What to do if you're refused car finance?
If you apply for a car loan and are turned down, depending on the circumstances, there are a number of steps to take. If you’re currently considering what to do if you’re refused car finance, then read on for some helpful suggestions of potential actions you can opt for.
Investigate why you’ve been refused car finance
With multiple reasons possible for why your application for finance might’ve been declined, it’s worth working out why. Something as simple as an error on your part when filling in the application can result in a rejection. If you feel you’ve got a healthy credit score and there’s no reason for you to be declined, it’s worth double checking your paperwork and ensuring you haven’t made any mistakes.
Contact the finance company
Most finance brokers and lenders will offer you the opportunity to contact them and find out why you’ve been declined for car finance if you’re not able to work out why you’ve been rejected. Sometimes when you use a finance broker who has access to a panel of lenders, they’re unable to match your credit record and situation to any of the finance companies they deal with.
Checking your own credit report
It’s a good idea when investigating why you weren’t accepted for a car finance agreement to examine your credit profile. Companies supplying this service like ClearScore and Experian allow you to see how you look to lenders, which can help identify anything on your record that might be negatively affecting them offering you credit.
The impact of your credit rating
If you haven’t used credit before, you might suffer from a limited credit profile with no history for lenders to look up, so they might decline to offer you finance. Similarly, if you’ve had payment issues in the past and have a bad credit rating, this will also make finance companies think twice about offering you a car loan.
If you’ve been turned down for car finance under these circumstances, it might be worth trying to get a guarantor the next time you apply.
Advantages of a guarantor
A person who is willing to fulfil your payments if you find you’re not able to during the time of your car finance is known as a guarantor. With a guarantor nominated on your car finance application, a lender will feel more confident when it comes to offering you an agreement.
Make sure you obtain the full consent of your chosen guarantor before making your finance applications as it’ll be their credit rating being checked prior to any credit being offered.
Stop applying
Don’t stop applying for car finance completely, but once you’ve recognised there is a problem with your credit history, it might be a good time to stop making any more applications until you’re in a better position.
Multiple failed attempts will negatively impact your credit score, making your attempts to secure finance increasingly difficult.
Rebuild your credit score
If your credit history is to blame, don’t worry as it can be rebuilt. Ensure your name is on the electoral role and that your address is up to date on any credit you currently possess. Set up direct debits for your utility bills to show responsible paying and consider a rebuilder credit card, especially designed to show lenders you can manage repayments.
If possible, pay off any existing debts and if you’ve got a default on your record contact the lender and arrange a repayment schedule. You can also add a 200-word statement explaining your situation that lenders can read to better understand your situation.
Check your credit score six to 12 months after following these steps and ensure it’s in good shape before applying again.