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
Jul 2, 2019

If you’re borrowing money to finance it, you’ll find that buying a car or, because you don't actually own it until you’ve paid for it, ‘acquiring’ one is a two-way street.

First, you have to approve of it in terms of liking its price and specification but then in return, the finance company lending you the money to get it, has to approve you.

This can be a surprise for some people but put yourself in the shoes of someone lending you money. They need to know you can and will 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.

Which is where a credit rating comes in. This is a rating 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 but the good news is that if you’re struggling to get finance, there are things you can do to improve your rating and hence your chances, and turn that ‘no’ into a ‘yes’.

Here’s how to maximise your chances of being approved for finance.

Car deals with finance

Understand how your credit rating is calculated

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 a loan 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 £2000 more than your annual salary if you have a higher credit score, so review your credit history before applying.

Have your personal finances at your fingertips

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.

Be sure you satisfy the following basic requirements 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 a car loan if you are working, too 
  • 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

Read more about:

Latest advice

  1. 2020 Nissan Juke: new vs used

  2. 2019 Peugeot 208: new vs used

  3. 2019 Vauxhall Astra: new vs used

What our customers say