If you’ve ever applied for credit and been told “no,” you’ll know how discouraging it feels. For many people in the UK, having a poor credit history makes the idea of getting a car seem impossible. You might be thinking: “Will anyone approve me?” or “Do I have to give up on owning a car?”
This is common especially when you are just trying to be a good payor and the good news is that car finance is still possible, even with bad credit. More and more lenders now specialise in helping people who’ve had money troubles in the past, giving them a chance to get back on the road while rebuilding their credit.
In this guide, we’ll walk you through what bad credit means for car finance, how approval really works, and the steps you can take to boost your chances of saying “yes” to a car loan.
What Is Car Finance and How Does It Work?
Car finance is buying a car or vehicle on borrowed money to cover the its full cost and repaying them in installments on a given period of time. The period typically lasts a few months; if you have the means to pay more, the period becomes shorter or pay less installments but longer to repay. Car finance is usually added with interest by dealerships, banks, or other form of lenders which takes approval upon looking at your credit history.
Here’s how it usually works:
- You choose the car you want.
- A lender (such as a bank, dealership, or specialist finance company) agrees to cover the cost of the car.
- You then pay the lender back in monthly instalments, which include interest.
There are a couple of common types of car finance in the UK:
- Hire Purchase (HP): You make monthly payments until the end of the agreement, and then the car becomes yours.
- Personal Contract Purchase (PCP): You pay lower monthly instalments, and at the end of the term you can either return the car, trade it in, or pay a final “balloon payment” to own it.
No matter which type you choose, lenders will usually check your credit history before approving you. This is where having bad credit can make things harder — but as you’ll see later in this guide, it doesn’t make car finance impossible.
What Does “Bad Credit” Mean in Car Finance/Loan?
“Bad Credit” generally means that in your previous loans, you haven’t been able to pay on time, how much loans you had, and if you were if not able to pay on time, able to pay them at all. If you have had these in your credit history then you are a less likely to get a good transaction in the eyes of the lenders.
When talking about missed payments, defaulted on loans, or have something like a County Court Judgment (CCJ), these are serious red flags to lenders. They see it as a sign that lending to you might be riskier compared to someone with a “clean” record.
But having a bad credit score doesn’t define you forever. What if you just recenlty lost your job causing the missed payments? What if there was a sudden cause in inflation, market shifts, and economical downturns that cause you to diminish your financial margin that forced you to stop paying. There are a lot more things such as dealing with illness, losing a loved one, and etc.
In the world of car finance, “bad credit” just means you may need to take a slightly different route to get approved. But you will surely get back on your feet.
Can You Get Car Finance with Bad Credit in the UK?
The short answer is yes — getting car finance with bad credit in the UK is possible. While it can be more difficult than if you had a strong credit history, many lenders now specialise in working with people who have less-than-perfect scores.
When you apply, lenders look at more than just your credit report. They may also consider:
- Your income and employment status – showing you have a steady income helps prove you can make repayments.
- The size of your deposit – putting more money down upfront can lower the lender’s risk.
- Your recent financial behaviour – even if your past record isn’t great, showing that you’ve been reliable with payments recently can work in your favour.
It’s true that approval rates can vary, and you may not always be offered the lowest interest rates. But the important thing to know is that bad credit doesn’t automatically mean “no.” With the right approach and lender, you still have a real chance of getting the car you need.
What Documents Do I Need for Bad Credit Car Finance?
When applying for car finance with bad credit, having the right documents ready can make the process much smoother. Lenders want to confirm your identity, income, and address before they can approve you. Typically, you’ll be asked for:
- Proof of identity – such as a valid UK driving licence or passport.
- Proof of address – usually recent utility bills, council tax statements, or bank statements.
- Proof of income – payslips if you’re employed, or bank statements if you’re self-employed.
- Bank details – so the lender knows where payments will come from.
What Is the Lowest Credit Score for Car Finance in the UK?
There is no number that acts as a universal indicator for a low credit score. Lenders usually have their own criterias to follow but according the the top 3 CRA’s or Credit Reference Agencies like Experian, Equifax, and TransUnion, 0-579 would be considers as low.
So while there’s no universal “lowest” score that guarantees approval, the reality is that even with a low rating, you still have options. What matters most is showing stability, such as a steady income and proof that you can keep up with monthly payments.
By law, CRA’s or credit reference agencies are required to give you a copy of your statutory credit report for free and you can even check how often you want according to Money Helper.
You can check Experian’s website to for a free credit score check. Click here!
Tips to Improve Your Chances of Approval
Saving for a deposit is something that you can alone control. If you keep your personal expenses low and if you are willing to take in the time waiting for your deposit to grow then you will get a higher chance of approval and it will show lenders that you actually are serious about paying and getting your credit score up by getting that car.
You can also show the lenders your stable income which adds to their peace of mind know you have been working in a stable manner for a long time. This ensures them that aside from the deposit, there is another factor why they should consider you. Getting guarantors also increase your chances of getting approved because you have a person willing to accept the burden should you fall short financially.
Also take not of your current financial behavior. Are you taking in another loan besides a car loan/finance or do you have other unnecessary expenses dragging you down? Finally, consider applying through a specialist bad credit car finance lender rather than a traditional bank. These companies are set up to work with people in your situation and are often more flexible when reviewing applications.
Do I Need a Guarantor for Bad Credit Car Finance?
No, not everyone applying for car finance with bad credit will need a guarantor, but having one can make a big difference. A guarantor can be a family member or a close friend with good credit history. You cannot have a guarantor who also has a bad credit history. The point of having one is that you have someone to jump in for you should you find yourself in a bad situation again despite having a deposit and stable income.
If you miss a payment or struggling to keep up a guarantor can strengthen your application and can also improve the terms offered to you by giving lower interest rates compared to having no guarantor, and can open doors to better choice of cars.
But, you should always take into consideration the emotional responsibility of guarantors and you must make them understand that you owe them the favor. Having a guarantor is extra support but you have to make sure that they are 100% willing to carry a potential burden for you.
Can I Get Car Finance with CCJs or Defaults?
Many people worry that having a County Court Judgment (CCJ) or defaults on their record means they’ll automatically be refused car finance. While these marks on your credit file do make things more challenging, they don’t necessarily close the door completely.
Work with car finance brokers in the UK who specialise in working with people who have CCJs or defaults. They usually have a network of lenders that cater to people and businesses with low credit scores. If you can show that your finances are now more stable, you may still be able to get approved.
It’s worth keeping in mind, though, that the terms may not be as favourable. You might face higher interest rates or be asked for a larger deposit. But the key takeaway is this: having CCJs or defaults doesn’t automatically mean “no.” With the right lender, it can still be possible to secure car finance and start rebuilding your credit for the future.
Is Interest Higher with Bad Credit Car Finance?
Yes, interest rates are higher when you apply for car finance with bad credit. This is because lenders see you as a bigger risk compared to someone with a strong credit history. To balance that risk, they charge more in interest.
While this might sound discouraging, it’s important to remember that the rate you’re offered will depend on your personal circumstances. Factors such as your income, the size of your deposit, and whether you’ve made payments on time recently can all influence the deal you’re given. Some specialist lenders may also be more flexible, offering fairer terms tailored to people in your situation.
Shop around and compare offers instead of jumping at the first approval you receive. Even with bad credit, you may still find lenders who can provide a reasonable rate. And as you make your repayments on time, you’ll not only keep your car, you’ll also be improving your credit score.
Can I Get Car Finance Without a Credit History?
Havin no credit history is worse than having a bad one. If you’ve never borrowed money before, for example, if you’re young, new to the UK, or have simply avoided using credit cards or loans, lenders won’t have enough information to judge how reliable you are. With bad credit score they will hesitate but with none they will decline.
There are some financing companies out there however, that offer “soft credit checks”. Companies like Carplus offer a car finance without damaging your credit score, but you still can’t apply without a credit history. There are also some companies like Car Loans 365 that will get you approved even without a deposit. Having a deposit will help get approved somehow.
No credit history doesn’t mean you can’t get a car financing it’s just very hard. But, should you be able to get a car finance and making regular, on-time payments, is one of the most effective ways to start building your credit from scratch.
