What Checks are Done for Car Finance?

When you apply for car finance, before you can see any offers available, the panel of lenders working with your car finance broker will check your financial history to determine whether you can repay your loan.

For lenders to be able to run these checks, you will need to provide several pieces of personal and financial information, including your address history, income, employment history and more.

You will also be subjected to soft and hard credit checks by the lender to help them understand your financial history in more detail and give them a better profile of who you are and your ability to make repayments.

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It may seem like quite an intense process, but lenders need to be 100% certain that you can repay what they loan you. After all, cars are not cheap, so they need to be able to trust that they will get their money back.

There are lenders out there that can work with those that are unemployed, people with bad credit and others that don't have a perfect credit history. While any loan application is not guaranteed, it's always worth researching the lenders that may be able to accommodate your particular predicament.

Credit checks for car finance

If you're applying for car finance, a panel of lenders will run credit checks on your financial profile to determine whether or not you are suitable for them to lend money to.

For them to be able to do that for you, you will need to provide them with some details that enable them to get a quick and clear picture of your circumstance, including address and employment history, income and identity.

Soft credit checks for car finance

A soft credit check is the first stage of a lender identifying your suitability. It's a brief sweep over your credit history that looks at your ability to manage loans and will enable you to get approved for an agreement in principle.

This type of check does not go in-depth, meaning no trace gets left behind on your credit file. If lenders see too many hard credit checks on your file, it may put them off lending to you.

Hard credit checks for car finance

A hard credit check looks at your full credit history - which goes as far back as six years - so a lender can determine your eligibility and the chances of making your repayments.

This check only gets carried out once you have initially explored the offers and have officially applied for one of the financial loans.

You should be certain that you wish to proceed with a full finance application; a hard credit check is visible on your credit history, which could deter other lenders from offering you finance, particularly if you have been rejected, or made multiple applications quickly.

What do car finance lenders check?

To pass your credit checks and be approved and eligible to apply for car finance, you first should provide personal and financial information for a lender to review to understand your money management.

Proof of identity

Car finance lenders first need to confirm who you say you are is legitimate and that you're not committing fraud. You'll be required to give your full name, marital status, whether you hold a UK passport, your nationality and date of birth.

Driver's license

You need to state and prove that you hold a valid driver's license. No lender will offer car finance to those without one or those on a provisional license as they can't legally drive without a full and valid license.

Employment history

Your lender will need to be sure you can make your repayments, and they do so by checking your employment history, which determines whether or not you have a steady income per month.

You should expect to state your employment status, job title, employer's name and location and how long you have worked there. If it's less than three years, you will have to provide your previous employer(s) until you have provided three years' worth of history.

Income

One of the most important parts of the application process is telling your lender how much money you take home each month. It will enable them to paint a picture of your salary and monthly outgoings to determine if you can repay them but can also afford all your other bills, utilities and more.

If you are self-employed, you may have to provide more information when you get to the stage, as it's likely that you will have different payment amounts and references going into your account each month.

Address history

Like your employment history, you should provide three years of address history. Therefore, if you haven't been at your current address long, expect to list any other places you have lived before that.

You will also need to provide your residential status, such as whether you are a homeowner with a mortgage, living with your parents or renting from a private tenant.

Credit score

Your credit score is the final piece of the puzzle and could be the difference between being approved or being refused. If you haven't got the best score, there are ways for you to build upon it.

If you have had previous loans and made your repayments on time, you will likely have a decent enough credit score to get approved for car finance.

How long does it take to be approved for car finance?

Providing all the details you have submitted are correct, it can take between a few hours and two days to get approved for car finance.