Credit score vs credit history in car finance

There are numerous misconceptions around these topical subjects in the finance industry

Applying for car finance can seem confusing, especially in the beginning. You may have a range of questions floating around your head, including: ‘will I get rejected if my credit score isn’t up to the required level’, or ‘how important is my credit history?’

There are numerous misconceptions around these topical subjects in the finance industry. 

Credit score 

It won’t take you long to figure out how to get a credit score assessment if you start searching for the relevant terms online. There are many companies ready to take your details, provide you with a score (usually out of 700 or 999) and offer advice on how to improve it. 

They will check you against some important factors: your payment history, any debt owed, credit available and your age - these are just some of the many things they will focus on. 

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And remember that, while these companies do take note of these key facts, they are also geared up to take the results in a direction based around opinions. 

The reality is that what these companies are offering will more than likely benefit you long-term; the advice - that they will charge you for on a monthly basis - may well help you to start improving your credit score over time and, in the long run, will more than likely positively impact your credit history. But that won’t just happen overnight. 

For the here and now, and for the sake of applying for car finance, receiving your credit score - whether it’s good or bad - is fairly meaningless. 

Why? Well, it’s quite simple: finance companies do not look at your credit score when you’re applying for finance. Instead, they go down the factual route only and check out your credit history and current status. 

Credit history 

There is of course a natural crossover between your credit score and credit history; finance companies will unearth your dealings with credit reference agencies, which is highlighted in both your score and history. Information from credit reference agencies is usually held for up to six years. 

But these aren’t the only things they take into consideration. Companies that provide you with a credit score don’t investigate all of the key components that finance companies take into consideration when deciding whether to approve your application. 

They look at much more, including: 

  • Employment status
  • Annual income
  • Residential status
  • Living status
  • Whether you have a guarantor 

While the key insight for finance companies is to assess how you are portrayed by the above points in the current time, they also document the history of these, where they will analyse trends and consistency over longer periods. 

Arguably the most important of the aforementioned points is your employment status and annual income. There’s every chance that your income may be quite different to what it was three or five years ago, and this will all be taken into account. 

Finance companies will match what they found from the credit reference agencies with your other personal statistics and, from there, will assess the risks of approving you to get a loan.

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If you are rejected by one lender, it doesn’t necessarily mean you will be dismissed by another, but it’s important to note that all of these will show up on your credit reference history, which may then go against you. Whatever you do, do not go from one lender to the next in a desperate attempt to seek approval. 

Ultimately, you are best placed to know what shape your credit history is in and whether you are in a good position to be approved. While finding out what your credit score is may give you some clarification on that status, there’s far more to the decision-making process than just that. 

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