Not everyone has a stellar credit rating. Unfortunately, financial institutions use your credit rating as a basis for determining your capacity to borrow and pay. While lending companies do not necessarily see your actual score, they will have access to your credit history. And if you are looking to buy or finance a new vehicle, your credit score matters a lot. What can you do if you have bad credit? Can you still apply for car finance and get approved?
Check your credit rating and assess the situation
Do not lose hope if you feel your credit rating is not good enough to finance a car. Car financing companies today are willing to work with all kinds of customers and offer them a deal that works for them. For example, you can get no deposit car finance on a PCP agreement with low monthly payments. For someone who is strapped for cash and wants to improve their credit score, a no deposit deal is a great choice.
In the process of checking your credit rating, use a service that will allow you to find out if you have missed any payments, have due credit or are linked to people with low credit scores. Taking time to review your credit history helps in pinpointing errors and correcting them. Once you get everything sorted out, you may even qualify for better deals than you initially thought possible.
Start paying off your debt on time
Sure, you may have missed a few payments in the past. But you can always start over and commit to paying on time. Keeping your end of the deal will show dealers that you are a responsible borrower. Over time, timely payments can help improve your credit score.
If you cannot avoid using your credit card, at least try not to spend over 75% of your credit limit. Exceeding your limit will only show that you cannot manage your finances.
Sever your connection with people who have bad credit
If you do not take the time to review your credit history, an old joint credit card may still lurk and ruin your rating. If you had a mutual agreement with someone who has since got a lousy credit rating, you might want to sever your connection with these people. A notice of disassociation will cut the ties, at least financially. Credit agencies should be able to remove the record of your relationship with a person who has bad credit.
Pay a higher deposit
Most car financing deals require a deposit. If you have cash, you can pay a higher deposit to increase your chances of getting approved. If you are willing to pay a little more upfront, the lender will have more confidence in your commitment, and capacity to pay. Most lenders are willing to look beyond your credit rating if you are determined to show that you are financially capable.
If all else fails, you can also try getting an unsecured guarantor loan. However, these loans tend to have higher interest rates. Ultimately, you need to decide whether this type of loan is the best route to take if you are out of options. Alternatively, you can wait a little longer until you get your credit rating back up before you finance a car.
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