What credit score do you need for car finance in the UK?

Daniel Timblick, Senior Credit Risk Analyst, Wednesday, 12 April 2023
Updated: Tuesday, 2 January 2024

When applying for car finance in the UK, your credit score is one of several factors considered by lenders when assessing whether or not to offer you car finance.

Lenders may have different criteria and requirements in terms of credit history, but also income, and affordability.

There is no definitive minimum credit score that you need to get approved for car finance. However, you may find it more difficult to get car finance with bad credit.

What is a credit score?

Before diving into ‘good’ and ‘bad’ credit scores, it’s important to understand what a credit score is.

Your credit score is a rating given to you based on your financial history. It indicates how reliable you are at borrowing and repaying money.

A higher credit score suggests that you have been responsible with credit in the past, which may make it easier to get approved for credit in the future.

The reason there is no specific credit score required for car finance is that there are three different credit reference agencies (CRAs) in the UK, each with their own credit score ranges.

These three agencies are responsible for compiling individuals’ credit and personal data. The credit score ranges differ for each credit reference agency:

  • Experian: 0-999
  • TransUnion: 0-710
  • Equifax: 0-1000

There are also some credit report services, the most popular ones are ClearScore and Credit Karma.

It’s important to know that they aren’t CRAs themselves. This is because they don’t collect the data themselves, instead, they use data from the CRAs. For example, ClearScore uses Equifax data but has its own score ranges, and Credit Karma uses TransUnion data and has the same ranges but they have slightly different names.

  • ClearScore: 0-1000
  • Credit Karma: 0-710

Learn more about credit scores with help from our guide – what is a credit score?

What is a good credit score?

There is no definitive answer to the question of “what is a good credit score”, as the three credit reference agencies mentioned above have their own ranges for assigning scores.

Each CRA groups scores together in bands so lenders can determine the risk level of each customer.

CRA Good Very good Excellent
Experian 881-960 - 961-999
Equifax 531-670 671-810 811-1000
TransUnion 604-627 - 628-710

Credit Karma’s scores for ‘good’ and ‘excellent’ are the same as TransUnion:

  • Good: 604-627
  • Excellent: 628-710

ClearScore’s ranges are slightly different. They use Equifax data but don’t use the same credit score ranges. They don’t call their scores ‘good’ or ‘excellent’, instead they use different wording. The equivalents of good and excellent are:

  • Looking bright: 605-724
  • Soaring high: 725-1000

The above information on credit scores, including the credit ranges of Experian, Equifax, and TransUnion, is accurate as of 15th May 2023.

How does my credit score affect car finance?

Your credit score can affect the following:

  • Whether or not you will be approved for car finance
  • Which types of car finance are available to you
  • Your interest rate

Having a low credit score doesn’t stop you from getting car finance, and having a good credit score doesn’t guarantee you car finance. However, having a good credit score can make it more likely that you will be accepted.

Is there a minimum credit score to qualify for car finance in the UK?

No, there is no minimum score requirement to purchase a car.

However, as we have already mentioned, a higher credit score means lenders might be more willing to offer you a car finance agreement at a more favourable interest rate.

Here are some tips that could help to improve your credit score, which might increase your chances of getting car finance:

  • Adding your name to any joint bills so that all your bill payments or finance repayments will show on your credit report, showing you are good at keeping up repayments
  • Make your regular payments on time
  • Register to vote through the electoral roll if you haven’t already
  • Check your credit report and notify the credit reference agency if you find any mistakes or out-of-date information

What are the different types of car finance?

Car finance is when you borrow money from a lender to cover the cost of a car. You then repay the amount in monthly instalments over an agreed period.

Here are the main types of car finance in the UK:

Conditional Sale

Conditional Sale is the type of finance agreement that we offer at Moneybarn. This is where we pay the dealership for the car, and you will legally own the vehicle once you’ve made the final repayment.

Hire Purchase

Hire Purchase agreements are similar to Conditional Sale. You might need to pay a deposit upfront, then you make monthly repayments usually over 12 to 60 months.

With HP, you won’t legally own the car until you make the ‘option to purchase’ fee at the end of the agreement.

Personal Contract Purchase

With Personal Contract Purchase agreements, you usually pay an initial deposit, followed by monthly repayments.

At the end of the contract term, you can:

  • Return the car to the dealership or lender, and start a new PCP plan
  • Pay the balloon payment and become the legal owner

Personal Contract Hire

Personal Contract Hire is also known as car leasing. You won’t fully own the car and will return it to the dealer or leasing company at the end of the contracted term.

Personal loan

A personal loan is a lump sum of money that can be borrowed from a bank or finance provider, which can be used to buy a car. Getting a personal loan is slightly different to car finance, check out our guide that explains the differences between a personal loan and car finance.

You can then choose to purchase the vehicle from a dealership or a private seller. The lump sum is then repaid in monthly instalments, with interest, to the lender.

For a closer look at each type of car finance, our guide on “how does financing a car work?” explains the process for each and some handy pros and cons.

What else do lenders consider apart from your credit score?

Your credit score isn’t the only factor lenders look at when assessing your car finance application. Here are some of the factors a lender may consider:

1. Income and expenses

Lenders will examine your income and expenses to make sure any finance they offer is affordable for your circumstances.

Some of the checks they make might include if you have any missed payments, any bounced direct debits, or any gambling transactions.

2. Credit history

While a credit score is simply a number, your credit history is a full report of any credit you’ve had in the past and present, such as car finance, credit cards, and loans. It will also show lenders whether you have made your payments on time. Lenders will investigate your credit history to assess how likely you are to make payments in the future.

A credit history that shows that you regularly make your payments on time will likely count in your favour. It is a positive sign that you are responsible with credit, and may increase your chances of getting approved.

Your credit history will also show if you’ve had a default, CCJ, IVA, or whether you have declared bankruptcy. These are some examples of things that might affect your chances of getting approved. It doesn’t mean you can’t get car finance, you just might need to use a specialist lender.

Before applying for car finance, you could check your credit report to make sure all of the information is correct. If anything is out of date or wrong, contact the credit reference agency to get it resolved.

Learn more about what affects your credit score with help from our guide.

3. Credit utilisation

Credit utilisation measures how much credit you use out of the total that is available to you. For example, if someone has £4,000 available in credit, but has only used £2,000, then their credit utilisation is 50%.

Experian suggest that the ideal credit utilisation ratio is 30% or less. A lower credit utilisation might show that you are more responsible with credit.

4. Address history

Address history refers to how many addresses you have had. If you have changed addresses a lot in a short timeframe, you could be seen as a greater risk.

Lenders will usually ask for your address history when you apply for credit.

How much can I afford on car finance with a low credit score?

A responsible lender will use a credit check to make sure any finance they offer is affordable to you. They will consider factors such as your credit history and income when deciding whether to offer you car finance.

You could use a car finance calculator to give you an indication of what your car finance might look like. Simply enter the amount you’re looking to borrow, how long you want the repayment term to last, and your credit score.

For more information on the types of checks done when you apply for car finance, check out our guides:

When applying for car finance in the UK, your credit score is one of several factors considered by lenders when assessing whether or not to offer you car finance.

Lenders may have different criteria and requirements in terms of credit history, but also income, and affordability.

There is no definitive minimum credit score that you need to get approved for car finance. However, you may find it more difficult to get car finance with bad credit.

What is a credit score?

Before diving into ‘good’ and ‘bad’ credit scores, it’s important to understand what a credit score is.

Your credit score is a rating given to you based on your financial history. It indicates how reliable you are at borrowing and repaying money.

A higher credit score suggests that you have been responsible with credit in the past, which may make it easier to get approved for credit in the future.

The reason there is no specific credit score required for car finance is that there are three different credit reference agencies (CRAs) in the UK, each with their own credit score ranges.

These three agencies are responsible for compiling individuals’ credit and personal data. The credit score ranges differ for each credit reference agency:

  • Experian: 0-999
  • TransUnion: 0-710
  • Equifax: 0-1000

There are also some credit report services, the most popular ones are ClearScore and Credit Karma.

It’s important to know that they aren’t CRAs themselves. This is because they don’t collect the data themselves, instead, they use data from the CRAs. For example, ClearScore uses Equifax data but has its own score ranges, and Credit Karma uses TransUnion data and has the same ranges but they have slightly different names.

  • ClearScore: 0-1000
  • Credit Karma: 0-710

Learn more about credit scores with help from our guide – what is a credit score?

What is a good credit score?

There is no definitive answer to the question of “what is a good credit score”, as the three credit reference agencies mentioned above have their own ranges for assigning scores.

Each CRA groups scores together in bands so lenders can determine the risk level of each customer.

CRA Good Very good Excellent
Experian 881-960 - 961-999
Equifax 531-670 671-810 811-1000
TransUnion 604-627 - 628-710

Credit Karma’s scores for ‘good’ and ‘excellent’ are the same as TransUnion:

  • Good: 604-627
  • Excellent: 628-710

ClearScore’s ranges are slightly different. They use Equifax data but don’t use the same credit score ranges. They don’t call their scores ‘good’ or ‘excellent’, instead they use different wording. The equivalents of good and excellent are:

  • Looking bright: 605-724
  • Soaring high: 725-1000

The above information on credit scores, including the credit ranges of Experian, Equifax, and TransUnion, is accurate as of 15th May 2023.

How does my credit score affect car finance?

Your credit score can affect the following:

  • Whether or not you will be approved for car finance
  • Which types of car finance are available to you
  • Your interest rate

Having a low credit score doesn’t stop you from getting car finance, and having a good credit score doesn’t guarantee you car finance. However, having a good credit score can make it more likely that you will be accepted.

Is there a minimum credit score to qualify for car finance in the UK?

No, there is no minimum score requirement to purchase a car.

However, as we have already mentioned, a higher credit score means lenders might be more willing to offer you a car finance agreement at a more favourable interest rate.

Here are some tips that could help to improve your credit score, which might increase your chances of getting car finance:

  • Adding your name to any joint bills so that all your bill payments or finance repayments will show on your credit report, showing you are good at keeping up repayments
  • Make your regular payments on time
  • Register to vote through the electoral roll if you haven’t already
  • Check your credit report and notify the credit reference agency if you find any mistakes or out-of-date information

What are the different types of car finance?

Car finance is when you borrow money from a lender to cover the cost of a car. You then repay the amount in monthly instalments over an agreed period.

Here are the main types of car finance in the UK:

Conditional Sale

Conditional Sale is the type of finance agreement that we offer at Moneybarn. This is where we pay the dealership for the car, and you will legally own the vehicle once you’ve made the final repayment.

Hire Purchase

Hire Purchase agreements are similar to Conditional Sale. You might need to pay a deposit upfront, then you make monthly repayments usually over 12 to 60 months.

With HP, you won’t legally own the car until you make the ‘option to purchase’ fee at the end of the agreement.

Personal Contract Purchase

With Personal Contract Purchase agreements, you usually pay an initial deposit, followed by monthly repayments.

At the end of the contract term, you can:

  • Return the car to the dealership or lender, and start a new PCP plan
  • Pay the balloon payment and become the legal owner

Personal Contract Hire

Personal Contract Hire is also known as car leasing. You won’t fully own the car and will return it to the dealer or leasing company at the end of the contracted term.

Personal loan

A personal loan is a lump sum of money that can be borrowed from a bank or finance provider, which can be used to buy a car. Getting a personal loan is slightly different to car finance, check out our guide that explains the differences between a personal loan and car finance.

You can then choose to purchase the vehicle from a dealership or a private seller. The lump sum is then repaid in monthly instalments, with interest, to the lender.

For a closer look at each type of car finance, our guide on “how does financing a car work?” explains the process for each and some handy pros and cons.

What else do lenders consider apart from your credit score?

Your credit score isn’t the only factor lenders look at when assessing your car finance application. Here are some of the factors a lender may consider:

1. Income and expenses

Lenders will examine your income and expenses to make sure any finance they offer is affordable for your circumstances.

Some of the checks they make might include if you have any missed payments, any bounced direct debits, or any gambling transactions.

2. Credit history

While a credit score is simply a number, your credit history is a full report of any credit you’ve had in the past and present, such as car finance, credit cards, and loans. It will also show lenders whether you have made your payments on time. Lenders will investigate your credit history to assess how likely you are to make payments in the future.

A credit history that shows that you regularly make your payments on time will likely count in your favour. It is a positive sign that you are responsible with credit, and may increase your chances of getting approved.

Your credit history will also show if you’ve had a default, CCJ, IVA, or whether you have declared bankruptcy. These are some examples of things that might affect your chances of getting approved. It doesn’t mean you can’t get car finance, you just might need to use a specialist lender.

Before applying for car finance, you could check your credit report to make sure all of the information is correct. If anything is out of date or wrong, contact the credit reference agency to get it resolved.

Learn more about what affects your credit score with help from our guide.

3. Credit utilisation

Credit utilisation measures how much credit you use out of the total that is available to you. For example, if someone has £4,000 available in credit, but has only used £2,000, then their credit utilisation is 50%.

Experian suggest that the ideal credit utilisation ratio is 30% or less. A lower credit utilisation might show that you are more responsible with credit.

4. Address history

Address history refers to how many addresses you have had. If you have changed addresses a lot in a short timeframe, you could be seen as a greater risk.

Lenders will usually ask for your address history when you apply for credit.

How much can I afford on car finance with a low credit score?

A responsible lender will use a credit check to make sure any finance they offer is affordable to you. They will consider factors such as your credit history and income when deciding whether to offer you car finance.

You could use a car finance calculator to give you an indication of what your car finance might look like. Simply enter the amount you’re looking to borrow, how long you want the repayment term to last, and your credit score.

For more information on the types of checks done when you apply for car finance, check out our guides:

 
Daniel Timblick, Senior Credit Risk Analyst
Bringing you guides that simplify the world of credit and answer common vehicle finance questions.
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