Your credit score is a vital component in determining your worthiness to take out new lines of financing.
This numerical figure, while not used directly by lenders, is a great indicator as to whether you'll get accepted or not for credit.
Obviously you won't know how good or bad your credit score is until you check it.
To do just that, you'll need to sign up to one of the many credit score agencies out there - these will be able to give you a helpful insight into your credit history, as well as that all-important score.
It's important to note that your credit score can vary between these agencies, as they tend to use different scoring models to each other.
If you discover that your credit rating is on the low side, there can be several reasons for this, including:
No Credit History: A limited credit history can lead to a lower credit score, as creditors require this information to assess your creditworthiness.
Too Many New Accounts: Opening multiple accounts within a short period could negatively impact your credit score, especially if you have a limited credit history.
Maxed-Out Credit Cards: Having one or more credit cards that are maxed out or close to their limit can harm your credit score.
Unarranged Overdrafts: Regularly using unarranged overdrafts can affect your credit rating because it shows potential lenders that you struggle to manage your finances.
Missed Payments: Payment history can be a significant factor in calculating your credit score. As such, any late or missed payments can negatively impact your score.
Errors on Your Credit Report: Inaccurate account information or mistaken missed payments can lead to an artificially low credit score. It is crucial that you dispute any errors found on your credit report.
Improving your credit score takes time and commitment, but be very much worth it in the long run - it can be advisable to:
Technically, there is no minimum credit score needed for car finance approval itself - however, if it is especially low, then your chances of approval will be affected.
What your credit score will have a great impact on will be the rate of interest incurred as part of a new line of finance.
Those with stronger scores will see lower interest rates as part of their agreement, while the opposite is true for those with lower scores, as they'll be seen as a greater risk to lend to.