What Credit Score is Needed for Car Finance?

Whether it's for your work commute, running errands or enjoying road trips, having a reliable car can significantly improve your quality of life. However, getting a car often requires financing, and your credit score is crucial in determining your eligibility. 

To help clear up any confusion you might have, let's delve into some common questions surrounding credit scores and car finance and help you navigate this process with confidence.

What credit score do you need for car finance in the UK?

The specific credit score required for car finance in the UK can vary depending on the lender and the type of car finance deal you want. Generally, lenders prefer applicants with good to excellent credit scores, typically ranging from 670 to 850. 

Credit score ratings can vary slightly depending on the credit bureau and scoring model used, but here's a common representation of credit score ratings:

Credit Score Range	Credit Rating	Description
800 to 850	Excellent	People with a credit rating above 800 will likely easily get loans because they’re seen as very safe borrowers.
740 to 799	Very Good	People in this range have a good track record with money. They can get more credit easily because they've shown they're responsible.
670 to 739	Good	Lenders think people in this range are okay at handling money. They're seen as decent borrowers, so they can get loans without too much trouble.
580 to 669	Fair	People in this group might have a harder time getting loans. Lenders might see them as riskier borrowers, so they might not qualify for as much credit.
300 to 579	Poor	People in this range have a tough time getting loans. If you're in this group, you need to work on improving your credit or work with lenders specialising in bad credit.

Reference: https://www.equifax.com/personal/education/credit/score/articles/-/learn/credit-score-ranges/ 

Remember, these ranges and ratings can vary slightly depending on the specific scoring model used by lenders.

If yours is poor, try not to worry. Some lenders, including ones we work with, specialise in bad credit car finance and may be able to offer financing options if you have a lower credit score.

How does credit score affect car finance?

Your credit score influences the terms and interest rates you're offered for car finance. Generally speaking, higher credit scores typically result in lower interest rates and more favourable loan terms, while lower credit scores may lead to higher interest rates and stricter lending conditions. Because you’ll get a more favourable deal, a good credit score can save you money over the life of your car loan.

What credit score model do car finance companies use?

In the UK, there are three main credit reference agencies – Equifax, Experian, and TransUnion. Each of these agencies has a different scoring system and uses different information to determine your credit score. It’s not unusual for your score to be different with each of these agencies.

At CarFinance 247, we work with a panel of lenders who use different credit reference agencies to determine whether they can approve you in principle. As you can’t be certain which of the three agencies your lender uses, it’s good practice to check your credit score at all three. 

What is considered a bad credit score in the UK?

In the UK, credit scores typically range from 0 to 999, with higher scores indicating better creditworthiness. A credit score below 580 is generally considered poor or bad. Individuals with bad credit may face difficulties getting as good a deal on their car insurance, simply because they’re seen as more risky to lend to.

What is the lowest credit score for car finance?

Because lenders use a variety of credit scoring models, there isn't a definitive lowest credit score for car finance. However, people with poor credit scores (below 580) may find it challenging to secure car finance from traditional lenders. 

How likely is it to get car finance with bad credit?

If you’ve got bad credit and are concerned about getting a car, you have options. You can still finance a car with a 500 credit score, or even 300. However, because you’re seen as a higher risk to lenders, you may face higher interest rates, larger down payments, and stricter loan terms. 

With our simple car finance calculator, you can get a good idea of what sort of deal you’ll be eligible for and make a decision from there.

Can I get approved for car finance with an average/fair credit rating?

Yes, it's possible to get approved for car finance with an average credit rating. When looking at your loan application, lenders consider various factors besides credit scores, including income, employment history, and debt-to-income ratio. 

Having a steady income and a stable financial history can increase your chances of approval, even with a low or average credit rating.

How are credit scores calculated?

Credit scores are calculated based on various factors, including:

• Payment history

• Credit utilisation

• Length of credit history

• New credit accounts

• Types of credit used

If you’ve paid all of your debts on time, you are likely to have a good credit score. But if, for example, you have missed payments, had to resort to a debt management plan or have been declared bankrupt, your credit score will have been negatively impacted.

How do I boost my credit score?

Boosting your credit score requires a combination of responsible financial habits and patience. Start by paying bills on time, reducing credit card balances, avoiding opening multiple new credit accounts, and checking your credit report regularly for errors.

Things like registering to vote can also be an easy way to boost your score. Head to our blog on how to boost your credit score for all our expert tips on this topic.

How likely am I to be accepted for car finance?

The likelihood of being accepted for car finance depends on various factors, including your credit score, income, employment history, and debt obligations. 

While a higher credit score improves your chances of approval, lenders also consider other aspects of your financial situation. Make sure you shop around and compare offers from multiple lenders to find the best financing option for you.

What credit score do you need for PCP finance?

PCP (Personal Contract Purchase) finance typically requires a good to excellent credit score, similar to other car finance options. Lenders offering PCP finance may have specific credit score requirements, but generally, a score above 670 is advisable for securing favourable terms and interest rates.

Does Jobseeker's Allowance affect credit rating?

Jobseeker’s Allowance itself does not directly impact your credit rating, since it's not a form of credit. However, if you're relying solely on Jobseeker’s Allowance as your primary source of income, lenders may view you as a higher-risk borrower. You’ll need to demonstrate financial stability and the ability to repay debts when applying for car finance.

Does applying for a car loan leave a footprint on your credit profile?

When you apply for a no-obligation quote with us, we first carry out a soft search, which doesn’t affect your credit profile. If you choose to take out a finance agreement, only then will we carry out a hard search on your credit history. This will leave a footprint on your credit profile, but we only carry out a maximum of 2-3 searches when you apply. 

A hard search generally stays on your credit report for 12 months. It can also temporarily lower your credit score, so it’s important to limit loan applications to those you're genuinely interested in to avoid unnecessary credit inquiries.