With the arrival of the 18-plate likely to inspire motorists into car dealerships – whether buying new or used cars – credit information provider Equifax is urging consumers to check they are credit-ready before applying for finance to fund their new set of wheels.
Whilst new car sales are down year on year, the use of finance to purchase a used vehicle remains very popular. Figures released by the Finance & Leasing Association (FLA) earlier this month revealed that the point of sale (POS) consumer used car finance market saw growth of 8% by value in December from the previous month, and 3% by volume. And in 2017 as a whole, new business for used car finance grew 12% by value and 6% by volume.
Traditionally, the March plate change sees a spike in consumers looking for car finance, as they look to upgrade their vehicle for something newer. And with a range of finance options available, Equifax believes it’s important car buyers think about their total budget – not just for the purchase but for the ongoing running of the vehicle. It also urges car buyers to look at their credit status because finance companies will want to know how likely they are to repay the loan.
“Lenders will look at an individual’s credit report to prove the identity of an applicant and to see how they’ve repaid past loans,” explains Lisa Hardstaff, credit information expert at Equifax. “Any missed payments or defaults might mean that an individual is less likely to repay a loan, which could affect their ability to get the best car finance deal.
“Anyone looking to buy a car on finance should make sure that all of their existing credit commitments are up to date. They should also close any old accounts to ensure they don’t seem over-reliant on credit. By looking at their credit report in advance, car buyers can also take steps to improve their credit score.
“It’s worth considering the cost of running and maintaining a car, as well as the fees and interest on the finance before committing. By checking their credit report, individuals can assess their financial status and update any missing information before making an application.
“If you are refused credit for a car, then check your credit report to address any outstanding issues. Make sure you are registered on the electoral roll, so that lenders can verify your identity, and pay off outstanding debts where possible. If you have missed payments, defaulted on payments or even have County Court Judgments (CCJs) on your report, it may take a while for your credit history to improve.
“Our credit report checklist can help car buyers avoid disappointment by getting them credit ready to enjoy the best deals on car finance at any time of year.”
The Equifax Credit Information Check List
1. Check your credit report
Apply for a copy of your credit report as early as six months before you start making new applications for credit. This will allow you to review your report to ensure it is accurate and up-to-date.
2. Do you have a credit history?
Lenders typically look at your credit history when making a decision on your application. If you already have a history of meeting your financial obligations, including repaying credit cards, loans or credit accounts and service contracts, lenders can use this to decide whether to approve your application. If you don’t have much credit history you could consider taking out small amounts of credit in order to demonstrate your ability to responsibly manage credit and repay debts. If you decide to do this, ensure the full balance is paid off each month to avoid being charged interest.
3. Are you registered?
The electoral roll is used by many companies for identity verification purposes in order to combat identity fraud. It is important, therefore, that you are registered on the electoral roll at your current address.
4. Correcting errors
If there’s a mistake on your credit report in relation to a specific account, contact the lender or service company it relates to and ask for the error to be corrected. If you’re unsure which company to contact, you can contact the credit reference agency concerned and they can raise this with the lender or service company on your behalf. In most cases the correction will appear on your credit report within 28 days.
5. The right to explain
You can also add a ‘notice of correction’ to explain any items on your report, such as missed payments, which may have occurred due to life changes such as losing your job. The ‘notice of correction’ will only be recorded with the Credit Reference Agency (CRA) you provide it to and will stay on your credit file indefinitely. The lender will see it when considering an application.
6. Individual Voluntary Arrangement (IVA) and County Court Judgment (CCJ)
If you are declared bankrupt or take out an IVA, it could impact your ability to gain access to credit during that period. If you’ve had a CCJ and it is now settled make sure the settlement is recorded on your credit file. If not, contact the court to get confirmation details and inform the credit reference agencies. These records will stay on your credit report for six years.
7. Managing existing credit agreements
Try to pay more than just the monthly minimum on credit agreements and, where possible, keep credit balances low. Settle debts, such as personal loans or hire purchase agreements in full. This demonstrates your ability to repay debts. Missed payments may make lenders think you’re already struggling with debt.
8. Have you got cards you’re not using?
Lenders will often look at the total amount of unutilised credit available to an individual and consider this when making a lending decision.
9. Don’t apply for credit too regularly
Avoid multiple applications in a short space of time. Each credit application logs a search on your credit file. Too many could appear as if you already have too many commitments.