What Credit Score do I need for Car Finance?
Financing can be a helpful option when buying a new or used car. However, not all car finance options are the same, and your eligibility is tied to your credit score. Your credit score directly affects your ability to get any type of financial product. There is no set minimum credit score requirement for car finance approval.
Your credit score can differ depending on the lender because they may use different credit reporting agencies. Each lender has its own scoring model, resulting in potential variations in your credit score. CarMoney specialises in helping those with lower credit scores with bad credit car finance.
Having a low score does not mean you cannot get car finance; equally, having a good score does not guarantee acceptance. But a good score does increase your chances of being accepted at a better rate. We go into the details of the different types of car finance and what you can expect depending on your score:
Hire Purchase
A Hire Purchase car finance deal is straightforward. You pay a deposit (usually around 10% of the vehicle’s value) and finance the remaining amount. The deal tends to last 2-5 years, and you make monthly repayments to pay off the loan. At the end of the agreement, you own the car.
A Hire Purchase deal is a significant financial commitment, and the loan is usually secured against the vehicle. If you fail to keep up repayments, the lender can repossess the car.
You can be accepted for a Hire Purchase agreement even if you have a low or fair credit score, but you may find that the rate you are offered is higher.
Personal Contract Purchase
PCP car finance is very similar to HP with a deposit and monthly payments, the main difference being that your repayments are for the depreciation of the car’s value while you have it. At the end of the agreement, you will have the option to trade it for a new car, hand the car back, or pay to keep the vehicle (a large balloon payment).
Lenders again tend to secure the loan against the vehicle, which reduces the risk for them. You can be accepted, even with a lower score – but similarly to HP, the rates may be higher than if you had a good score. Find out more about good credit car finance.
Personal Loan
A personal loan is a fixed-term loan that can be used for any purpose, including car purchases. It tends to have lower rates than other options for car finance and typically lasts one to five years.
You would borrow a specific amount from a lender to buy a car. You will then make fixed monthly payments to repay the loan with interest within the agreed-upon term.
Personal loans tend to require relatively good credit scores to be accepted, and the better your score, the better the rate you will be offered.
Guarantor Car Finance
With guarantor car finance, a trusted individual (your guarantor) agrees to be responsible for your loan if you’re unable to repay it. This can help you secure a loan even with a bad credit score.
This should be considered carefully before proceeding, as you do not want to put your trusted guarantor in a bad position. A guarantor can help you get finance, but be sure that you have the ability to repay the loan, or they will be liable for it.
Find out more about guarantor car finance…
Bad Credit Car Finance
If you have a poor credit history, securing car finance can be challenging but possible. Many car finance providers also specialise in helping individuals with less-than-perfect credit.
A bad credit car finance deal can help you to get behind the wheel, but beware of higher interest rates!
Choosing the Right Option
When it comes to car finance, there is no right or wrong option. It all depends on your personal situation and which finance option suits you and your budget. If you have a lower credit score than you would like, it is important to check out your options before proceeding with a financial commitment.
Learn more about credit scores and how they impact your chance of acceptance. Or try our car finance calculator to see how we can help you get car finance at the best rate —>
