Does cancelling hire purchase agreement affect credit rating?

blazey101

Hello, forum newbie here. I've looked around this site and others for an answer but couldn't find anything definitive.

My hire purchase agreement on my car has a 'right to cancel' disclosure that mentions that, providing that there is less than X amount remaining, I can cancel and return the goods.

All sounds fine, but does anyone know if this affects my credit rating? I'd hate to go through with this and then fail to be able to buy my replacement car and be stuck without transport... :rotfl:

Thanks guys!

Gaz83

The only way it would affect your credit rating is if you cancelled the Direct Debit before the cancellation had been processed.

If you do it properly, i.e. get in touch with the finance company and cancel it through them, then it won't affect anything.

blazey101

Cheers Gaz83, that's what I thought.

I ended up finding a good article which I can't post here apparently and I have decided against it. Here's an excerpt:

"Does voluntary termination affect my credit rating?

One of the myths about VT is that it is detrimental to your credit rating or credit score. This is not true. You are simply exercising your legal right to terminate the agreement, and your credit rating will not be affected. However, the termination will be noted on your credit record so other finance companies will be able to see that you have not fulfilled your agreement to repay your loan.

The finance company whose agreement you have just cancelled will almost certainly decline any further finance applications, along with any related companies. Other car finance companies may also decline any subsequent finance applications you make, as you have demonstrated that you have form in not repaying your agreed finance amount.

If you plan on financing another car any time soon, you may have difficulty getting finance approval. But it should not affect any other form of credit application such as a mortgage, credit card or loan."

It's totally do-able but sounds like it could be a lot of hassle. I hope it's useful for anyone else in the same position.

bris

Doing a VT is legal and not supposed to have any detrimental effects to you obtaining further credit, but as said above I know a friend who did just that and couldn't get another car.


It may be legal, but lenders don't like it and can choose not to lend to you.

CLAPTON

of course it affects your credit worthiness : otherwise it wouldn't be on your credit files

SeanG79

In my experience, it doesn't prevent other vehicle finance, provided there isn't a number of VT markers on your file, what it does often do is result in a change of terms for the next agreement, with lenders either wanting a larger deposit or shorter term, to safeguard the lender from future losses.

It doesn't have any detrimental impact on personal loans or mortgages.