5 Step Guide to Building a Credit Profile for Car Finance
If you are looking to buy a used car on finance then there a few things that you will need to know about before you buy a car. This blog post talks you through our 5 step guide to building up your credit profile and also looks at the different types of car finance that are available as well as getting a free car finance credit check.
Have you got History?
The first thing to consider is what state your personal credit profile is in. Everything you do financially is recorded with credit reference agencies. If you have borrowed money, paid domestic bills, kept up to date on the electoral register, been to court, applied for credit cards…… you get the idea. All of your financial information can be viewed by potential lenders. The better your credit profile, the better your chances of obtaining the best rates available on the market.
Lenders have different criteria for underwriting your loan application. One company may base a large percentage of their decision on your previous ability to pay off loans quickly. Another, may like their customers to be up to date on the electoral register. Many companies like to see a previous loan paid back in full over a medium to long time period on your profile. They will then consider offering you a loan as you have previous borrowing on your profile.
There are many things that will make your profile better without putting a great deal of effort in, this guide will help you make a start.
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Step 1 - Get a Bank Account
This is a fairly obvious one but in order to build up your credit history you will need to set up a UK bank account with one of the major high street banks. The account will need to be in your own name and your current residential address.
Step 2 - Register Yourself
The very first thing you need to do is make sure you are registered at the address where you live. Contrary to popular belief this does not mean if you pay your council tax then you are registered. You need to be on the electoral register. You can do this by calling your local council or looking on your local council website for guidance.
Step 3 - Get a Store Card
The next thing to do is get yourself a store credit card such as John Lewis, Debenhams, next etc etc. You need to show you can pay back small amounts of credit to move up the ladder. Spend around £200 on the card, then be strict with yourself and make small repayments over the next 6 months, such as £35 per month. Do not pay it back instantly. You are trying to show you can pay monthly payments and can be trusted over a reasonable period of time.
If you do repay the full amount within the first one or two months it will not have the desired effect. All though you will have a credit card on your profile, it will not give a lender any information. Credit reference agencies will not give you any recognition for paying a store card debt quickly.
If you pay it back over 6 months your credit score will be improved and when an underwriter views your profile, they will see you manage your finances well. These credit cards are very easy to obtain and often come with good store offers, just watch out for the interest rate. Unfortunately if you are just starting out then your options are limited. A little bit of hardship is far outweighed by the great deals that will come your way later.
Step 4 - Pay Your Domestic Bills
All of your domestic bill payments are recorded on your credit profile. Gas, electric, water, mobile phone, home phone, internet…. It might sound obvious but make sure your name is on these bills. If you share a house then share the bills. Don’t put just one persons name on the bill. Make sure your name is on your council tax bill as this can sometimes be used as evidence of your home address in the absence of registration on the electrical register. Finally, make sure your bills are paid on time and in full.
Step 5 - Build Your Credit History
Registering, getting a store card and arranging bills are the first fundamental building blocks to getting a credit profile. This is the very least you will need to have in order for an application to be accepted by a market leading lender. If you do not have these attributes in order, don’t think you can’t obtain a loan or get accepted for finance, you absolutely can, but you may have to apply through smaller companies. These companies will perhaps be an independent lender who does not advertise everywhere but will have the time to “hold your hand” through the application period and make sure your paperwork is in order. Top Notch Cars have access to lenders who cater for people with excellent credit profiles all the way through to profiles showing bankruptcy. Get in contact with the team if you’re thinking of applying for finance to buy a car.
Throughout his career Christian has battled to achieve trust and improve clarity within the car industry. He has accumulated considerable praise from the very people who have purchased vehicles from him. To read about their experiences, search for Top Notch Cars Thetford on Google. To follow Christian's blog join the Top Notch Cars Facebook page.