HP Car finance question

Jimboooob

So at the moment I'm working full time. I'm 26 and I earn £3640 a month after tax driving heavy machinery in demolition. I pay £400 rent while living at home with parents. I am looking for a new car. Long story short I had a credit card out years ago and I never paid it which resulted it been a default. I wasn't aware when I was 22 how important your credit score is. Recently for the past 9 months I've been working on getting my score up by taking a £200 credit card out and spending 20% for 7 months. It hasn't really boosted my score as of yet but I assume when I get to 12 months of clean history my score will go up.

The car is valued at 17k, with a 2k deposit the total amount payable is 25k with a 31% which is crazy I know. Now, the question I ask is how much will it boost my score? I look at this as an incredibly expensive way to boost my credit score. If I were to ask for a settlement agreement before entering the agreement, my idea is that I take this finance out over 3 years, but part exchange the vehicle in 12 months with positive equity which I'm assuming would be at around £2k. The monthly instalments are at £656. 

The only reason I'd be doing this is to boost my score while having a car what I enjoy for 12 months, but if this dosen't drastically boost my score well there's no point in me doing this. ANY ADVICE would be really appreciated guys.

TadleyBaggie

Your score is meaningless, apart from you no one else can see it. 

Aran76

It will not drastically improve your credit worthiness, it is more likely to make it less likely for you to get mainstream credit in the future. Through the amount you are borrowing and using a sub prime lender.

The drastic improvement to your credit file will come in 2 years when the default falls off your file. You earn very good money and are living at home paying only £400 per month in rent, you should be able to save huge sums of money so it wouldn't take long before you can buy the car you want outright.

Grumpy_chap

Jimboooob said:

So at the moment I'm working full time. I'm 26 and I earn £3640 a month after tax driving heavy machinery in demolition. I pay £400 rent while living at home with parents. I am looking for a new car. Long story short I had a credit card out years ago and I never paid it which resulted it been a default. I wasn't aware when I was 22 how important your credit score is. Recently for the past 9 months I've been working on getting my score up by taking a £200 credit card out and spending 20% for 7 months. It hasn't really boosted my score as of yet but I assume when I get to 12 months of clean history my score will go up.

The car is valued at 17k, with a 2k deposit the total amount payable is 25k with a 31% which is crazy I know. Now, the question I ask is how much will it boost my score? I look at this as an incredibly expensive way to boost my credit score. If I were to ask for a settlement agreement before entering the agreement, my idea is that I take this finance out over 3 years, but part exchange the vehicle in 12 months with positive equity which I'm assuming would be at around £2k. The monthly instalments are at £656. 

The only reason I'd be doing this is to boost my score while having a car what I enjoy for 12 months, but if this dosen't drastically boost my score well there's no point in me doing this. ANY ADVICE would be really appreciated guys.

Your credit score is for your eyes only.  What is important is your credit history - lenders use that information to undertake their own risk profile and determine what credit, if any, they are willing to extend and under what terms.

If I read your post correctly:

1. You have a credit card default from 4 years ago - that will drop off from records in the next 2 years.
2. You have a credit card you use now and prove sensible management of credit using that.
3. You are considering buying a car, not because you need a car, but because you think managing that debt will also help to show responsibility to lenders.  At present, the car finance is at a high interest rate, because of the poor credit history parameters.  You gamble that you will be able to sell the car and yield £2k back after a year over and above what you have paid.

Is that correct?

If so, I'd respond as follows:

1. You cannot change the past
2. A sensibly managed credit card can assist to demonstrate to lenders that you are able to manage credit obligations.
3. Aiming to make £2k on a car is a big gamble, and it will cost you a lot to do that.  Not only the high interest rate, but also the costs of insurance, maintenance, VED, petrol etc. I would not expect to make £2k profit on the car over a year, but even if you do, the other costs will have wiped that gain out.  A better solution would be to put the £656 per month into a savings account.  In 12 months you will have just under £8k.  By that time, if you want a car, you will have the default past a further year into history plus the £8k so can either buy a cheaper car for cash or can borrow half the amount for a £17k car.  

Incurring the costs of high-interest credit simply to boost your credit score is not MSE.

elasto

As others have said, companies don't see your credit score. Each conducts their own unique assessment of your credit-worthiness. Roughly speaking, some might favour low risk low returns, and others high risk high returns.

You are young with a good income. You have no great need for credit right now. This is good because time is your greatest ally here and you have plenty of it.

It's good that you have one credit card you are demonstrating reliability with. That's honestly all you need.

When the default drops off your record, you'll find opportunities increase. When you have 6 years of no missed payments, you'll find opportunities increase further.

Save your money. Don't get the car. Patience is all you need here.

 

sourcrates

Take a reality check here, your credit score is a made up number used as a marketing tool by the CRA`s, and from your post there marketing appears to be quite effective.

Please read the sticky post, and save yourself the money and hassle -

What your Credit Score really means - Please read first before posting about a credit score issue. — MoneySavingExpert Forum

Credit history is what is important, not the score.

BikingBud

Jimboooob said:

So at the moment I'm working full time. I'm 26 and I earn £3640 a month after tax driving heavy machinery in demolition. I pay £400 rent while living at home with parents. I am looking for a new car. Long story short I had a credit card out years ago and I never paid it which resulted it been a default. I wasn't aware when I was 22 how important your credit score is. Recently for the past 9 months I've been working on getting my score up by taking a £200 credit card out and spending 20% for 7 months. It hasn't really boosted my score as of yet but I assume when I get to 12 months of clean history my score will go up.

The car is valued at 17k, with a 2k deposit the total amount payable is 25k with a 31% which is crazy I know. Now, the question I ask is how much will it boost my score? I look at this as an incredibly expensive way to boost my credit score. If I were to ask for a settlement agreement before entering the agreement, my idea is that I take this finance out over 3 years, but part exchange the vehicle in 12 months with positive equity which I'm assuming would be at around £2k. The monthly instalments are at £656. 

The only reason I'd be doing this is to boost my score while having a car what I enjoy for 12 months, but if this dosen't drastically boost my score well there's no point in me doing this. ANY ADVICE would be really appreciated guys.

Over £3200 per month after tax and accommodation? Wow!

Save

• 2k per month = 24k + interest
• 1500 per month = 18k = interest

and buy a car for cash within 12 months?

You have much more choice and you are not paying lots of interest!

We are where we are because for the majority of people, from the Government down, credit is seen as the first option.