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Bad credit explained

What does it mean to have bad credit? What causes you to have bad credit, and does that affect your ability to get finance? As vehicle finance experts, we’ve written this guide to answer all these questions so you can understand bad credit and take steps to improve your credit score.

Why do I have bad credit?

Your credit file can be affected by lots of different factors. For example, you could improve it by sticking to the terms of your credit agreements, but it can be negatively impacted if you:

Miss a payment
Repay a bill late
Declare bankruptcy
Enter into an IVA
Have a CCJ

If you’re still not sure why you have bad credit, or want to know more about what affects your score, then check out our guide on factors that affect your credit score.

How does bad credit affect me?

Whenever you want to borrow money from a lender, they will run credit checks to see if they will lend to you. They’ll base their decision on a number of personal factors, one of which is your credit file.

Mainstream lenders, such high-street banks, will often not lend to customers who they view as having bad credit. This is because someone with bad credit, whether it is because of a County Court Judgment (CCJ), an Individual Voluntary Arrangement (IVA), or something else, could be seen as risky to lend to.

That’s why you might be charged a higher APR than someone with good credit. So, if you’ve been refused finance elsewhere, you may need to find a specialist lender.

If you have bad credit, you might be looking for no deposit finance. No deposit can be helpful if you don’t have the money right away. However, if you have bad credit, it could be more difficult to find a lender that offers that sort of agreement. For more information, see our guide on no deposit car finance.

Understanding bad credit

We’ve written a series of guides to help you better understand your money and credit. Below are some of the guides we would recommend. They cover some financial jargon such as soft credit checks, affordability checks, and APR. By understanding what they mean, you can know how your credit file affects your chances of getting finance.

Why do I have bad credit?

Your credit file can be affected by lots of different factors. For example, you could improve it by sticking to the terms of your credit agreements, but it can be negatively impacted if you:

Miss a payment
Repay a bill late
Declare bankruptcy
Enter into an IVA
Have a CCJ

If you’re still not sure why you have bad credit, or want to know more about what affects your score, then check out our guide on factors that affect your credit score.

How does bad credit affect me?

That’s why you might be charged a higher APR than someone with good credit. So, if you’ve been refused finance elsewhere, you may need to find a specialist lender.

Understanding bad credit

Do I have a good credit score?

We explain what a good credit score is with each of the three credit reference agencies, so you can understand if you have a good credit score.

Soft credit checks

We use a soft credit check at the point of application, which does not affect your credit score. Read more about soft and hard credit checks in our guide.

Affordability checks

Lenders will do affordability checks when you apply for finance. This helps them decide whether or not to lend to you. Find out more about them here.

What does APR mean?

Annual Percentage Rates (APR) get added on to all loans. If you have bad credit, you might be charged a higher APR – find out what that means below.

What is a bad credit score?

Each of the three main credit reference agencies have their own definitions of a bad score. Check out what they are in our guide.

Do I have a good credit score?

We explain what a good credit score is with each of the three credit reference agencies, so you can understand if you have a good credit score.

Soft credit checks

We use a soft credit check at the point of application, which does not affect your credit score. Read more about soft and hard credit checks in our guide.

Affordability checks

Lenders will do affordability checks when you apply for finance. This helps them decide whether or not to lend to you. Find out more about them here.

What does APR mean?

Annual Percentage Rates (APR) get added on to all loans. If you have bad credit, you might be charged a higher APR – find out what that means below.

What is a bad credit score?

Each of the three main credit reference agencies have their own definitions of a bad score. Check out what they are in our guide.

Can I get vehicle finance with bad credit?

Having a poor credit history doesn’t mean you can’t get vehicle finance. But it may make it harder to find a lender that will accept your application. We recognise that even if you have bad credit, you may still need to borrow money to afford a car, van, or motorbike for your everyday needs.

You might have heard that because you have bad credit, you have to apply with a guarantor. This isn’t the case, and car finance with no guarantor and bad credit is more common.

As a specialist lender for people with bad credit, we’ve provided finance to thousands of people across the country to help them get the vehicles they need. You could try our car finance calculator to get an idea of which vehicle you might be able to afford.

Can I get vehicle finance with bad credit?

You might have heard that because you have bad credit, you have to apply with a guarantor. This isn’t the case, and car finance with no guarantor and bad credit is more common.

Myths about bad credit finance

Everyone’s eligibility for finance is different. If you have bad credit, there are some myths that you should be aware of when you’re researching a finance agreement.

You may have seen some lenders advertising finance that is guaranteed. It’s important to know that guaranteed car finance doesn’t exist, nor does no credit check car finance. It’s a widely promoted topic, but you should be aware that no responsible lender can guarantee any kind of finance.

We’re all different so it’s impossible to have a product that is one size fits all and vehicle finance is no exception. A vehicle finance provider will always need to know your personal circumstances before offering you finance, and that’s why it can never be guaranteed.

Another bad credit myth is that, just because you claim benefits, you have bad credit. However, it is possible to get car finance on benefits.

Myths about bad credit finance

Everyone’s eligibility for finance is different. If you have bad credit, there are some myths that you should be aware of when you’re researching a finance agreement.

Another bad credit myth is that, just because you claim benefits, you have bad credit. However, it is possible to get car finance on benefits.

Other ways we could help

We could help you make the switch to a hybrid or electric car. Check out our guide to getting electric car finance.

Looking to buy a van, but have a low score? Find out how we could help you get bad credit van finance.

Getting accepted for motorbike finance with bad credit can be tricky, but it’s not impossible.

We could help you make the switch to a hybrid or electric car. Check out our guide to getting electric car finance.

Looking to buy a van, but have a low score? Find out how we could help you get bad credit van finance.

Getting accepted for motorbike finance with bad credit can be tricky, but it’s not impossible.

How it works

Make sure you completely understand the vehicle finance agreement that you may be entering. We’ve written a guide that explains how the vehicle finance process works with us.

Improving your credit score

There are many things you can do to improve your credit score, such as making repayments on time. Find out more in our comprehensive guide to improving your credit score.

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)

Representative example: Total amount of credit £9144. Repayable over 56 months, 55 monthly payments of £291.86. Representative 30.7% APR (fixed). Deposit of £754.93. Total charge for credit £6908.30. Total amount payable £16,807.23. Subject to status and affordability. You could risk losing your vehicle if you do not keep up payments.