Turned down car finance - Why? how do i fix this and how long will it take!

mcfcblue

All,

Hope you are well.

I am 24 years old and need a car to travel to meetings etc. I applied for a car on finance (£400 per month payments, 0 deposit over 4 years) and was declined. This worried me immensely as I had planned to buy a house later this year, so the first thing I did was head over the Clear Score. My score is low (265) however I have never missed a payment, or done anything, in particular, to negatively impact my credit rating.

I have never been great with money, particularly during my time in London it is safe to say I squandered most of it, and consequently have several credit cards which are maxed (totaling 5k), one of which is used for business but remains high, this in turns means my credit utilization is very high. I have a loan that I took out when I first moved to London as a graduate too (5k) now after paying most of it off. Payments for credit cards and loan currently around the £600 per month mark.

If I do my best to pay the above debts off over the coming months will this be a quick fix and mean when my credit utilization drops I can reapply for a car? and will this hinder chances of getting a mortgage in the future? I am hoping it is not a slow process however sure it is!

any advice is welcome.

thanks.

Potbellypig

Ignoring all the other bits, do you need a car that costs £400 per month? Perhaps you'll stand a better chance with one that costs considerably less.

[Deleted User]

You're going to severely impact your mortgage chances if you continue to borrow.

Cut your costs and get your debts cleared. Then save for a deposit plus other moving costs before thinking about a mortgage.

mcfcblue

thanks for the response both.

@potbellypig The way I rationalized £400 a month was 10% of monthly income after tax would be aligned to a car (£450 with insurance) due to spending hours upon hours a week in there (and having a 5k yearly car allowance provided by work).

@zx81 if I clear debts will this positively affect my credit rating quickly? or does this take time?

[Deleted User]

Clearing your debts will mean you present a lower risk to lenders.

System

£400 a month for a car just "to get to meetings"? While you are already servicing considerable other debt? Absurd. I wouldn't lend it to you. sorry!

Exodi

beany_bot wrote: »

£400 a month for a car just "to get to meetings"? While you are already servicing considerable other debt? Absurd. I wouldn't lend it to you. sorry!

OP suggests he takes home £4500 a month and received a yearly £5000 car allowance so in these circumstances it doesn't seem unreasonable.

Whilst your credit score doesn't count for much, why is it so low? You should check Experian & Noodle as well and get to the root of this. If you're taking home what you say you are and your outgoings are relatively low, there's no reason you should be declined.

Me thinks there's something hiding on your credit files.

Candyapple

If you are planning to buy a house later this year then I assume you have substantial savings right? In which case, you should clear your £10k worth of credit card/loan debt first. £600 per month is a lot to be spending every month servicing your debts and any mortgage lender will definitely be taking that into account and deducting it from the amount of money the bank will be willing to lend you.

Regarding your Equifax score, whilst scores from the CRAs are generally useless as in they are not seen by any lenders and mainly used as a marketing tool to get you to buy extra products and services, they can be useful in that they offer a guideline that your credit history may be in trouble. 265 is a very low score so I’m guessing that you either have late payment markers / defaults / CCJs?

If you’ve applied for finance and been turned down and still need it, your only choices are to clear your debts as fast as possible, not make any applications for credit in the next 6 months and then if you reapply, try a lower priced model.

There are no quick fixes when it comes to repairing your credit history I’m afraid – it’s all about time (as in years) and being consistent with making your payments on time every single month and managing your credit well.

The free versions to check your credit files are below:
Experian: https://www.moneysavingexpert.com/creditclub
Equifax: https://www.clearscore.com
Call Credit: https://www.noddle.co.uk

mcfcblue

Thanks for all of the above responses.

In regards to there being something hidden in my credit files, I can’t see anything after investigation. My credit score took quite a tumble over the space of 12 months when I applied for an Amex (approved) the initial moving down loan (approved) and another credit card around 12 months afterwards (approved).

Since then it hasn’t really recovered mainly down to being foolish and spending the money I have each month, and therefore having consistent 80%+ credit utilisation. Since all of this I have no missed payments, CCJs or anything like that and if I did from previous, I am sure Amex would not have approved me for a gold card. This gives me confidence there isn’t anything hiding there from old and it’s mainly down to high credit utilisation.

In regards to the savings question, I have around £9,000 in an ISA and £10,000 in shares with my current company (which I can sell in August).

If I used the £9,000 in the ISA to clear the debts, this would immediately impact my credit utilisation which from what I can see, seems to be the only real negative on my credit history. But as you have mentioned above it does seem awfully low!!

Thanks again for all of your advice, I have only recently started to become more financially aware and although it is late and I have made mistakes, I am confident this can be rectified.

[Deleted User]

Remember you won't be judged on the pretend credit scores the CRAs provide. They're just a comedy gimmick for you to enjoy.

You'll only ever be assessed on your history and circumstances,.

Candyapple

mcfcblue wrote: »

In regards to there being something hidden in my credit files, I can’t see anything after investigation. My credit score took quite a tumble over the space of 12 months when I applied for an Amex (approved) the initial moving down loan (approved) and another credit card around 12 months afterwards (approved).

2 hard searches would have barely an impact on your credit history so it won't be that.

mcfcblue wrote: »

Since then it hasn’t really recovered mainly down to being foolish and spending the money I have each month, and therefore having consistent 80%+ credit utilisation. Since all of this I have no missed payments, CCJs or anything like that and if I did from previous, I am sure Amex would not have approved me for a gold card. This gives me confidence there isn’t anything hiding there from old and it’s mainly down to high credit utilisation.

Sorry it still doesn’t add up. Even when I used to stooze on cards and my credit utilisation was pretty much maxed out and had £50k across cards my credit score was never that low (ranged between 450-500)

Each of the three credit reference agencies use a different scale. Experian score you out of 999, Equifax up to 700 and Callcredit up to 710. Just so you can see how low your 265 score is on the scale.

I don’t understand why you have an income of £75k pa and still have debts? Where is your money going?

Have you checked Experian and Call Credit?