Can you get car finance with bad credit?

Buying a car outright is a huge financial commitment for the average person. Even with used car prices finally beginning to drop – and substantially so – from the rather insane peaks of the pandemic, the average cost of the most popular used models still sits at a rather hearty £17,250.

So, what do you do if you don’t have the best part of twenty grand ready to splurge? Most of us look to spread the cost via finance deals; personal contract purchase (PCP), hire purchase (HP) and personal contract hire (PCH) car leasing being the most common methods of getting behind the wheel. But with all of those agreements being types of loans, how does it work if you have bad credit?

Below, you’ll find all the answers you need surrounding the world of bad credit car finance.

Can you get a car on finance with bad credit?

Yes, you can, but financing a car with bad credit does tend to make things a bit more difficult.

Having a bad credit history positions you as more of a ‘risk’ to lenders. Because of that, they’ll be more careful in lending to you which means you’ll typically find it harder to get approved on deals with lower interest rates or larger loans attached.

So, yes you absolutely can get car finance with bad credit, but you might find yourself missing out on certain deals or having to pay a higher interest rate to make up for the risk associated with your current credit profile.

Can you get car finance with no credit history?

Applying for car finance with no credit history will see you considered similarly ‘high risk’ by lenders because there’s no proof of you being a reliable borrower, which is why it’s often tougher for young people to get approved for finance.

So, if you’re trying to get a car finance deal with no real credit profile to speak of, you’ll likely be in the same boat as bad credit applicants, looking at higher interest rates and frozen out of some of the better deals available.

What is a bad credit score in the UK? And what credit score do I need to buy a car on finance?

There isn’t a set bar for what’s considered ‘bad credit’ in the car finance industry. Every lender has its own criteria as to what makes an applicant a ‘prime’ (good credit) or ‘sub-prime’ (bad credit) candidate – and indeed what being a prime or sub-prime applicant means in terms of the deals and rates you’re offered.

The easiest and most objective way of understanding your credit profile is to use one of the trusted credit agencies’ credit score apps. Take Experian, one of the biggest agencies in the UK, as an example. Experian uses a 0-999 scoring system that will give you a rough idea of where you’re likely to stand with lenders. A score of 561-720 is considered ‘Poor’, while a score below 561 is considered ‘Very Poor’. If you’re in either of those brackets, you’ll probably be considered to have a bad credit history by most lenders.

How to get car finance with bad credit

If you’ve got bad credit, don’t worry. There are plenty of ways you can get a car finance deal.

Improve your credit score

If you can afford to wait a little bit, improving your credit score can put you in a better position to get finance. There are a number of simple steps you can implement to get your credit score moving in the right direction:

• Pay off your debts in time and in full: paying off your key debts like your utility and credit card bills in a timely fashion will show lenders you can manage your money reliably and boost your score.
• Manage your credit utilisation: your credit utilisation is the amount of credit you’re using versus the amount of credit you have available to you. You want to keep this at 30% or less to bump up your score (for example, say you have £1,000 of credit available to you, you’ll want to keep the amount you use to £300 or below).
• Be careful with your credit applications: be wary of formally applying for credit too often. Whenever you do so, a hard credit check will be carried out which will be recorded on your report and put a dent in your credit score. You can usually gauge your eligibility for various types of credit using your credit score app or via soft credit checks that don’t impact your credit score (we, for example, offer a free soft credit check that you can use to find out your eligibility before formally applying).
• Register to vote: register on the electoral roll at your current address. It’s an easy way to get all of your details in order for credit agencies, and impacts you negatively if you’re not on there.

Pay more upfront

The larger the deposit you can put down on your car finance deal, the lower the interest rates you’ll have access to. Paying more upfront will also make your monthly payments smaller, making them more manageable across the course of your deal.

Choose a cheaper car

Opting for a finance deal on a cheaper car means a lower loan amount, which in turn increases your chances of being accepted and lowers the interest rate on the deal.

Add a guarantor

Adding a guarantor – that’s someone who can honour your financial obligations on the deal if you can’t – eliminates a lot of the risk for lenders, making them more likely to lend to you and offer better deals.

Find a bad credit specialist

There are bad credit car leasing and car finance specialists out there who are more likely to work with bad credit profiles. We’re one of them – and big believers in the idea that everyone should be able to get a good deal on a car that they want.

Looking for a great bad credit car finance deal? Hippo Finance can help you

Getting car finance with bad credit doesn’t have to be difficult. At Hippo Finance, we work with thousands of bad credit applicants every year to get them a great deal on a car they love. Indeed, we’re proud to call ourselves bad credit and zero deposit specialists.

If you want to know what your options are, visit Hippo Finance today and use our free soft credit check to see what deals you’re eligible for without affecting your credit score.