Credit Concerns? How to get credit-record-ready for vehicle finance

Credit Concerns?
How to get credit-record-ready for vehicle finance

So you’ve had some problems in the past – maybe a relationship break up, business failure, or you were over-committed. While bad credit can impair your ability to obtain car finance, depending on the circumstances, and the way you can demonstrate your money management now, you still have some options.

Bad Credit Car Finance

To increase your chances of a yes, even with a bad credit history, check out these tips.

  1. Make sure any defaults are paid. While defaults and collections stay on your credit record for five years, the default listing also shows whether or not the debt has been paid. Even if you weren’t in a position then to make a full or partial repayment, make sure you repay any outstanding balance, and that the listing is updated to show as paid, to demonstrate you have intent to repay a loan.
  2. Pay your utility bills on time. Many credit agencies are now offering “positive credit reporting” – which means that you get recognised for meeting your commitments on time. So, even if you do have a bad credit history, by meeting your current commitments on time, you can demonstrate that you now have some good money management practices in place. Basically, you get credit for being a good payer, rather than just being penalised for past mistakes.
  3. Make sure you have good account conduct. Un-arranged overdrafts or failed transactions due to insufficient funds makes it look like you are bad at managing your money (for example, not aligning up your pay dates with regular payments) or are forgetful, and don’t always make your payments on time. The two most important considerations when someone is assessing your loan application are “can you afford the loan?” and “are you likely to repay the loan?” Obviously you need to verify that you do have sufficient capacity to repay the loan, but even if that is the case, you still need to show that you are likely to meet your loan repayments, on time.
  4. Pay rent or mortgage payments on time, so you can demonstrate good money management. Rent or mortgage payments are a fixed and known regular commitment. By making sure these are always paid on time, you can show a good payment history to a potential lender, showing that you prioritise meeting these important commitments. This is especially important if you don’t have any other credit facilities at the moment. A lender will often want to see the last three to six months payment history for other loans, hire purchases or credit cards; if you are unable to show this, then your rent or mortgage payments may be an acceptable substitute to show your commitment to meeting regular payments.

So, while having defaults and collections on your credit check report does mean you might have a “bad credit” profile, provided you can demonstrate you have put some good money management practices in place, and that you have the intent to meet your commitments, it doesn’t mean you will now automatically be declined for a car loan.

While clear credit and a good credit score is likely to get you an easier approval - and of course lower interest rates - by putting in a little bit of work to turn your credit profile around, you may still be able to get that car loan approved.

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Disclaimer: Please note that the content provided in this article is intended as an overview and as general information only. While care is taken to ensure the content is correct, the information provided is subject to continuous change. Please use your discretion and seek independent guidance before making any decisions based on the information provided in this article.