What Credit Score is Needed for Car Finance in the UK?

Your credit score is one of the factors lenders will look at when you apply for car finance. A good credit score will improve your chances of approval and of getting the best interest rates, but there are options for people with bad credit too.

Rhiannon Philps Last updated on 13 July 2021.
What Credit Score is Needed for Car Finance in the UK?

When you apply for car finance, your credit history is one of the most important things a lender will look at.

Finance providers will use your credit history to determine the level of risk you present, and so help them decide whether to approve your application and what interest rate to offer you.

Although this is just one factor lenders will look at, it is one of the most significant. Read on to find out how your credit score affects your car finance application, and what you can do to boost your chances of approval.

Why is your credit score important?

Your credit history is important when you apply for any kind of credit, including personal loans and car finance.

It shows information like when you’ve applied for credit, how many credit applications you’ve made, how much you owe, if you’ve made all your repayments or if you’ve missed any. It will also show up any debt relief orders (DROs), CCJs, IVAs or bankruptcies. In short, it tells a lender your financial history and how you’ve handled credit in the past.

Lenders will use this information from the credit check, as well as other details like your income and expenses, to decide how well you could manage the credit you have applied for. Your credit score will also influence the interest rate the provider will offer you, if you get accepted for finance.

If you have a good credit score, lenders will view you as less of a risk, so they are more likely to approve your application and offer you the most competitive rates.

However, if you have missed repayments in the past, made lots of applications for credit, and have a chequered credit history, your credit score will be lower. This will make lenders more wary about offering you car finance and, if they do accept your application, the interest rates are likely to be higher to account for the increased risk.

How can I check my credit score?

Because applying for credit leaves a mark on your credit history, you should only apply for car finance if you are confident that you will get accepted. Checking your credit score before applying for finance can highlight anything that could be a problem for lenders, and allow you to take steps to improve your score if necessary.

You can check your credit score online from all three main agencies for free, and this won’t leave a mark on your file.

Some car finance providers will also allow you to check your eligibility for finance, again without affecting your credit score.

» MORE: How to check your credit score

What credit score do I need to get car finance?

The better your credit score, the more likely you are to get approved for car finance with a competitive rate. However, even if you don’t have a great credit score, you may still be able to get car finance.

It’s difficult to say specifically what score you need to get car finance, partly because credit reference agencies like Experian, Equifax and TransUnion operate different systems. Equifax ranges from 0 to 1,000, Experian from 0 to 999 and TransUnion from 0 to 710. With all agencies, the higher the number, the better your credit score.

Those with good and excellent credit scores should find it easier to get accepted for car finance, as long as they have sufficient income to afford the repayments. A good credit score is anything over 531 with Equifax, 881 with Experian, or 604 with TransUnion.

If you have a fair credit score, you may also be eligible for finance but face higher interest rates than someone with a better score.

If you have a poor credit score, some lenders may reject your application, but others may approve it. There are specialist finance providers that cater for those with poorer credit scores, or you could try to find alternative sources of finance.

Bear in mind that having a limited credit history could also affect your chances of approval for finance, as lenders won’t have much information to determine how much of a risk you are. If you’re in this situation, perhaps because you’re a young driver for example, it may be worth building up a credit history before you apply for finance.

Your credit score is just one of the checks that car finance providers will make. Your income, employment status and the amount you want to borrow will also influence the lender’s decision on your application.

» MORE: What is a good credit score?

Can I get car finance with bad credit?

Although it is undoubtedly easier to get car finance with a good credit score, it is possible to get finance with bad credit.

If you are struggling to get accepted for standard car finance, you could consider applying for finance from providers that specialise in lending to people with poorer credit scores.

You could also consider guarantor car finance. The guarantor’s commitment to repay the personal loan if you default reduces some of the risk for the lender, so can help you to get accepted for car finance. If you make all the repayments on time, this will also help to improve your score.

» MORE: Car finance options if you have bad credit

How can I improve my chances of getting car finance?

Whether you have a good or bad credit score, there are some things you can do to improve your chances of getting car finance and to help you access the most competitive rates.

  • Improve your credit score. If your credit score has room for improvement, you may want to wait before applying for finance so you have time to increase your score. For example, you can continue to make your existing payments, try to clear some of your debts, and check there are no mistakes on your report.
  • Improve your affordability. Lenders will look at your income to see if you can comfortably afford to repay the car finance alongside your other expenses including rent/mortgage payments, bills, and more. You could prepare for a car finance application by reducing your expenses where possible, to get your finances in a healthier position.
  • Put down a bigger deposit. If you can save up more money as a deposit for your car finance agreement, you won’t need to borrow as much. This reduces the risk for the lender so they may be more likely to approve your application for a smaller loan.
  • Choose a cheaper car. The cheaper your car, the less you will need to borrow to pay for it. Lenders will be more likely to approve your application if you only need to borrow a small sum as you are more likely to make all the repayments.

» COMPARE: Car finance

Image source: Getty Images

About the author:

Rhiannon is a financial writer for NerdWallet, with a particular interest in personal finance and insurance guides for consumers. Read more

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