Can you get a car on finance without needing a credit check?

Can you get a car on finance without needing a credit check?
Photo by Antoni Shkraba:

If you’re looking to get a car on finance, you may be wondering how likely you are to get accepted. When you apply for finance, it’s worth noting that it will never be guaranteed that you will get an approval and you will need to meet the lenders criteria before you can get a car. In many cases, this can be as simple as meeting their requirements around age or employment, but it can also mean passing a credit check first. If you have a low credit score or no previous borrowing history, you may be worried about the likelihood of approval after a credit check has been performed. The guide below looks at how credit checks work and why they’re important to car finance. 

What is a credit check?

Your credit report is essentially your financial CV. It lists your personal information and your history of borrowing. Your credit score reflects how well you’ve managed finance or credit in the past and if you can make payments on time and in full. A bad credit usually means you’ve missed payments in the past, have gone bankrupt or have defaults in your name. All of which can seriously affect your ability to get finance. A credit check is a tool used by lenders to see how you’ve handled your credit in the past and gives them access to your credit report and your credit score. Based on the information they find when they perform a credit check on you, they can then decide whether they would like to accept or decline you for finance. 

Why would you not want a credit check done against you?

Many consumers can be put off by the prospect of having a credit check performed on their credit file. They may be worried about the impact that a credit check has on their score or the likelihood of being approved for finance. A credit check can affect your current credit score if you make multiple applications for finance in a short space of time. This can indicate to lenders that you are desperate for credit or keep getting refused by other lenders. This is usually associated with hard search credit checks though and where possible you should try to stick to soft search applications only. 

Why do lenders use a credit check when you apply for finance? 

From a car finance lenders point of view, it’s all about risk. This is the risk they take when they give you money to buy a car and the likelihood that they will get their money back on time and in full. A good credit score usually means you’ve had a strong history of making payments on time and handled your credit responsibly. If your credit is a little on the low side, it can be possible to get car finance for bad credit, but you may be best off avoiding prime lenders and instead using a lender which specialises in poor credit finance. If you are continuously being declined finance, it can be a better option to wait a while and use this time to work on your credit score first before applying again. 

What is a hard search credit check?

In the paragraph above we mentioned a hard search and soft search credit check. When credit checks first came about, they were hard searches only. A hard search allows the lender to see your full credit report, see the applications you’ve made for finance, the outcome of any applications and your credit score. Multiple hard searches for finance will also negatively impact your credit score. This as unfair for lenders to do especially if consumers were only looking for a quote for finance or check their eligibility. A soft search credit check is now often used by many lenders instead which allows you to check your chances of approval without harming your credit score. Lenders also don’t get access to your full report and instead only see part of your credit report too. 

Can you get a car with no credit check? 

Car finance lenders are not legally obliged to perform a credit check on you when you apply for finance. However, it is often best practice and helps them to calculate the level of risk and set interest rates accordingly. If you want to get a car on finance with no credit check, it can be possible. However, these lenders may set higher interest rates because they don’t know the level of risk. It can be more cost effective to get a quote or use a car finance broker to help find the lowest rate for you. These lenders will usually perform a soft search credit check which won’t harm your credit score though. 

If you want to get a car on finance and are struggling to get approved, it can be a good idea to build your credit score first. Not only can it improve your chances of acceptance but also lower your interest rate. This can make your deal cheaper and also means you aren’t paying more than you need to.