Does Applying for Car Finance Affect Your Credit Score?
No, simply applying for car finance will not impact your credit score. At Quick Car Finance, we run a ‘soft search’ to – and this allows you to see how much you can borrow towards a car purchase and how long for, with quotes from car finance providers in real-time.
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No, simply applying for car finance will not impact your credit score. At Quick Car Finance, we run a ‘soft search’ to check your eligibility – and this allows you to see how much you can borrow towards a car purchase and how long for, with quotes from car finance providers in real-time.
If you wish to proceed with one of the car finance offered, one of the partner lenders with will run a ‘hard search’ on your credit file and this will be present on your record for 12 months, but will not have any positive or negative impact on your credit record.
What is a credit score?
A credit score is a numerical value that give lenders an idea of your creditworthiness. You get a credit score automatically when your turn 18 and it will go up, down or maintain the same level based on how well you keep up with financial obligations such as paying off credit cards, loans, mobile phone bills and more.
When a car finance provider runs a credit check on your name, they can see how well you have paid off similar forms of credit in the past and this will be important when deciding whether to lend to you or not.
Your credit score is held by the three main credit reference agencies in the UK: Experian, Equifax and CallCredit – and a lender will access information from one of these sources when you apply.
Why is a credit score important?
Having a good credit score is essential to access basic credit requirements such as credit cards, loans, car finance and also mortgages. It is essentially the route to your financial freedom.
If you have not kept up with payments in the past and have a bad or poor credit score, you may find it tougher to get approved for basic credit cards, personal loans and car finance.
To make up for this, you may not only be limited in what financial products you can access but you may have to pay higher rates too (see poor credit car finance).
In addition, those with bad credit score may be limited in the amounts they can borrow, or need to provide more security such as a guarantor or collateral (car, home etc).
How does a soft credit search work?
A soft credit search is used by a lot of brokers and lenders to check initial eligibility of a customer. Covering some basic credit information, the search shows up on the customer’s credit file and then quickly disappears – and has no further impact to their credit score.
By comparison, a hard credit check shows the lender more information and stays on the individual’s credit file for 12 months.
What impacts my credit score?
One risk is having to many hard searches on your credit file in a short space of time, because this can make you seem desperate for finance. So where possible, avoid making lots of applications with lots of companies in a short period.
Above all, the biggest impact to your credit score will be whether you make payments on time or miss them.
Missing repayments and falling into arrears will cause your credit score to fall and beyond this, having county court judgements (CCJs), involuntary arrangements (IVAs) and bankruptcy will stay on your credit file and be visible by other lenders for a minimum of 6 years or longer.
Furthermore, you should avoid having joint accounts or mortgages with someone with bad credit, since future lenders may associate you with this person and it can limit your ability to borrow.
If I miss car finance payments, will it affect my credit score?
Yes, missing any monthly repayments for car finance will negatively impact your credit. If you have one missed repayment and pay back quickly, this will not have a huge impact. However, repeatedly missing payments over a long period of time or falling into arrears will cause your credit score to fall and influence your chances of accessing future credit.
If I make car finance payments on time, will my score improve?
Yes, if you constantly make car finance payments on time, this information will be updated on your credit file and cause your score to improve over time.
If you already have a good credit score, making repayments on time will keep it strong and maintained at a high level.
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