Declined for car finance? Don’t panic
Being rejected for car finance isn’t pleasant…or too uncommon.
But, it's important not to panic and give up hope.
If you’ve been 'knocked back’ by a couple of finance companies, the advisable thing to do is ascertain why your applications have being rejected (don’t blindly make multiple applications)?
In these days of ever-changing lending criteria, there can be many reasons why car finance is refused and it will almost certainly be connected to your ‘credit score’.
What exactly is a credit score?
Basically a 'credit score’ is a tool used by lenders to help determine whether you qualify for credit, based on information contained in your credit report which will have been compiled by ‘credit reference agencies’ (CRA’s). Those with a higher ‘score’ are perceived less of a risk in the financial world, meaning lenders are more likely to grant them credit. However, a low credit 'score' means the opposite.
Various different factors will affect your credit report, including:
Your total debts, and how much of you’re available credit you’re already using
Your history regards making credit account payments
The number of recent credit searches (applications for credit) which have been carried out
Public record (your address according to the electoral roll and any county court judgments (CCJ’s)
Credit reports can be wrong
It’s important to realise that credit reports CAN be incorrect, for example timely payments can often be misreported as ‘late’…a loan can still be listed as ‘open’ even though it had long since been paid off…or your report may still be linking you to an old address.
The only way you would know this is by reviewing your credit report, and this easy to do.
All ‘credit reference agencies’ (CRA’s) have a statutory obligation to provide you with a copy of your credit report for free, the three main ones being Experian, Equifax and TransUnion.
Spotted an error on your report? Dispute it!
If you notice inaccurate or outdated information on your credit report, you can request to have it removed/updated in a process known as a ‘dispute’.
To dispute credit information, you’ll simply need to contact the CRA in whose report you found the error (ie Experian). But, bear in mind that, if one CRA has incorrect information, there is every chance the error will appear in your files collected by other credit bureaus as well.
All three of the major CRA’s can can be contacted online…by phone…or by mail.
What happens after you submit your ‘dispute'?
After you’ve formally submitted a dispute, the CRA will work to resolve the issue by asking the lender (ie the bank or credit card issuer) to check their records.
If it is agreed the information held is incorrect, your credit report will be corrected, updated or deleted accordingly…which would lead to your credit score going up.
However, it is possible that the company reporting the data certifies that the information is indeed accurate.
Either way, it’s important to know that filing a ‘dispute’ with one or all of the CRA’s has no negative impact on your credit score.