How Does Car Finance Affect Your Credit Score?
Understanding the Impact of Car Finance on Your Credit Score
When it comes to car finance, your credit score is a pretty vital part of the process. We’ve talked before about how your credit score can be improve and how to check it with West Motors, but today we’re looking into how your credit score is affected by car finance. Any credit agreement you take out has an impact on your score, and it can be either negative or positive, depending on your attitude to repayments. Here, we explain how your credit score can be affected by car finance, so that you can avoid it heading downward when you sign on the dotted line for your new car. Read on to find out more.
What is a credit score?
In case you weren’t aware, a credit score is your financial CV. There are several different agencies that are able to calculate your score (Equifax, TransUnion, and Experian), so you’ll find that the way the score is formatted will vary depending on which one you use, but the way they’re calculated remains the same.
By gathering a picture of your borrowing from banks, local authorities and utility companies, they’re able to score you as an indicator of how trustworthy you are to lend to.
The lower your score, the riskier you appear to a lender, so your options may be more limited than if your score was higher. Things like frequent credit applications and late payments can be red flags, and these show up on your credit report.
How does car finance affect your credit score?
Car finance is a fantastic way to spread the cost of your next car, and it’s an option that many of our customers here at West Motors choose. The agreement means that essentially you’re borrowing the money to buy the car on the proviso that you can repay the amount in instalments every month.
If your credit score indicates that you’re a risk, you may find your borrowing choices narrowed. But can car finance have an impact on any borrowing you may do in the future?
The answer to this is yes, depending on the following two factors…
What type of check the company does on your credit score
There are two types of credit check that a finance company runs can run to check you out. The first is a soft check, and operates on a ‘decision-in-principle’ basis, saying yes or no based on the personal details you provide, and a quick look at your score, which doesn’t show up on your report.
The second type of check is a hard check, which is more in-depth and will happen if you actually apply for the finance. These do show up on your report, which leads us on to…
Whether you’re applying in lots of places
If lots of hard checks appear, this will raise eyebrows among lenders. So if you’re heading to lots of different dealerships and applying for finance but changing your mind, you may find that this affects your score.
Of course, another way your score can be affected by car finance is if you get behind with repayments. Any late payments will drive your score down, so make sure you can comfortably afford your side of the bargain.
Does a West Motors free credit check affect your credit score?
At West Motors, we make it easy to check your eligibility for car finance with a free credit check, which is something you can get started on through every car on our website. This is one of those soft checks that we referred to earlier, so it won’t impact your credit report. Result!
All you need to do is find a car you love, fill in a few details, and your likelihood of approval for finance against our panel of lenders will be calculated. Your results will be based on your details, as well as what we know about the vehicle.
Choose car finance at West Motors
Car finance remains an affordable way to pay for your next car, taking the pressure off your bank balance to pay the full purchase price. Finding a car that fits your lifestyle as well as your budget is easy here at West Motors, where you’ll find over 100 premium used cars ready for their next adventure.
Get started by browsing online today, and find out more about the car finance we offer at West Motors.