix is the type of credit you have, for example, a credit car will be a different type of credit to a loan. If you currently only have credit cards (known as revolving credit), adding a loan (known as installment credit) shows you are capable of successfully managing different types of credit, which works in your favour.
How buying a car could hurt your credit score
Buying a car on finance could have a negative impact on your credit score if you are unable to keep up with the repayments. You will usually have a short grace period if you miss one payment, to give you a chance to make pay the amount. However, if you still aren’t able to make the payment your loan will be considered delinquent. The lender will report this to the credit bureaus and your credit score will reduce. If you repeatedly make a late payment, each instance will be reported and will affect your credit score.
If you are unable to pay the loan back at all, your loan will be in default. In this case, the debt will be turned over to debt collectors, who will come to you for the payment. It may be that the car will be repossessed to make the payments if you are unable to cover it another way. You will get a negative mark on your credit report for each separate instance of a missed payment, the debt going to a debt collector, and a repossession.
Buying a car could also affect your credit score if you fall behind on other payments because you are focusing on paying for the car. You should always check your monthly budget to ensure you can cover all of your outgoings, including the car repayments and your usual bills, etc.
GetCarFinanceHere will search over 300 loan products from leading lenders to find the best deal available to you. Whether you have good credit or bad credit, we can find the most affordable deal for you, so you can get your next car. Apply online today or contact us for more information.