How far back do lenders typically look?

sipar69

Hi all, my first forum post. 

I've been reading a huge amount about credit reports and ratings recently.  Having always worked, having a fairly good income and been responsible with made repayments on time etc, but having quite a relaxed attitude to using credit, my credit scores (which I know should not be taken as definitive) on all three major bureaus have tend to hover around the fair to good mark, the main reason being a fairly high credit utilisation percentage. 

I've recently started on a mission to improve my credit.  Having paid off all my revolving credit in the last month, I've seen my scores jump to the higher end of their scales.  I'd like to buy a new car on PCP in the coming months (I know not everyone thinks this is a good idea but it's an option that works for me).   

I realise that applying for significant credit like a car loan right now when my scores have just improved would not be a sensible move.  However, the one thing I can't seem to find much information on is how far back lenders typically look at your credit file when making a lending decision.  In other words, how long do I need to demonstrate that low credit utilisation, very few applications for credit etc is my typical behaviour before I can expect a favourable decision / to be offered the best interest rates etc.  Six months seems like it might be the norm but nothing I have seen is definitive on this point.  I know that info stays on file for six years but I'm assuming that unless there are CCJs, missed payments, defaults etc, information going back years is unlikely to have much bearing on an application for car finance. 

I appreciate that to some extent this is a how long is a piece of string question but any general thoughts/observations would be much appreciated.
 
Thanks.

[Deleted User]

Firstly, please ignore the nonsense "score", it can go up or down depending on what the CRAs are trying to sell you that week, it reacts (usually negatively) to any change at all. Whether you get finance or not is down to how the lender scores you on their internal system which you will never see

Secondly, your credit file is 6 years, lenders will check the whole thing, though older records tend to have less of an impact e.g. a 5 year old default is probably better than a couple of 2 month old late payments

Thirdly, the chance of you getting finance will be based on your credit history e.g. paying off a credit card in full every month is good, holding lots of debt is bad (but if it was all paid off properly, it's not necessarily a negative)

Hope that helps

MalMonroe

Hi and welcome!

I am just coming to the end of a two year, 0% interest PCP term and it's been absolutely fine. I found it was great having a nearly new, very reliable car and the monthly cost was low and very manageable. My credit record is probably worse than yours, tbh. 

When I applied for the PCP, I was holding my breath and crossing all fingers but it was fine and to my surprise, the application sailed through without any problems at all. Plus I'm retired and my only income is via pensions but this didn't affect my application at all.

Generally, lenders really don't like it if you are using 50% or more of your available credit but it sounds like you are okay. Also, you're more likely to get car finance than any other kind of finance. As Farfetch says, the credit scores you see on your reports are not the same credit scores that lenders see, or use.

Good luck! 

sipar69

Thanks for that.  I have no defaults but have to confess in recent years I’ve tended to pay at or close to the minimum payment on my two credit cards. That is until recently when I was fortunate to be in a position to pay them off in full. I plan to keep them but only use them occasionally and pay the balance in full every month. I’ve also had a few loans in recent years, which are all paid off.   Do think that having only paid the minimum on my cards in recent years would be a significant drawback is the eyes of lenders if I pay them in full for say the next six months? (I’ve never missed or even been late with a payment.)

[Deleted User]

sipar69 said:

Thanks for that.  I have no defaults but have to confess in recent years I’ve tended to pay at or close to the minimum payment on my two credit cards. That is until recently when I was fortunate to be in a position to pay them off in full. I plan to keep them but only use them occasionally and pay the balance in full every month. I’ve also had a few loans in recent years, which are all paid off.   Do think that having only paid the minimum on my cards in recent years would be a significant drawback is the eyes of lenders if I pay them in full for say the next six months? (I’ve never missed or even been late with a payment.)

Not paying off cards in full does make you look less attractive from a lender's view though that may mean they simply offer you less attractive finance. PCP is easier to get than say a loan because they can simply take the car off you if you stop paying and then chase you for the rest - hence why even a pensioner can get it (by that I mean, someone without a job income even if a pension might be considered more stable than a job)