What credit score is needed to buy a car

Rather than looking at what credit score is needed to buy a car on finance, lenders actually review things like your income, committed expenses, your credit utilisation, and your credit history when reviewing an application.

They can’t actually see your credit score – that’s an indicator for you to gauge your credit health – it’s the information on your credit report that counts. But your score can still be a useful tool that indicates how a lender may perceive you.

What credit score do I need for car finance?

In general, the higher your score, the better the chances of approval for a car loan, but it's not the score that's the determining factor. And a low score also doesn't necessarily mean rejection.

If you're wondering what credit score you need for car finance, we'd recommend instead considering everything we've mentioned so far about what lenders are looking at on your file, as well as:

• Whether the product is a bank personal loan, PCP, HP, or Conditional Sale.

• The size of the deposit you're putting down.

• Vehicle age or mileage.

• Your employment stability.

• The car's value and whether it's too high compared to your income and expenses.

• Whether you're behind on credit repayments.

• Whether the application is single or joint (you're applying with someone else).

These factors materially change both approval odds and APR in practice. 

Note: The UK's main credit reference agencies, Experian, Equifax, and TransUnion, use different ranges and scoring systems, so a 'good' score can look different depending on the credit reference agency that you're using.

Even Experian explicitly states there’s no ‘magic’ number because different companies look for different things, even when they use the same credit report data.

In practice, stronger score bands generally correlate with wider product options and lower APR, but lending policies vary, and affordability can still lead to rejection.

How lenders assess your credit score for car finance

The FCA-commissioned ‘market impact assessment’ also describes an important pricing split.

In new-car finance, eligibility is often treated as pass or fail, and approved customers receive a standard APR.

In the used-car finance market, lenders more often apply risk-based pricing (different APRs for ‘low/fair/good/excellent’ credit health tiers).

Again, even with the FCA's market impact assessment, they're not interested in what credit score is needed to buy a car – it’s all about your credit health.

The FCA's rules require a lending firm to consider:

• Credit risk: the risk that the customer won’t make repayments by their due dates.

• Affordability risk: the risk to the customer of not being able to make repayments in line with the rules.

The rules also define affordability expectations. Lending firms must consider the ability to repay over the life of the agreement, from income and/or certain assets, without needing to borrow to make repayments, without missing other contractual/statutory obligations, and without the repayments having a significant adverse impact on your financial situation.

That said, the FCA states in the guidance that it doesn’t describe exactly what checks to make and that assessments should be proportionate to factors such as the loan type, amount, cost of credit, and the customer's position.

Can you get car finance with a low credit score?

Yes, many consumers can get a car finance with a low credit score, but the offer typically comes with trade-offs such as:

• Fewer lender options.

• Higher APR.

• Stricter car criteria (which one you can get).

• More documents and financial checks.

• With a guarantor (a person who is financially responsible if you don't make payments).

Those are underwriting levers to reduce both credit risk and affordability risk within FCA expectations.

The outcome of a car finance decision depends on the personal financial factors we've discussed and how strict the lender is.

How to improve your chances of approval

Now you know it's not what credit score is needed for car finance in the UK, it's your overall credit history. Improving approval odds is usually about improving your overall credit health.

That means:

• Reducing signs of missed-payment risk in your credit file.

• Improving affordability headroom (income stability, lower committed outgoings, and realistic loan size/term).

These negative markers can stay for several years, but your credit health will benefit once they drop off your report:

• Credit accounts' payment history, judgments, insolvencies, and defaults commonly remain on credit files for six years.

• CCJs can remain for six years, but can be removed from your credit file if paid in full within one month (or otherwise marked satisfied). 

• Experian notes that most hard searches remain on the report for 12 months.

You can also use the Checkmyfile grow your score page for more guidance.

Interestingly, financing a car and meeting the minimum payments can also help improve your credit score and overall credit health over time.

Remember your credit score is a great indicator of how lenders might view you, but it's definitely not the deciding factor. Don't worry if your score isn't where you'd like it to be, especially if your overall credit health is good. There are always steps you can take to get things moving in the right direction.

If you're interested in learning more about your credit file, start with a 7-day free trial now, then it's just £14.99 a month. Cancel online anytime.