How to maximise your odds of being approved for car finance

Read our tips and increase your chances of getting approved for car finance

John Evans
Aug 16, 2021

Thinking about the possibility of getting your next car with an affordable and manageable finance deal? Car finance can be something of a minefield filled with hoops to jump through and criteria to meet.

Once you have found the car you want, in the right colour with the right spec and the Android Auto function you cannot live without, all at the right price, you need to submit a finance application to the lender before you go any further. Only once you have had your application approved are you able to make a deal.

This might seem a little unfair, but put yourself in the shoes of someone lending you money, they need to know you can afford to pay it back. That’s easier if you know the person you’re lending the money to, but if you don't, it’s much harder.

This is where your credit rating comes in. It's calculated by credit reference agencies including Equifax, TransUnion and Experian that collect records on aspects of your personal and financial histories.

Finance companies take this rating and apply it to their own rating system to arrive at a score that will determine whether or not they’ll lend you any money and if they will, how much and at what interest rate.

It all sounds a bit Big Brother doesn't it? But the good news is, if you’re struggling to get car finance approval, there are things you can do to improve your credit rating and turn that ‘no’ into a ‘yes’.

But before you get too stuck into the finer details of car finance, there are a few criteria you must meet to have any chance of getting yourself a deal. Be sure you tick all of the following boxes before you apply for finance.

  • You are employed or have an income of over £10,000 (this cannot be child benefit)
  • You are over 18 and under 75
  • Your monthly income is at least four times the monthly cost of the car you wish to buy
  • You have held UK residency for over 36 months
  • You have no active CCJs
  • If you are a student, you have a better chance of getting approved if you are also working at the same time.
  • If you are self-employed, it will help your application if you have been so for more than 12 months. If you have been self-employed for a shorter period, the finance company may take into account any previously secure employment

Understand your credit rating

Knowing what aspect of your financial and personal histories credit reference agencies consider when calculating your credit rating will help you work out how to improve your situation.

Factors that will decrease your rating are having too many loans or missing repayments, having multiple credit cards and bank accounts, having a poor employment record, being frequently overdrawn, having a county court judgment against you, being associated with someone who has a poor credit history or simply making too many loan applications.

Remarkably, having had little credit in the past can count against you, too, because the agency has less information to judge you on.

Review your financial and personal histories

Now you know what credit reference agencies are looking for, you should review those areas of your personal and financial record that may be letting you down. Things you should check are whether there are existing loans you can settle, dormant accounts you can close and credit cards you can terminate.

Make sure you’re on the electoral register, too, since being on it proves to a lender that you have a regular address. Any actions you take to address these areas will be fed back to the credit reference agencies and your record updated and score adjusted, hopefully in the right direction.

Check your credit score for errors

You have a right to see your credit history and if you think you notice any errors or information that needs updating or clarifying, tell the reference agency concerned immediately. It will mark your file as being disputed and has 28 days to update it or explain why it believes it’s accurate as it stands. Also, speak to the lender who may be using this incorrect information to see if you can resolve things that way. 

Demonstrate financial resposibility

When applying for your loan, be realistic about what you can afford to borrow. The finance company knows your credit score, so demonstrating financial responsibility by applying for a loan that it is comfortably within your means to repay will always impress them and improve your chances of getting a loan.

Apply for finance on a lower value car

Especially if you’re a younger applicant, an application for a loan on a low-value car is more likely to be accepted. If you’re aged 18 to 21 you could get a loan equal or up to £2,000 more than your annual salary if you have a higher credit score, so review your credit history before applying.

Know your numbers

When you apply for a loan, the finance company will want to know things such as how long you have been employed, your annual salary, what you pay in rent or mortgage repayments each month, your general monthly expenditure and the value of any existing loans. Being able to answer these questions promptly and accurately will improve your chances of getting a loan.


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