Can you finance a car with bad credit?

Whether you want to buy a used car or a brand-new motor, if you intend to use a loan or car finance to cover the cost, your credit score matters.

The term ‘credit score’ refers to the 3-digit number (ranging from 0-999) that indicates your past reliability for repaying borrowed money. It is calculated from a level analysis of your credit files.

Banks and other credit brokers (including car dealerships) use credit scores to gauge the level of risk associated with offering a loan or finance.

Therefore, it is far easier to get approval for car finance with a good credit score. If you have a poor credit score, this doesn’t mean you won’t be able to borrow money for the car you’re after – but some lenders may not approve you.

In this guide, we will cover how a poor credit score affects your ability to secure car finance - and your options for financing a car with a bad credit rating. We’ll also explain how to find out your credit score – and list some helpful tips for improving it.

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How does poor credit history affect car finance?

Poor credit history can affect your ability to get car finance in various ways. For example, some lenders might not offer you finance because they feel you’re likely to miss payments.

What’s more, having a poor credit history might mean that you’ll face higher interest rates if you are accepted for car finance.

Therefore, it’s a good idea to carefully review all the car finance options available to you - or explore other solutions, such as part exchanging your car on finance.

Can you finance a car with bad credit?

Whilst it is certainly possible to get approved for finance with a bad credit score, you should be aware of some of the challenges this can present.

Some lenders simply won’t approve you for finance, whilst others may increase the level of interest on your car finance. (Credit lenders may use the latter method to deter prospective customers with poor credit ratings.)

If you are unsure how much financing a car might cost you, try our free car finance calculator.

How to finance a car with bad credit

You will have a better chance of being approved for car finance with bad credit if you:

Are aged between 21-75.
Earn over £1,000 monthly (after tax).
Have a full valid UK driving licence.
Have payslips or bank statements for two consecutive months or a tax return available.

Tips for improving your credit score to buy a car

Fix any incorrect information: Errors on your credit report such as a misspelt address (or an out-of-date address) can hurt your credit score. Double-check your report and ensure that you keep your details updated to avoid this.
Register for the electoral roll: When your name is on the electoral roll, it’s easier for lenders to confirm your name and address, which can improve your chances of getting credit.
You can register to vote via the gov.uk website.
Using your credit card wisely: Avoid late or missed payments, as these will hurt your credit score.
Avoid moving house frequently: Whilst moving house regularly won’t affect your credit score, it can affect your ability to get credit.
Choose soft credit checks: Soft credit checks don’t leave behind any evidence on your credit report, but hard credit checks do. Hence, if a lender notices that you’ve had various hard credit checks for loans and have been turned down, this could be perceived as bad money management. (Eventually, you will need a hard credit check - and that is fine. However, when building your credit score, try to avoid them.)

Does it take longer to get a car with bad credit?

If you have a poor credit score, this might mean it will take you longer to secure the credit you need.

Unfortunately, there is no set timeframe for securing car finance with a bad credit history. However, following the tips above to improve your credit score will put you in better stead to get approval.

How do I find out my credit score?

Use an online tool: There are several free tools from UK credit agencies that can retrieve your credit score.
Alternatively, you can approach your lender. You may receive a free credit check from a finance company when you enquire about applying for finance.
You can approach a credit assessor directly to find out your credit score.
Finally, you can request a physical copy of your credit score from a credit reference agency.

What is an OK credit score for a car?

There are three main credit reference agencies in the UK. Their credit score boundaries are as follows:

Experian state that a very poor score is 0-560, whilst a poor score is 561-720.
Equifax state that a poor credit score is 0-438.