In the sub prime finance market we often get asked by customers if we can offer them car finance plans that require no credit check carried out. Many UK consumers wrongly think that this is the only way it would be possible for them to get a foothold once again with a hire purchase or car lease agreement. The truth is that no responsible lender would ever consider advancing a potential customer the funds to purchase a new or used vehicle without some form of background check before hand by offering a No Credit Check Car Finance package. This is where many customers begin to falter and potentially give up even before they start the process. Mainly this is due to misconceptions on how the credit rating system actually works or it might be a simple case of listening to closely to a friend down the pub!
How Lenders use your credit rating
A credit rating is simply an overview of a persons credit agreements usually stretching back 5 or 6 years time and will detail the status of each months payment or lack of payment. Main stream lenders work closely with credit reference agencies and will filter this information depending on their business model at the time. When times are good the finance company may lower the bar a touch as it can afford to be more lenient – obviously this also swings the opposite way too and as soon as their own funders start to tighten the screws as we found out from 2008 onwards with the so called credit crunch you would see lending decisions made on a tougher set of criteria that previously found.
This is related to our consultants on a daily basis by customers that had been with prime lenders – often for 10 or more years without any late or missed payments what so ever. When they then suffered with any other credit agreements they might have held or simply been late once or twice on a monthly bill this is when they then found out the company no longer wished to deal with them. This decision is a result of the lender using a profile type scoring system or Credit Check as it might better be known. Even if they really wanted to offer new business there ‘system’ wouldn’t allow it because the applicant simply didn’t make the grade and they were highlighted as being a credit risk.
Specialist lenders use revised scoring system
Now what is required then is a lender who will use a custom built scoring model based upon the sub prime market and so can tailor decisions towards those with adverse credit scores. The lenders that we work alongside at MSG Cars wont offer to approve every single application by offering no credit check car finance but they will use the available data to make a informed decision on that particular persons profile.
What is the credit check used for then?
When a check is carried out the great majority of it is to confirm the identity of the potential client and to make sure that the home address that has been given is the correct one! From our experience they will also look if any credit problems are ongoing or if they are from months or even years ago though each case is different and can offer strengths and weaknesses to the lenders system. The main areas in which we advise customers to check are there voters roll trace and that they simply put the Correct details on the application – then leave the rest to us!