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Is a credit check required for car finance?

Simply put, yes. When you apply for car finance, you will undergo a credit check.

But if you’re worried about your credit rating, don’t panic. A poor credit rating won’t necessarily put the brakes on your plans for a new vehicle.

Here’s all you need to know about car finance credit checks and what lenders will be looking for when you submit an application.

Why do we require a car finance credit check?

A car finance credit check is necessary because lenders need to know your credit history and financial situation. Before they agree to lend to you, they like to know how you’ve handled credit in the past whether you can commit to your repayments.

Your credit score gives them an insight into how you’ve handled credit in the past. The better your credit score, the more chance you have of a successful application.

What is a car finance soft credit check?

At Zuto, we first carry out a car finance soft credit check ­­– often known as a ‘soft search’. This is a search on your credit file that won’t leave a mark or affect your credit score.

It helps us work out what you’re eligible for and match you with the best lender for you, without impacting your file. It will be recorded on your file, but lenders can't see it.

A ‘hard search’ is the opposite ­– it will leave a mark on your file and lenders will be able to see it’s been done. If you are eligible and wish to proceed with your application, we will then conduct the necessary hard search but will always gain your consent beforehand.

It’s important to note that lots of hard searches on your credit file in a short amount of time can impact how lenders perceive you which is why it’s important to think carefully before you apply for any kind of loan.

Can you finance a car with a bad credit score?

If you have a low credit score, you may be concerned about a car finance credit check.

At Zuto, we’re experts in helping drivers with bad credit find the right car finance deal based on your personal circumstances.

It’s also worth noting that a credit score isn’t the only factor considered when you make an application.

Other factors, such as the amount you want to borrow, the deposit you’re able to put down and your current income are also evaluated.

Let’s take a closer look at what will be assessed in a typical car finance application.

What is assessed in a credit check for car finance?

Your credit file reveals a lot of information about your spending history and current financial circumstances. Lenders will be looking at factors including:

  • Whether you pay your finances on time
  • Whether you pay in full or the minimum
  • Your income compared to your outgoings
  • Your current debts and debt-to-income ratio
  • Your credit utilisation score
  • Your loan application history
  • Court and public records (including CCJs and bankruptcy)

All these factors give a lender a good idea of what you’re like as a borrower and whether or not you are in a suitably stable financial position.

Before applying for car finance, be sure to take the time to look over these aspects of your personal accounts.

Read more on how to improve your credit score now to maximise your chances of a successful application.

As well as these in-depth checks on your credit file, lenders will also require:

  • Proof of your identity
  • Personal details
  • Proof of your income
  • A valid driver’s license
  • Address details for the last three years
  • Your current employment details and history

The takeaway

A car finance credit check is necessary for every application. It gives lenders a crucial insight into your financial history, reliability as a borrower and helps them predict whether you can make your repayments on time.

We know there is often some concern about a credit check affecting your credit score, which is why we provide a car finance soft credit check before anything else.

Lenders also take into consideration a number of factors when assessing your application; your credit score is important, but they look at everything on a case-by-case basis. 

The best thing you can do to improve your chances of a successful application is to make steps to improve your credit rating and ensure your accounts reflect your eligibility for the amount you’ve requested.

If you’re concerned about your credit score and want to know more about your options, head over to our complete guide on bad credit car finance.

You can also find answers to common questions in our pre-application help and advice pages, including information about applying for car finance with a poor financial history.

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