If you’ve applied to get a car on finance and the lender has rejected your application, it can be really disheartening. You may already know why your car finance application was declined or you may be feeling at a loose end. Whatever your circumstances, what you do next can be really important.
The first thing is to click here to check the invoice pricing for the car you are interested in so you are in a better negotiating position on the price of the vehicle.
The guide below has been created for anyone who has been declined car finance and is looking for a way to fix their credit score and increase future chances of approval. Let’s take a look.
Most common reasons you were refused car finance
There can be a number of reasons why you declined car finance. In many instances, it can be as simple as you don’t meet the lender’s criteria. However, the most common reasons can include the below.
- Low credit score. When you apply for car finance, lenders will usually require you to pass a credit check to see how you’ve handled finance or credit in the past. One of the leading factors that affect your credit score is your ability to meet repayment deadlines. If you’ve had problems in the past making payments on time and in full, you may find yourself with a low credit score. A less than perfect credit score makes you more of a risk to lend to and car finance lenders can be worried that you won’t pay their loan back.
- Affordability. In some cases, you may be refused car finance if you simply can’t afford to pay back your finance each month. An affordability check can be used to see how much you could comfortably afford to pay each month towards your finance deal.
- Employment status. Lenders tend to look for applicants who have a full-time job and the required monthly income before they will accept you for finance. Most lenders will require you to submit 3 months’ worth of bank statements to very your income and expenditure to make sure you can afford car finance. If you’re unemployed your options may be limited. However, car finance on benefits or self-employed finance could be an option if you receive enough income and can prove your affordability.
What to do next?
If you’ve recently been refused car finance, it can be more damaging to your credit file and future chances of approval if you take the incorrect steps after a refusal. Here’s what you should do after being refused car finance.
1. Check your credit file
In some cases, you may have been refused car finance if your credit file is not up to date. Having incorrect information on your file can negatively impact your score and make it hard for lenders to verify your application. When you check your credit report you should make sure all your information is accurate and up to date. If not, you can ask the credit referencing agency that provided your credit report to update your details.
2. Increase your credit score
It can be possible to get approved for bad credit car finance but you can increase your chances of approval and also reduce your interest rate by having a better credit score. To increase your credit score, you could consider meeting all your current financial commitments, making any payments on time and in full, reducing existing debt, keeping credit usage low, and registering on the UK electoral roll.
3. Find the right lender
If you’ve recently applied with a mainstream lender and been rejected, it may be because they aren’t right for your circumstances. It can be harder to get approved by banks and prime lenders if you have a low credit score. You could consider using a car finance broker instead. Brokers have access to multiple lenders and can help find the most suitable finance package for your circumstances.
4. Limit finance applications
When you need a car, it can be tempting to apply with a lot of car finance lenders. However, making multiple applications for car finance in a short space of time can negatively impact your credit score. Hard search credit checks especially can be damaging as they are recorded on your credit report for all lenders to see. Therefore it makes more sense to make just one application, to a reputable car finance company like iva car finance. But do some research first in order to find the most affordable one for your circumstances.
5. Find a guarantor
If you really need a car in a hurry, you could be better off getting a car finance deal with a guarantor. Some guarantor car finance deals may have high-interest rates but can be easier to obtain. From a lender’s point of view, they essentially have two chances of the loan being paid back by both you and your guarantor.
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