Let’s take a hard-nosed but practical look at the painful subject of bad credit histories and applying for car finance.
The key message at the outset – don’t give up! Car finance may be available for you even if you do have a poor credit history.
Deal with reality
If you have issues on your credit history files and it’s to do with inaccuracies and errors, then you have certain legal rights with respect to getting redress. In what follows though, we’re considering that the problems on your files are genuine. A credit repair company can help you improve your credit.
The first tip – don’t waste your time ranting, feeling sorry for yourself or trying to explain/apologise to others for your history. Those things will achieve nothing. They certainly won’t put you behind the wheel of your chosen vehicle. To be blunt, that car salesperson just isn’t interested.
Instead, accept the following realities of life where car finance is concerned:
- your credit history problems exist and aren’t going anywhere fast;
- they’ll be visible to just about anyone thinking of lending you money;
- they are something you’re going to have to live with and manage if you’re to secure finance for vehicle purchase purposes;
- they are typically NOT showstoppers in terms of your finding such finance – providing you go about things the right way.
Remember that car finance companies aren’t ogres and they don’t make moral judgements about the way you might have managed your affairs in the past. By contrast:
- they’re desperate to try and find ways to lend you money, as that’s the business they’re in;
- they’ll have seen problems like yours thousands of times before and also very probably far worse cases;
- they do though need to understand the risks involved in lending to you in future.
Lenders are not all the same
The final point above is critically important for one simple reason – not all potential lenders assess the ‘future risk’ inherent in a loan proposition in the same way. Some may interpret your position to be ‘high risk’ in terms of a loan but another may see things very differently.
That is going to have a significant impact on both the availability of finance to you and the price you’ll have to pay for it.
So, the differences between lenders’ assessment approaches can be a powerful factor you can exploit in terms of securing finance but it’s also a potential problem for you too. The reasons for that are simple:
- the chances are, as a private individual, you won’t know which lenders are likely to be more sympathetic to your particular credit history issues, as opposed to those who might be less well disposed;
- like it or not, every time you apply for a loan and are refused, that fact will go onto your credit history records too. The more refusals you get, the more it will adversely affect your records.
The challenge therefore is clear – how do you find a potentially sympathetic lender and one that may have suitable interest rates given your circumstances?
One thing that you really don’t want to do is to simply make multiple applications in parallel hoping you strike lucky – unless you want to risk further damage to your credit scoring.
The solution for significant numbers of people seeking vehicle finance might be a bad credit car finance broker.
These are companies that operate on behalf of clients looking for vehicle (and other) loans. They have access to significant numbers of potential lenders, some of whom may be more suitable for you and your circumstances than others. The broker will use his or her knowledge of the markets and lending companies to try to ‘place your risk’ – which is another way of saying finding you your finance and at an attractive price.
They won’t waste their time or yours, by applying to companies that they already know may be less receptive to your requirements.
It’s typically fast and runs less risk of damaging your credit history than if you were making your own approaches to those same potential lenders.
Can a broker guarantee to find you a loan? No, they can’t. In some circumstances, a credit history may be so poor that it may prove impossible to obtain a loan. Yet in many cases the broker will succeed. It’s worth considering them, however poor you think your credit history may be.