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Why have I been refused car finance?

Posted on 26/07/2016

If you’ve been refused car finance then you may be left wondering why and what steps you can take next in your journey to acquiring a car on finance. If you’ve been declined then it doesn’t mean that it is impossible to get car finance but you may have to take certain steps to secure it.

Reasons you may have been refused car finance:

  • Bad Credit – One of the most obvious reasons for a car finance application being declined is due to a bad credit score. If you have County Court Judgements (CCJ’s) or have missed credit repayments then this will affect your credit score in a negative way. Missed payments will remain on your credit report for 3 years and any CCJs or Bankruptcy will remain on your credit file for at least 6 years.
  • Too many searches – Each time a lender checks your file, a footprint will be left. Too many of these means that lenders will assume you can’t manage your money well if you are constantly applying for credit.
  • Don’t fit the lenders criteria – This can be a surprising one for people who appear to have good or reasonable credit and are in full time employment but the unfortunate truth is that lenders are looking for a unique type of person based on various ‘borrower profiles’ they have when screening applicants before providing them with finance or credit. If you don’t fit the criteria they are looking for, then you can be declined.
  • No history of borrowing – If you have no history of borrowing, then you have no history of repaying on time and lenders don’t know if you are reliable. Taking out a credit card and spending a small amount on it each month is a good way of building up your credit – just make sure you can afford the repayments!
  • Employment status – If you are self-employed or work part time, it can be particularly difficult to get car finance. Before applying, make sure you have all of the relevant documents which are typically things like bank statements, proof of income and address history.
  • No full driving licence – If you only hold a provisional licence, but you want to sort out your car finance before you pass your test, unfortunately you will find it more difficult to be accepted. There are a few lenders who will provide finance but many of them will suggest a joint application with someone who holds a full licence. To apply for car finance without a full licence, you would usually need a good credit rating.
  • Not on the Electoral Register – If you aren’t registered to vote, your credit rating will be affected. This might sound odd, but it helps lenders determine your identity and trace your address. By registering on the electoral register you make this information accessible to lenders who can use it to determine your suitability.

 

After you have determined some possible reasons as to why you may have been declined, the next step is to look at what steps you can make to either improve your credit score or find a bad credit car finance deal. Quick fixes you can make include registering on the electoral register and paying off any outstanding credit cards where possible. If you have no credit history at all, it can be a good idea to try and get a credit card to build up your credit before applying for finance again.

If you have bad credit and your file shows missed payments, CCJ’s, defaults or arrears then it isn’t going to be possible to change your credit score overnight. If you want your car sooner rather than later you will most likely have to approach a bad credit car finance specialist.

Bad credit and good credit signs

 

Brokers, such as Refused Car Finance, arrange car finance deals for bad credit customers, using a panel of lenders across the UK. It must be noted that a poor credit rating will affect your APR and monthly payments will be higher than if you had a good credit score. This is because you are seen as a higher risk to the lenders. Some companies will advertise 0% interest, or interest free car finance for bad credit customers, however this is not possible as the interest will be built into the cost of the car and therefore into your repayments.

Using online car finance calculators will give you an insight into your monthly repayments depending on the type of loan you would like and an idea of what to expect for your APR and monthly repayments.

Registered with Information Commissioners Office ICO Registration Number: ZA132327

UK Car Finance Limited. Registered in England
Registered number 9397657.
Registered Office Henson House, Whitley Road, Benton, Newcastle Upon Tyne, NE12 9SR

Refused Car Finance and refusedcarfinance.com is a trading style of UK Car Finance Limited and is acting as a licensed credit broker and a lender, we are authorised and regulated by the Financial Conduct Authority, registration number 714966. All finance is subject to status and income. Applicants must be 18 or over, terms and conditions apply, guarantees and indemnities may be required.

Written quotations on request. Certain exclusions for NI residents.

Note: We cannot be held responsible for specification errors, and price errors, we use Motortrade software which is not always 100% accurate. Copyright 2017 Refused Car Finance.

Refused Car Finance can introduce you to a limited number of finance providers based on your credit rating and we may receive a commission for such introductions.

*Representative Example
Cash price – £8,500.00, Deposit – £0.00, Amount of credit – £8,500.00, Rate of interest – 16.24% per annum, Amount of interest – £6,912.00, Lender Documentation fee – £0.00, Lenders option to purchase fee – £10.00, Total charge for credit – £6922.00, First repayment – £256.70, Followed by 58 Monthly repayments of – £256.70, Final repayment – £266.70, Total amount payable – £15,412.00, Representative APR – 29.9%

*Last month, over 51% of Refused Car Finance customers that had their loan arranged were offered an APR of 29.9% or lower

In the first 3 months of this year, UK Car Finance Ltd received 2140 unique applications, of which we were able to offer 2136 applicants a line of credit, subject to the applicant being able to provide acceptable proof of affordability, being free from insolvency and or/a supporting guarantor fitting the lenders eligibility criteria, this represented 99.8% of applicants in this period.

Rated No.1 for car finance in the North East of England based off of Google Business Reviews.