Most car finance companies will carry out a credit check on you when they receive your application.
While different lenders look for different information to meet their criteria, they all basically want to know the same thing – what kind of borrower are you and will you pay the money back?
Looking at your own credit report will show you what the lenders see, but what will they check?
Your credit score
First and foremost, lenders will want to know your credit score. Although many lenders will have their own criteria for potential customers, they’ll use a credit reference agency to get an idea of your financial history and your current finances.
Your credit score helps lenders determine what kind of risk you pose to them as a borrower. The better your score is, the more chance you’ll have for your application to be accepted, and you’ll also be eligible for lower interest rates.
Your credit report
While your credit score gives lenders an overall view of your financial status, your report gives them more detail about what kind of borrower you are. Here are some of the key points they’ll look for:
1. Your repayment habits
Your credit report will show whether you always repay on time, in full, the minimum, or have missed payments in the past.
2. How much you owe
Lenders will look at this to ensure what you owe is manageable. Your report will cover all your debt, from overdrafts and credit cards to mortgages and unsecured loans.
3. Your address
If you’re registered on the electoral roll, your address will show up on your credit report, as will any previous addresses from the past six years. Lenders use the information to see the stability of your situation. If you’ve moved multiple times over a short period of time, it could be a red flag.
4. Court and public records
Your credit report will highlight any CCJs, IVAs or whether you’ve been declared bankrupt. It will also show the status of your arrangement. The more time has passed since any of these events – or if they’ve been resolved – the better it looks to the lender.
5. Your financial associations
If you’re financially connected to anyone with poor credit, this will show on your file and can be a reason for lenders to decline your application.
6. Your application history
Every time you apply for credit with a hard search, it’s visible to lenders. If you’ve submitted many applications over a short time, it can look to lenders as though you’re desperate for credit or not managing your finances well.
How long do credit checks take?
Usually, credit checks are fairly quick to perform, but it’ll depend on whether the lender has all the information they need. You can normally expect them to be done between two to 10 days. If you use our soft credit search tool, we’ll usually give you a decision within a couple of hours, which will tell you how likely you are to be accepted for car finance.
Rates from 12.9% APR. Representative APR 18.9% We are a credit broker, not a lender.
*a hard search will be performed if you decide to proceed
Do car dealerships do hard credit checks?
A hard credit search will be leave a mark on your credit report to show lenders you’ve been looking for credit.
If lenders see several searches, they may not be as willing to approve your application because it looks as though you are applying for multiple loans. This type of search can also damage your credit rating.
Unfortunately, many credit reference agencies charge lenders for searches, and they can charge them more for conducting a soft search than a hard search. It means that some will not use the soft search facility to look for car finance for customers as it takes some time and costs more to set this up.
At Hippo Motor Finance, we always carry out an initial soft check to find the right lender for you without hurting your credit score*. But some dealerships don’t and will do a hard credit check, so it’s always best to ask first to see what their policy is.
*If you wish to proceed with a finance application after the soft check, we will perform a hard credit search.
What other checks will be done for car finance?
Aside from a full credit check, the finance company will need other information and documentation from you before they go ahead and accept your application.
Obviously, you’ll need to let them know the car you want to purchase along with your deposit amount, monthly payments you can afford to make and over what term you would like the finance agreement to run. This information will be passed on by the account manager or salesperson who you’ve been working with.
On top of that, you’ll usually need to provide:
1. Your personal information
The lender will need to know your full name, date of birth, marital status and address history for the past three years, including your current residential status (i.e., renting, mortgage, living with parents).
Documents you’ll be asked for: you’re normally asked to provide proof of address with two separate documents. These can be bills such as council tax or utility bills like gas, water or electric. Bank statements are also accepted. The documents need to be dated within the past three months and you need to be named on them.
2. Your employment history
You’ll usually be asked to supply your current job title, employer’s details and salary, as well as the details of past employers going back over the past three years. If you’re self-employed, the finance company will ask to see proof of income, such as account records.
Lenders ask for this information so they can see whether or not you can afford your monthly repayments alongside your regular expenses.
Documents you’ll be asked for: you may need to provide proof of income, particularly if you’re self-employed. This could be via bank statements, payslips, tax returns etc.
3. Your bank details
These need to be the same details as the bank your monthly payment will come from. Ideally, the account should be in your name or jointly in your name. You’ll need to supply the account number, sort code and branch address.
4. Your driver’s licence
Unsurprisingly, you’ll be asked to provide a full valid driver’s licence when applying for car finance. If for any reason you can’t, you’ll need to provide an alternative means of ID, such as a passport. The finance company will then also contact the DVLA to find out your driver’s licence status.
It’s worth noting that this isn’t an extensive list. As lenders check on different things, some may not ask for all of the above, and others may ask for more.
Do car dealerships check bank accounts?
If you’re applying for car finance through a dealership, they may ask for a bank statement to verify your income.
This is more than likely not for the dealer but for the lender who’ll provide your loan. The dealership will put all the information and documentation together and send the application to the lender.
If you’re at all concerned about the security of your information, speak to the dealership, who’ll explain their security policy.
However, typically all the statements and information you submit will go straight to the lender and not be kept by the dealership.
Will I get accepted for car finance?
If you meet the lender’s criteria, then yes, you will get accepted for car finance. To make sure you don’t damage your credit rating by making too many applications, though, it’s good to opt for a broker or dealership that can perform a soft search.
Find out if you’re likely to get accepted for finance today using our fast and free finance check.
You can get pre-approved for finance today using our free soft finance check. It takes two minutes to complete the application, and we can typically let you know within a couple of hours if you’re eligible to get a car with us.
Most importantly, though, applying won’t affect your credit score – so you can check without worrying about affecting your chances further down the line.
If you’d like to know more about us, take a look why hundreds of customers have rated us ‘Excellent’ on Trustpilot.
Rates from 12.9% APR. Representative APR 18.9% We are a credit broker, not a lender.
*a hard search will be performed if you decide to proceed
