Looking for a no credit check car loan? If you’re looking to finance a vehicle, but have a poor credit history, you may be searching for a no credit check car loan. Perhaps you’ve been refused car finance in the past, or you have one or more County Court Judgments (CCJs) against you.
All responsible car finance lenders will run some form of credit check on you, but you shouldn’t let this concern you. There are still various options available for people with poor credit ratings, and many lenders specialise in car loans for bad credit.
How Do Credit Checks Work?
When it comes to credit checks, there are two different types. A soft credit check won’t impact your credit score, as it’s not reported on your credit file. This is a less in depth search than a hard credit check, which looks at all the information on your credit report, and is recorded.
The information found on your credit file includes things like your name, date of birth, address, and financial history. So your loans, credit cards, overdrafts, as well as your utility bills are all recorded on your credit report. This means that when lenders undertake a full credit check, they’ll be able to see any late or missed payments from the last six years. Insolvency, bankruptcy and CCJs are also noted on your credit file. Having such negative marks on your credit report will lower your credit score.
It’s important to remember though that your credit file is constantly being updated. So even if you do have a history of late or defaulted payments, you can start to rebuild your credit score by making payments towards your current credit commitments on time. Improving your credit score can not only increase your chances of getting car finance, it can also mean you get offered better interest rates.
How Can I Check My Credit Rating?
Before you apply for car finance, it’s generally a good idea to check your credit score, as well as your credit file. These things can be a good indicator as to whether you’ll be approved for a car loan, and can also flag any issue that could potentially be resolved before you make an application. For instance, if there is any inaccurate information on your credit report, this could be impacting your score - you can simply request for the details to be amended.
You can get a copy of your credit file through one of the prominent credit reference agencies - you’d generally need to pay a small fee for each of these. The three main agencies in the UK are:
You can check your credit score for free using sites like Experian and Credit Karma. It’s often helpful to regularly check your score, to see if you’ve managed to improve it. There are a few easy ways to boost your score - we’ve listed a couple below:
- Register on the Electoral Roll: It’s important to have accurate information on your credit file, and proving where you live by registering on the electoral roll can be beneficial
- Build Your Credit History: Having no credit history can be just as detrimental to your credit score as having bad credit, as lenders can’t see how you manage your money. You may therefore need to take out credit to build your credit profile
- Pay On Time Where Possible: Making payments on time or early can demonstrate that you’re a reliable borrower. This includes bills as well as things like credit cards and loans
For more information on your credit rating and bad credit, you can check out our Bad Credit Explained page.
What Factors Do Car Finance Providers Consider?
Your credit score isn’t the only factor lenders look when making a loan decision. They will also consider things like the amount you can afford to pay each month, and your general affordability. They’ll therefore ask questions about your income and expenditure, and may wish to check recent bank statements. If you can prove you have a regular income, such as through payslips, this will also help demonstrate your ability to pay.
Another consideration for finance providers is whether you’re able to make an initial deposit towards the vehicle. A large deposit will typically show you’re able to save up money, and are thus financially responsible. And the less you have to borrow, the better, as it will mean lower interest rates.
Secured Car Loans
When it comes to car finance, it’s good to bear in mind that this is a secured loan. Secured loans, as the name suggests, are secured against a valuable asset. The most common example of a secured loan is a mortgage - your property acts as collateral against the loan. With car loans, your vehicle is the collateral.
The benefit of a secured loan is that, because there is less risk for the lender, you’re more likely to be accepted even if you have a poor credit history. If you’re unable to keep to the repayments, the finance provider can repossess the car, therefore they won’t be losing money. Of course this does mean there is more risk for the borrower.
It’s for this reason that it’s essential you consider your finances before taking out any form of credit. You should work out how much disposable income you have each month, and then figure out how much you can put towards car expenses. This includes the loan repayments as well as various upkeep costs.
Can I Apply for No Credit Check Car Finance?
As discussed above, lenders don’t tend to offer no credit check car finance - most will at least perform a soft credit check when you apply. But even if you have a bad credit rating, this doesn’t necessarily mean that you can’t get a car loan. Many finance providers understand that in a lot of cases, a poor credit score will be through no fault of your own. For instance, if you haven’t taken out much credit previously, you may not have much of a credit footprint. Lenders therefore can’t see how you manage your money, and your credit score might be lower.
Alternatively, you could have experienced a challenging life event, such as taking a leave of absence from work, or losing your job. Should this happen, it’s likely that you’d fall behind with your repayments. And as negative marks on your credit file stay there for around six years, they could be affecting your score for some time.
As car finance is a type of secured loan, and your vehicle acts as collateral, your credit rating may be less important. In fact, it can be easier to take out vehicle finance than unsecured personal loans. So even if you have bad credit, and are looking for no credit check car finance, we will do our best to connect you with a suitable lender!
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