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Aug
When you apply for car finance, the lender will undertake a few different checks before they approve you for the loan. These checks let them look at various details, such as your personal information, employment history, and financial situation. All of this helps them to determine if you will be able to make your repayments for the loan.
If you want to know exactly what a car finance company will look at before they give you a loan, read on.
What will car finance companies check?
A hard credit check will be carried out after you have finalised your finance agreement with the car finance company. They will then look at the following to check your eligibility for the loan.
Proof of identity
The car finance company will need to validate that you are who you say you are, to ensure you’re not committing fraud. So, they will request proof of your full name and date of birth as well as your marital status and residential status. If you have ever changed your name, you’ll also need to provide details of your previous names.
The finance company will request specific documents to validate your identity. This typically includes your driver’s licence or your passport, as well as any supporting documents needed for name changes and the like.
Proof of address
Most car finance companies will need to validate your current address, but some might also ask for details of your past addresses, sometimes going back three years.
For your current address, you will usually need to give at least two documents, such as a utility bill and a council tax bill where you are named as a resident. These will usually need to be at least three months old.
Employment
Car finance companies will ask details about your employment, to see if you have a regular income that will support you in paying back the loan. You’ll often have to give your current job title and the company you work for as well as your salary.
You may also sometimes have to give a longer employment history of up to three years. The longer you’ve been with a company, the more positively it will impact your finance application, as it suggests you are capable of holding a job down and so will retain a steady income.
Income
Car finance companies will check your income as a way of ensuring you have enough money to repay the loan. Often your employment details will suffice, but some companies might also ask to look at your payslips or bank statements to validate your income.
If you are self-employed, finance companies are more likely to request extra documents to validate your income, such as bank statements going back three months.
Driver’s licence
Car finance companies will ask for proof you have a valid driver’s licence to ensure you’re eligible to drive the car. If you don’t have one, you will usually be rejected for your finance application.
Some car finance companies will accept a provisional driver’s licence, if you are currently learning to drive, but not all. There may also be limitations on the value of the car you’re looking to finance.
Credit score
The credit score is one of the most important factors finance companies will check for your finance application. Once your soft credit check has been completed, they will undertake a hard credit check. This will leave a mark on your report and will negatively affect your credit score if you have too many hard checks in a short space of time.
Your credit score gives lenders an insight into your credit history, previous loans you had, current debt you have, and how well you make your repayments. This helps them to decide if you are likely to be able to make the repayments for the new loan.
The better your score is, the more likely you’ll be approved for car finance. If you have a poor credit score, you can look for companies that provide bad credit car finance, where a poor score doesn’t necessarily mean you can’t get a loan.
What’s the difference between a soft credit check and hard credit check?
A soft credit check will usually be carried out before a hard credit check. A soft credit check won’t leave a mark on your credit report, unlike a hard credit check. If you have too many hard credit checks on your report, it can negatively affect your credit rating. But you can have multiple soft credit checks without it affecting your score.
During a soft credit check, the loan company will look at your history of making loan repayments and any debt you have had or currently have. The aim is to give an idea of how well you will be able to repay the car finance loan. If you have a good history of repaying your loans, you will be approved for an agreement in principle, and then a hard credit check will be done.
How long does a credit check take?
A credit check will be conducted while a lender carries out the other checks, and the entire process usually takes between one to two business days. Often, once you’re approved for car finance, you can receive the funds in your account the same day.
Can I get car finance without a credit check?
Car finance is a form of credit, so finance companies will always need to carry out a credit check to provide you with the loan. It allows them to analyse the risk of loaning you the money, and the likelihood of you keeping up with the repayments.
How do I know if I’ll get accepted for car finance?
Each car finance company will work a little differently. You might find that one lender won’t approve you but another will. You can help improve your chances by improving your credit score. You should also make sure all the information you give them about your personal details, employment, and finances, are correct and up-to-date.
GetCarFinanceHere has a number of routes for you to get the best car finance deals. Our team will find the best finance option that’s available to you, helping you through the entire process. You can apply online and get the process started today.