Do you have bad credit?
You’re not alone. According to the Australian Securities and Investments Commission (ASIC), 1 in 6 Australians are battling credit card debt.
Having bad credit tells lenders – like banks and businesses, that you might not have the ability to repay a debt on time and in full.
This makes getting approved for car finance and borrowing loans harder.
But don’t worry, there are still ways to take advantage of car sales and get approved for car financing if you have a bad credit score.
If you’re looking to get approved for car finance with bad credit, here’s what you need to know.
- Know Where You Stand
The first step to getting accepted for a car loan with a bad credit rating is to access your credit file online.
Knowing exactly where you stand is a great way for working out ways to get approved.
Being well prepared and knowing why your credit rating is poor can help you find ways to understand the situation and find ways to work around it or improve it.
- Honesty is Key
The next step is to be honest in your loan application when applying for car financing.
Fully disclosing your credit card rating is better than hiding it and later having the lender find out that you were dishonest.
When you are dishonest with a lender and they find out, it’s very tempting for them not to work with you. After all, how can they trust you? Getting approved for car finance is the same. Just be honest with your application, we’re all human and they can understand whatever you’re going through.
When you try to get financing for your car, remember that you’re still working with humans.
Be genuine in your communication and you’ll be amazed at what can happen.
- Save Money
Another way to get approved is to demonstrate that you can save money.
Even if it’s a small amount each week, it proves that you have some income that you can devote to loan repayments after covering your living expenses.
This is necessary to show the bank that you are capable of returning the money that you have borrowed for a car.
Lenders also want to see statements and savings to prove that you can cover your loan, which is why saving money is important.
Having control over your finances is the most important thing. If you can’t properly manage your finances, requesting a loan is a terrible move. You need to make sure you can handle the payments. And if you’ve had a financing request accepted and you can’t pay your installments…Things start to get messy real quick.
- Stable Employment Status
Proving employment status is helpful in getting approved for car finance, even with a bad credit score.
To prove that you can repay the loans, a regular and reliable source of income is needed. To be considered stable, you should have a solid employment history which will reflect on your application.
But, having many different jobs in a short amount of time doesn’t help with your loan application. Finance companies and lenders are looking for a fixed and secure source of income to service the debt, therefore evidence of stable employment is critical to this process.
4 Ways to Improve Your Credit Rating Before You Apply for a Car Loan
1 – Pay Your Bills On Time
Trying to turn bad credit into good credit can be your solution to getting approved for car finance. One way that you can do this is by paying your bills on time.
A record of consistent and punctual bill payments will help towards getting a good credit rating. Try not to miss any payments as that will show up and contribute towards a bad rating too.
Doing this will ensure that your credit rating is improved and therefore will make it easy for you to get approved for a car loan.
2 – Pay Off Any Loans and Debts
Having existing loans and debts are a major contribution to a bad credit rating. Paying these off will definitely help improve your credit score and show you’re a reliable person to lend money to.
Having many loans and debt shows that you are not well grounded and will be unable to pay back the money lent for buying a car. It will portray you as an irresponsible and non- reliable person and drag your credit rating down. However, paying these loans and debts will clear this problem and improve your credit rating. Making efforts to reduce outstanding debts will be very beneficial in your case.
Financial advisors at Credit Capital say, “having too many existing loans can be a red flag.” They mention, “when we’re looking at our clients finances to try to find ways to assist them in getting accepted for their car loans, we often find them with a bunch of existing unpaid loans. If they’re small and easy to pay off, do it. It’ll make it easier to get accepted for the bigger loans”.
3 – Contact Your Creditors
Seeking help from creditors or getting help from a legitimate credit counsellor can be useful for you.
They can assist you and help you manage your credit and give advice on how to efficiently pay your rent, bills, loans and debts on time.
Your credit score might not improve immediately, but it will over time, if you listen to credit counsellors and work on the advice that they have given you.
4 – Stabilise Your Residential Arrangements
Lenders look at how long you have lived in one place and how often you move houses. The more you move, the riskier it is to give you finance. The longer that you have stayed in one home, the more reliable of a person you are as the lenders know that you’re not going to pick up and leave to avoid paying off their loan.
Constant moving and not disclosing your previous areas of residence are a major red flag. When you call up and want help with a loan, and you’ve moved 6 times the past year, it can be a pretty good indicator that you’re not in a stable position right now. Lenders may not consider your application.
Why You Should Add Positive Information to Your Credit Report
There are ways that you can show lenders that you are reliable without having to pay off debt. Lenders look for stability in your personal and financial life, by seeing if you:
- Are married
- Own a house
- Have lived at the same address for several years
- Have worked with the same employer for several years
These factors contribute to making you a reliable borrower and lenders are less harsh when deciding whether to lend you a loan or not.
There are many different ways that you can get approved for car finance, even with a bad credit rating.
These ways involve proving that you are a reliable person who can repay the loan, improve your credit rating, and show indicators of stability.
In summary, proving that you’re a trustworthy and dependable person will boost your chances of being accepted for a car loan.