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Car finance ›
What checks are done for car finance?
Updated: Tuesday, 2 January 2024
When applying for car finance in the UK, a lender will run a series of checks to understand your affordability and eligibility for credit.
Whilst the specifics of these checks vary depending on the lender’s criteria, you should expect to encounter all of them during the application process.
In this guide, we’ll explain each of the different checks so you can understand what they are and how they work before submitting your finance application.
Credit checks for car finance
When you make a car finance application, lenders will assess your eligibility. One of the ways they do this is by checking your credit report, including your credit score and history.
Your credit report is a history of any credit or loans you’ve had in the past. It is a record of your payment history, credit utilisation, and shows if you’ve missed payments in the past or have had a CCJ or IVA.
A responsible lender must ensure their finance is affordable and suitable for your circumstances. If you have a history of missed payments or a poor credit score, this may make it harder to get approved.
Lenders check your credit report by making either a soft or hard credit check. It’s important to know the difference and to check which the lender uses before you make an application.
Soft credit checks
A soft credit check gives the lender an overview of your borrowing history by using data collected by a credit reference agency.
We use a soft credit check at the point of application. This doesn’t affect your credit score and gives you an indication of whether or not we can lend to you.
This type of credit check won’t leave a mark on your credit report and does not affect your credit score. It is only visible to you when you check your credit score, and has no impact on any future credit applications you might make.
We only use a hard credit check once you decide you’d like an agreement with us.
Find out what might affect your credit score with help from our guide.
Hard credit checks
A hard credit check gives a lender an in-depth look at your financial history. It allows them to see the full details of your credit report, which helps them decide whether you are eligible for credit.
This type of credit check will leave a mark on your credit report. Even if you are not approved, or you decide not to continue the credit agreement, a hard check will affect your credit score. According to Credit Karma, most hard searches stay on your credit report for 12 months and can affect your score by a few points.
Some vehicle finance lenders use a hard credit check at the point of application, so it’s worth checking before you make an application, as lots of hard searches in a short space of time can add up and cause your credit score to drop.
What additional checks are done for car finance?
Your eligibility also depends on factors beyond your financial history. Each lender will have their own criteria to determine whether or not to approve an application. This includes checks on the person that is applying, and the vehicle they are looking to finance. You can read our lending criteria here.
Proof of identity
Car finance providers need to confirm that you are who you say you are. They will ask you to share some personal details, including your full name, date of birth, marital status, and address history.
You might also be asked for proof of identity; this is usually a valid UK driver’s licence. Some lenders might let you use your passport, along with a completed DVLA or DVA mandate if you’re in the process of getting your licence renewed.
Finance companies need this information to confirm your identity and ensure you aren’t trying to apply for car finance on someone else’s behalf.
Proof of address
To further verify your identity, lenders also ask for your address history. This varies depending on the lender, but we ask for the past 3 years. Unfortunately, we don’t accept applicants who have less than 3 years of UK address history.
Proof of income
Lenders will need assurance that you have the income to keep up with your monthly car finance payments.
To check this, they may ask to see payslips, bank statements, or your tax return. These provide the lender with proof that their finance offer is affordable and suitable for your circumstances.
In some cases, lenders might ask for additional documents to verify your income. This might be to help their affordability checks, or if you are self-employed and applying for car finance.
Employment history
Finance companies will ask for your current job title and salary, and might ask for other details such as the industry you work in. Showing continuous employment demonstrates to lenders that you have a stable income and that you can afford to make monthly payments.
If you are self-employed, you may need to provide additional documents to confirm this.
Do I need to be credit checked for car finance?
Every car finance company will do a credit check before deciding whether to offer you finance. A responsible lender uses this to make sure any finance they offer is affordable for you.
You might have heard of lenders claiming to offer no credit check car finance. This doesn’t exist, even though it is a common claim in the car finance industry. For more information, check out our guide that explains why you should be cautious of this claim.
If you are accepted for car finance with a below-average credit score, you’ll likely find that you are offered a higher Annual Percentage Rate (APR) which means that you will likely pay more in interest over the course of your agreement.
Can I increase my chances of being accepted for car finance?
Being accepted for car finance depends on various factors since each lender’s criteria are different.
Generally, the following things can increase the likelihood that a lender will approve your car finance application:
- Settling existing debts, such as credit card balances or overdue utility bills
- Building up your credit history by making payments on time and in full
- Being on the electoral roll at your current address
- Make sure you’re not financially linked to a bad borrower
- Only make an application you know you can afford
If you have a poor credit score or little credit history, you may need to apply for car finance from a specialist lender such as Moneybarn. Even if you have bad credit, we could help. Find out more about how we could help you with car finance for people with bad credit.
Representative 30.5% APR.
How long does it take to get car finance?
How long it takes to get approved for car finance varies depending on the lender. When you complete an application with us, you’ll get an immediate decision as to whether or not we can help.
Upon completing the necessary checks, car finance companies will arrive at one of three decisions:
- Rejected: if your car finance application was refused, it might be because you didn’t meet the lender’s criteria.
- Approved: if your application is approved, the lender will contact you to help progress your application.
- Approved in principle: the lender might need additional information before they make a final decision. It might be because you need to provide additional documents, or the lender needs to clarify certain parts of your application.
If you’re approved or approved in principle, we’ll be in touch to help progress your application. For more information, find out how our application process works.
FAQs about the checks done for car finance
What types of car finance are available?
Different types of car finance agreements are available for borrowers in the UK. The main finance options are:
- Conditional Sale (CS)
- Hire Purchase (HP)
- Personal Contract Purchase (PCP)
- Personal Contract Hire (PCH or Leasing)
- Personal Loan
It’s important that you understand how it works before making an application. But regardless of the type you choose, the finance company will carry out the same kinds of checks that are explained above. They will use a credit check, and will need proof of identity, address, and income to progress your application.
When do lenders carry out car finance checks?
Lenders will perform initial eligibility checks when you apply for a quote, whether that is making an online application or applying over the phone.
Some lenders may use a hard credit check at the point of application, which does leave a mark on your credit file.
We use a soft credit check which doesn’t affect your score. If we’re able to offer you finance, and you would like to take out an agreement with us, we will then use a hard check. This is done at the point where contracts are drawn up for you to sign.
What is an Agreement in Principle?
If you’ve applied for car finance and been offered an ‘agreement in principle’ (AIP), or have been ‘approved in principle’, this means that the lender needs additional information before they can give you a final decision.
This might happen if they need extra documents as part of their affordability checks. Or it might be because they need to confirm certain parts of your application. Either way, the lender will be in touch to help you further.
Will receiving benefits mean I'm unable to get car finance?
No, receiving income support such as Universal Credit will not stop you from getting car finance. Benefits count as a source of income and do not directly reflect your ability to keep up with monthly payments or avoid getting into debt.
Every lender is different, and some might offer car finance with benefits while some might not. We can’t speak for other lenders, but there are certain benefits we accept for car finance.
When applying for car finance in the UK, a lender will run a series of checks to understand your affordability and eligibility for credit.
Whilst the specifics of these checks vary depending on the lender’s criteria, you should expect to encounter all of them during the application process.
In this guide, we’ll explain each of the different checks so you can understand what they are and how they work before submitting your finance application.
Credit checks for car finance
When you make a car finance application, lenders will assess your eligibility. One of the ways they do this is by checking your credit report, including your credit score and history.
Your credit report is a history of any credit or loans you’ve had in the past. It is a record of your payment history, credit utilisation, and shows if you’ve missed payments in the past or have had a CCJ or IVA.
A responsible lender must ensure their finance is affordable and suitable for your circumstances. If you have a history of missed payments or a poor credit score, this may make it harder to get approved.
Lenders check your credit report by making either a soft or hard credit check. It’s important to know the difference and to check which the lender uses before you make an application.
Soft credit checks
A soft credit check gives the lender an overview of your borrowing history by using data collected by a credit reference agency.
We use a soft credit check at the point of application. This doesn’t affect your credit score and gives you an indication of whether or not we can lend to you.
This type of credit check won’t leave a mark on your credit report and does not affect your credit score. It is only visible to you when you check your credit score, and has no impact on any future credit applications you might make.
We only use a hard credit check once you decide you’d like an agreement with us.
Find out what might affect your credit score with help from our guide.
Hard credit checks
A hard credit check gives a lender an in-depth look at your financial history. It allows them to see the full details of your credit report, which helps them decide whether you are eligible for credit.
This type of credit check will leave a mark on your credit report. Even if you are not approved, or you decide not to continue the credit agreement, a hard check will affect your credit score. According to Credit Karma, most hard searches stay on your credit report for 12 months and can affect your score by a few points.
Some vehicle finance lenders use a hard credit check at the point of application, so it’s worth checking before you make an application, as lots of hard searches in a short space of time can add up and cause your credit score to drop.
What additional checks are done for car finance?
Your eligibility also depends on factors beyond your financial history. Each lender will have their own criteria to determine whether or not to approve an application. This includes checks on the person that is applying, and the vehicle they are looking to finance. You can read our lending criteria here.
Proof of identity
Car finance providers need to confirm that you are who you say you are. They will ask you to share some personal details, including your full name, date of birth, marital status, and address history.
You might also be asked for proof of identity; this is usually a valid UK driver’s licence. Some lenders might let you use your passport, along with a completed DVLA or DVA mandate if you’re in the process of getting your licence renewed.
Finance companies need this information to confirm your identity and ensure you aren’t trying to apply for car finance on someone else’s behalf.
Proof of address
To further verify your identity, lenders also ask for your address history. This varies depending on the lender, but we ask for the past 3 years. Unfortunately, we don’t accept applicants who have less than 3 years of UK address history.
Proof of income
Lenders will need assurance that you have the income to keep up with your monthly car finance payments.
To check this, they may ask to see payslips, bank statements, or your tax return. These provide the lender with proof that their finance offer is affordable and suitable for your circumstances.
In some cases, lenders might ask for additional documents to verify your income. This might be to help their affordability checks, or if you are self-employed and applying for car finance.
Employment history
Finance companies will ask for your current job title and salary, and might ask for other details such as the industry you work in. Showing continuous employment demonstrates to lenders that you have a stable income and that you can afford to make monthly payments.
If you are self-employed, you may need to provide additional documents to confirm this.
Do I need to be credit checked for car finance?
Every car finance company will do a credit check before deciding whether to offer you finance. A responsible lender uses this to make sure any finance they offer is affordable for you.
You might have heard of lenders claiming to offer no credit check car finance. This doesn’t exist, even though it is a common claim in the car finance industry. For more information, check out our guide that explains why you should be cautious of this claim.
If you are accepted for car finance with a below-average credit score, you’ll likely find that you are offered a higher Annual Percentage Rate (APR) which means that you will likely pay more in interest over the course of your agreement.
Can I increase my chances of being accepted for car finance?
Being accepted for car finance depends on various factors since each lender’s criteria are different.
Generally, the following things can increase the likelihood that a lender will approve your car finance application:
- Settling existing debts, such as credit card balances or overdue utility bills
- Building up your credit history by making payments on time and in full
- Being on the electoral roll at your current address
- Make sure you’re not financially linked to a bad borrower
- Only make an application you know you can afford
If you have a poor credit score or little credit history, you may need to apply for car finance from a specialist lender such as Moneybarn. Even if you have bad credit, we could help. Find out more about how we could help you with car finance for people with bad credit.
Representative 30.5% APR.
How long does it take to get car finance?
How long it takes to get approved for car finance varies depending on the lender. When you complete an application with us, you’ll get an immediate decision as to whether or not we can help.
Upon completing the necessary checks, car finance companies will arrive at one of three decisions:
- Rejected: if your car finance application was refused, it might be because you didn’t meet the lender’s criteria.
- Approved: if your application is approved, the lender will contact you to help progress your application.
- Approved in principle: the lender might need additional information before they make a final decision. It might be because you need to provide additional documents, or the lender needs to clarify certain parts of your application.
If you’re approved or approved in principle, we’ll be in touch to help progress your application. For more information, find out how our application process works.
FAQs about the checks done for car finance
What types of car finance are available?
Different types of car finance agreements are available for borrowers in the UK. The main finance options are:
- Conditional Sale (CS)
- Hire Purchase (HP)
- Personal Contract Purchase (PCP)
- Personal Contract Hire (PCH or Leasing)
- Personal Loan
It’s important that you understand how it works before making an application. But regardless of the type you choose, the finance company will carry out the same kinds of checks that are explained above. They will use a credit check, and will need proof of identity, address, and income to progress your application.
When do lenders carry out car finance checks?
Lenders will perform initial eligibility checks when you apply for a quote, whether that is making an online application or applying over the phone.
Some lenders may use a hard credit check at the point of application, which does leave a mark on your credit file.
We use a soft credit check which doesn’t affect your score. If we’re able to offer you finance, and you would like to take out an agreement with us, we will then use a hard check. This is done at the point where contracts are drawn up for you to sign.
What is an Agreement in Principle?
If you’ve applied for car finance and been offered an ‘agreement in principle’ (AIP), or have been ‘approved in principle’, this means that the lender needs additional information before they can give you a final decision.
This might happen if they need extra documents as part of their affordability checks. Or it might be because they need to confirm certain parts of your application. Either way, the lender will be in touch to help you further.
Will receiving benefits mean I'm unable to get car finance?
No, receiving income support such as Universal Credit will not stop you from getting car finance. Benefits count as a source of income and do not directly reflect your ability to keep up with monthly payments or avoid getting into debt.
Every lender is different, and some might offer car finance with benefits while some might not. We can’t speak for other lenders, but there are certain benefits we accept for car finance.
For a better road ahead
Moneybarn is a member of the Finance and Leasing Association, the official trade organisation of the motor finance industry. The FLA promotes best practice in the motor finance industry for lending and leasing to consumers and businesses.
Moneybarn is the trading style of Moneybarn No. 1 Limited, a company registered in England and Wales with company number 04496573, and Moneybarn Limited, a company registered in England and Wales with company number 02766324. The registered address for these companies is: Athena House, Bedford Road, Petersfield, Hampshire, GU32 3LJ.
Moneybarn’s VAT registration number is 180 5559 52.
Moneybarn Limited is authorised and regulated by the Financial Conduct Authority (Financial Services reference No. 702781)
Moneybarn No. 1 Limited is authorised and regulated by the Financial Conduct Authority (Financial Services reference No. 702780)
