Why was I refused car finance?
08 Nov 2021
Why was I refused car finance?
08 Nov 2021
For a lot of people, funding a new car isn’t as simple as just walking into a car showroom and driving out with your dream car. Whether you are looking for a car replacement or you just want an upgrade, for most people car finance is their most suitable funding option.
You’ve decided what car you want to buy, how much you need to borrow, you’ve applied for your car finance, and you’ve been denied. What next?
The first thing to do would be to find out why you have been denied finance.
Possible reasons that your car finance application was refused
The most likely reason that your car finance has been refused is due to your credit history. Lenders use your credit file to look at your financial history and gain insight into your borrowing behaviours. If you have missed payments in the past or defaulted on your credit agreements, lenders can see this and may be reluctant to offer you finance.
Affordability is another reason. You may be applying for finance for a car that is just out of your budget. The lender will refuse your application if they believe that you will struggle to repay the loan.
If you have just passed your test at 17 then unfortunately you will instantly be denied as car finance cannot be offered to under 18s. If you are over 18, then this is dependent on the lender. Some lenders have age requirements and won’t lend to under 21s, or sometimes under 25s.
If you are unemployed and on benefits, self employed or work part time, it is not impossible to be accepted for car finance, but it can be more difficult. Again, this depends on the individual lender. Some lenders will still accept you as long as you have a proven track record with repaying credit and bills, and you can prove that you can afford the loan.
Maybe you only have your provisional licence, and your test is coming up, so you want to arrange your car finance before your test. A lot of lenders will require you to have a full UK driving licence, not all, but those who accept provisional licence holders may have extra requirements.
What can I do if my car finance application is denied?
Check your credit report
Checking your credit report can be a huge indicator for why your application was unsuccessful. It will allow you to see if you’re credit score has suffered due to missed credit payments, defaults or too many credit applications, this can all affect your chances of being accepted by a lender.
Contact the lender
Perhaps you have investigated your credit report, and it seems to be in shape, this can be frustrating as well as confusing. If you contact the lender that has refused your application, they may be willing to shed some light onto why they denied you.
Double check your applications
Before you submit any application, it would be advisable to check all your answers and information beforehand. Even just misspelling your name or inputting the incorrect postcode can impact your possibility of getting finance. This is because the lender needs to be able to prove who are and your eligibility. Mistakes on your application can make it difficult for the lender to do this.
Stop making applications
Making multiple applications over a short space of time will negatively impact your credit score which in turn will make it harder for you to find a willing lender. When you make a credit application and agree for a lender to look at your credit report, this is called a credit search and each search appears on your record. Having a lot of applications can make you appear as “credit hungry” so this can make lenders reluctant.
Improve your credit score
Building your credit score before applying for anymore credit will significantly increase your chances of being offered car finance. You can do this by making sure you make any repayments on time, closing old, unused credit accounts, correcting any mistakes on your credit file, and registering on the electoral roll if you haven’t already.
Look into your lender
If you are applying directly with a lender, the lender you have chosen may not be the right fit for you. Each lender has different requirements, and you may not meet all these requirements. For example, if your credit score is suffering, there are some lenders who will still accept you, it is best to find out which lenders accept applications with bad credit before applying.
Like any loan, it is important that you make sure that you can afford the finance that you are applying for. Accepting a finance offer that you are going to struggle to repay can put you in an even worse financial situation so make sure that you can afford to repay all your payments on time to avoid damage to your credit score.
Editorial Disclaimer: This article was updated 05.11.2021
Opinions expressed here are the author's alone, and not those of any bank, credit card issuer or any other company. This article has not been reviewed, approved or otherwise endorsed by any of these organisations. NB: The information on this page does not constitute financial advice, please do your own research to ensure that the product / service is right for your individual circumstances.