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Last updated on 17th of December 2021

What credit score do I need to buy a car?

If you’ve had problems with debt in the past, you might be wondering what credit score you need to buy a car and whether yours is good enough to drive a new vehicle away from the dealership. Read on to learn all about credit scores and car finance.

If you’ve had problems with debt in the past, you might be wondering what credit score you need to buy a car and whether yours is good enough to drive a new vehicle away from the dealership. Read on to learn all about credit scores and car finance.

What credit score do I need to buy a car?

Whether you’re applying for a mortgage, a personal loan or car finance, your credit score is important. Yet there is no minimum score needed to be approved. Having a good credit score will certainly increase your chances of getting a loan and you’ll probably have access to a wide selection of deals and rates, but it’s still possible to buy a car with a low or average credit score. 

Instead of worrying about what credit score you need to buy a car, focus on improving your credit score with good money habits and sensible debt management.

How are credit scores calculated?

Your credit score is calculated by credit reference agencies. You won’t just have one credit score, though. In fact, you’ll have at least three.

There are three main credit reference agencies in the UK. They include Experian, Equifax and TransUnion. Each agency will create a report for you based on your financial behaviour in the past. They’ll look at whether you’ve borrowed money and how well you managed it. 

The information credit referencing agencies use is given to them by lenders, so whether you’ve been good at managing debt or you’ve struggled to stay on top of it, your financial behaviour will be recorded.

On your credit report you’ll find details of the following:

  • Personal loans

  • Phone contracts

  • Credit cards

  • Store cards

  • Mortgages

  • Overdrafts

  • Utility contracts

  • Payment history

If you missed repayments on any of the above or defaulted on your debts, this is likely to have had an impact on your credit score.

Your credit report will also show whether you’ve had a joint bank account or joint mortgage with someone else. Even if you’ve broken up with or no longer speak to this person, there’s a chance their financial behaviour could affect yours. To financially delink yourself from them, you’ll need to contact the credit reference agencies and ask for a notice of disassociation.

Do lenders have different credit requirements?

There are no industry standards dictating what credit score people need to buy a car, so you’ll have to rely on lenders' own policies and criteria.

Lending criteria can vary from one lender to another. This means that while some lenders will approve your application and give you the loan you need to buy a car, others will reject you.

How important is my credit score when buying a car?

Your credit score is important when buying a car, but lenders consider more than just the score itself. 

Think of your credit score as a summary of your credit report as a whole. And rather than focusing just on that score, most lenders will be more concerned with the health of your entire credit history. 

Lenders basically want to see that you have the ability to manage debt well. They’ll use your credit information to determine how likely you are to pay back your new debt on time. 

If you’ve had any problems with debt, these issues will likely show up on your credit file. Very few people have perfect credit histories, though, so try not to worry about any mishaps from the past. Instead, it’s far more productive to focus on how you’ll improve your credit score going forward. 

What else do lenders take into account?

Your credit report isn’t the only thing that lenders take into consideration when deciding whether to approve your loan or not. They’ll may think about the following:

  • Your income

  • Financial obligations such as rent, mortgage and bills

  • Existing debts

Can I buy a car with bad credit?

Having bad credit doesn’t necessarily mean you won’t be able to get a loan and buy a car. 

Getting your loan approved can certainly be harder if you don’t have a good credit score or you’ve struggled with debt before, but that doesn’t make it impossible. 

You may struggle to access the best deals. Lenders usually keep their cheapest loans for customers with strong credit histories. This is because they see them as less risky than those who’ve had problems keeping up with debt payments.

What are the different types of car finance?

There are four main types of car finance. These include: 

  • Hire purchase

  • Personal contract purchase

  • Personal contract hire

  • Personal loan

If you’re unable to access any of the above types of car finance, a guarantor loan might be suitable. To get this type of loan, you’ll need to find a friend or relative who agrees to help you repay the debt if you’re unable to make the repayments yourself.

How can I improve my credit score before applying for a car loan?

The higher your credit score, the better your chances will be of accessing a loan with a low-interest rate and generous terms. So, it makes sense to try and improve your credit report in the run-up to submitting your application. Here are a few ways you can do just that:

Pay all your bills on time

This one might sound obvious but it might well be the best thing you can do for your credit score. Paying all your bills on time will show you’ve got everything under control and that you can easily manage your debt. Set up a direct debit so you don’t forget to make payments.

Avoid applying for lots of credit in a short space of time

Lenders tend to shy away from borrowers who’ve applied for lots of credit within a matter of days, weeks or sometimes even months. This is because it gives off the impression that the borrower is desperate for money, regardless of whether they can afford to pay it back or not.

While there are no concrete rules saying how long you have to leave it between applications, try to hold off applying for other forms of credit for 3-6 months before you want to get a car loan. 

If you want to buy a car soon but you got a credit card, personal loan or mortgage recently, this doesn’t necessarily mean you’ll be rejected. It’s worth taking a look at your credit report yourself to see how healthy it is.

Stop carrying debt over

Do you keep carrying debt over from one month to the next, only paying off the minimum each time? If possible, clear your current balance and start paying off the full amount each month. 

Lenders may be concerned if they see you only paying off the minimum amount and they may reject your application.