Car finance with low credit score?

bananamonkey

Hi,

I'm new to this forum so please excuse me if I have put this in the incorrect section. I'm just after a bit of advice really, hope somebody can help me.

Long story, but in short I have a very low credit score (358 according to Equifax) - from a defaulted payment on an outsanding overdraft on a closed bank account in 2010 which I have only just realised I still owe on.

I haven't paid the amount off yet, but intend to do so in full tomorrow - will this improve my credit score instantly? Or is it correct that the default will be reset and still on my credit report for a further six years? If so would I not be best not paying the outstanding amount, in which case it will be wiped off in 2 years? It is a small amount of money and I'm very frustrated with myself for not realising I missed it previously.

I will need to think about replacing my car soon, although I'm not desperate to for probably another year or so yet - whats the chances of being approved for finance? Would I be better off waiting until I have improved my credit score?

Hope this makes sense,

Thank you

InsideInsurance

It can take a couple of months for updates to get through to the CRAs depending on when in the cycle you make the payment (banks report monthly)

Just paying it off wont wipe it off your record but it may improve it. Given youve closed the account then it will be 6 years from the later of the default or closing date before it drops off your record but as you get further from it the less impact it will normally have.

The natural question really would be as to why you need finance on a car. Why not just get something within your means?

MrSilk

bananamonkey wrote: »

Hi,

I'm new to this forum so please excuse me if I have put this in the incorrect section. I'm just after a bit of advice really, hope somebody can help me.

Long story, but in short I have a very low credit score (358 according to Equifax) - from a defaulted payment on an outsanding overdraft on a closed bank account in 2010 which I have only just realised I still owe on.

I haven't paid the amount off yet, but intend to do so in full tomorrow - will this improve my credit score instantly? Or is it correct that the default will be reset and still on my credit report for a further six years? If so would I not be best not paying the outstanding amount, in which case it will be wiped off in 2 years? It is a small amount of money and I'm very frustrated with myself for not realising I missed it previously.

I will need to think about replacing my car soon, although I'm not desperate to for probably another year or so yet - whats the chances of being approved for finance? Would I be better off waiting until I have improved my credit score?

Hope this makes sense,

Thank you

Hi there!

It shall remain on your file for 6 years from the default date, paid or now, however if it's settled then as the years go on, it would have less of an impact on your file.

Because car finance is secured on the car, you should find a finance company who would accept you, however; expect to pay higher fee's or APR, don't forget the final payment at the end of the finance agreement if you wish to keep the car.

bananamonkey

Thank you both

II - I feel it would be more beneficial for me in the long run to buy a newish car on finance then it would be to buy an older car outright. I've looked at the type of car I want, and have seen several that are well within my means which are cheaper to run, tax and insure than my current car is, so I don't feel it would effect my current outgoings too much, if at all, and I can afford it easily, its just my credit score holding me back.

Thank you for clarifying MS, I've never really had to worry about my credit score before now, I've only previously had a bank loan (to buy my current car, ironically) and a store card, both of which the payments were met on time and settled. I know its hard to answer without knowing me, but do you think the best option for me right now would be to keep my current car and save for a larger deposit in the meantime, which hopefully will bring the monthly payments down significantly if I do have to pay higher %APR? I've sought advice on how to improve my credit rating, and obtained a credit card with a low limit which I will pay off in full each month, but this is still a work in progress as this has only come to light in the last couple of weeks.

I'm not good at making decisions!

Tixy

Ideally keep your current car running until the default falls off your credit file - so some time in 2016.
If you still need finance at that point on top of whatever you have saved then you'll be much more likely to get accepted for finance/a loan at a competitive rate.

If you can't wait that long then definitely best to put it off as long as you can and continue saving as much as you can towards a new car. The older a satisfied default is the less of an impact it may have on a potential lenders decision.