Being turned down for car finance is frustrating, but it doesn’t mean you can’t get finance at all. Lenders all have different criteria, and the reason is often something you can fix. The most important thing is not to rush into lots of new applications. This guide explains why applications get declined and what to do next.
In short
If you’ve been refused car finance, ask the lender why and which credit reference agency it used, then check your credit files for mistakes. Don’t apply again straight away: each application leaves a hard search. Fix what you can, use soft-search eligibility checkers, and consider a cheaper car, a bigger deposit or a guarantor.
Common reasons for being refused
- Your credit history. Missed payments, defaults, CCJs or an IVA can lead to a decline, especially if they’re recent.
- Affordability. The lender doesn’t think the payments fit your income and spending, even if your credit history is good.
- Not enough credit history. If you’re young or new to the UK, there may not be enough on your file for the lender to judge.
- Not on the electoral roll, or your details don’t match across your application and credit file.
- Too many recent applications, which can suggest you’re under financial pressure.
- Mistakes on your application or credit file, such as a wrong address or a debt that isn’t yours.
- The car or the deal. Some lenders won’t finance older cars or high mileages, or lend above a certain amount compared with the car’s value.
What to do next
- Don’t apply again straight away. Each full application leaves a hard search on your credit file. Several in a short time can make the next lender more cautious.
- Ask why. Lenders don’t always give detailed reasons, but if your application was turned down because of information from a credit reference agency, the lender should tell you which agency it used.
- Check your credit files with Experian, Equifax and TransUnion. Look for mistakes, old addresses, accounts you don’t recognise and financial links to people you no longer share finances with.
- Correct any errors. Each agency has a free process for disputing information.
- Check the budget. Look honestly at whether the payments are affordable. A cheaper car, a longer term or a bigger deposit may help, but a longer term usually means paying more interest.
- Use soft-search eligibility checkers before your next application, to see how likely you are to be accepted.
Important
Be wary of anyone who promises guaranteed car finance or asks for an upfront fee to find you a loan. No legitimate lender can guarantee approval, and fees for credit broking must be explained clearly before you pay anything.
How long to wait before reapplying
There’s no fixed rule. If the decline was caused by a mistake on your credit file, you can reapply once it’s corrected. If it was about your credit history or affordability, waiting a few months while you pay everything on time and reduce other debts usually helps more than trying another lender straight away.
Options that may help
- A bigger deposit. The lender lends less compared with the car’s value.
- A cheaper car or a lower amount to borrow.
- A guarantor. Someone with a good credit history agrees to make the payments if you can’t. It’s a big commitment for them.
- A specialist lender. Some lenders focus on people with poor credit, usually at higher rates. See bad credit car finance.
- Saving up to buy a cheaper car outright, if finance isn’t affordable right now.
If debt is the problem
If you’ve been turned down because of existing debts, or you’re struggling to keep up with what you already owe, taking on more credit may not be the right step. Free, confidential debt advice is available from MoneyHelper, StepChange and Citizens Advice. If you already have vehicle finance and are struggling, see struggling with car finance payments.
Refused car finance FAQs
Does being refused car finance affect my credit score?
The refusal itself isn’t recorded on your credit file, but the hard search from the application is, and other lenders can see it.
Why was I refused car finance with a good credit score?
Lenders use their own scoring, not the score you see in an app. You may have been declined on affordability, the car or deal, too many recent applications, or details that didn’t match.
Can I find out why I was declined?
You can ask the lender. It doesn’t have to give detailed reasons, but if it relied on credit reference agency data, it should tell you which agency it used, so you can check your file.
Should I try another lender straight away?
It’s better not to. Check your credit files and fix any problems first, then use soft-search eligibility checkers before making another full application.
Can a dealer get me finance if a bank refused me?
Possibly. Dealers and brokers work with lenders that have different criteria. But every full application leaves a hard search, so ask whether they’ll check your eligibility with a soft search first.