The plain and direct answer to this is “yes”.
That applies to car finance or typically any other form of borrowing you’re considering.
Potential lenders have a professional responsibility to try and confirm that a borrower:
The second of those two objectives is usually dealt with, in large part, by a credit history reference check (sometimes also called a “credit check” or “credit score check”).
That process usually entails a potential lender contacting one of several large credit reference agencies who maintain information about large parts of your financial behaviours. That information includes things such as any IVAs or CCJs registered against you, late payments you might have made on your credit card bills, loans you’ve applied for and so on.
It also contains positive information about your financial history, such as loans you’ve successfully paid off on schedule.
The central agencies will use all that information to create a “credit score” for you. That indicates their view of how high or low the risks would be in lending to you.
Your credit score is used for a number of purposes but perhaps the two best known are:
It’s worth noting that every time you apply for a loan, even if you decide not to progress it, the fact you made the application will be recorded on your credit history files. Every time you’re refused a loan, that fact will be similarly noted.
This is important because the more refused finance you have on your records, the more that might negatively affect your overall credit score. That might make it even harder for you to obtain a loan in future.
The clear message here is that if you’re looking for a car loan or self-employed car finance (or if you believe you have a poor credit history) it typically isn’t advisable to make lots of random loan applications to see what happens! This will make you look financially desperate to any other prospective lenders.
At CarFinance Plus, we perform what we call a “soft credit check” in advance of your formal loan application.
This essentially involves checking your credit history references but NOT in the context of a loan application. This means that nothing is updated on the central credit reference databases because no application has been made.
This is exceptionally important because once we have that understanding of your credit status we will be better positioned to identify those car finance lenders who will be most likely to offer a favourable response to your car loan request. That helps to protect your credit history files, saves you time and improves the likelihood of a successful loan application.
Please don’t think that having a poor credit history means that you’re shut out of car finance options. Let CarFinance Plus work with you to find a solution, using our soft credit check as a starting point.