You’ve found your ideal car, van or minibus for sale at a price you’re happy with, but you need a loan to cover the costs. You’re spoilt for choice with car, minibus and van finance offers from dozens of lenders, but you’re acutely aware of the fact that your credit score isn’t the best.
At which point you begin to wonder – how does having a poor credit score compare with having no credit history whatsoever?
Different Issues, Similar Problems
Often confused as one and the same, bad credit loans and no credit loans are entirely different products. Likewise, bad credit car finance isn’t the same as no credit car finance, though many specialist lenders will offer both facilities.
In any case, getting to grips with the difference between bad credit and no credit will help you find the perfect loan to suit your requirements.
No Credit Loans
As a general rule of thumb (though not always the case), having no credit history isn’t considered as ‘bad’ by the average lender. Having no credit history basically means that you haven’t yet taken out any loans, credit cards and financial products. Hence, there’s no evidence whatsoever as to your responsibility (or otherwise) as a borrower.
That said, there’s also zero evidence of irresponsible borrowing, or failure to keep up with your debts. You have no debts at all, suggesting that you’re probably in a relatively stable financial position. Lenders will naturally approach no credit applicants with a certain amount of scrutiny, though tend to demonstrate at least some flexibility.
Particularly if you can provide evidence of your strong current financial position, you’ve a good chance of qualifying for a loan – or specialist car finance.
Bad Credit Loans
The difference is that with bad credit loans, there’s evidence that you have indeed used financial products and have struggled to keep up with your debts. This paints a wholly less reassuring picture for the lender, who may naturally assume you’re a high-risk applicant.
Nevertheless, this will not necessarily count you out of the running. Once again, there are plenty of specialist lenders on the market who take all important factors into account. Again, providing evidence of your current financial position could augment the damage done by your imperfect credit score.
Your application is likely to be turned down by vast majority of mainstream lenders, but you could access the financial support you need from a specialist independent lender.
Considerations Before Applying
If you have any concerns whatsoever regarding your credit history, it’s important to consult your credit report before applying. This will help you understand your situation and any potential restrictions – possibly ruling all major High Street lenders out of the equation.
Applicants with poor credit scores or no credit history whatsoever are strongly advised to consult with independent brokers, rather than approaching lenders directly. The more extensive the credit issue, the greater the importance of gaining objective advice and support from a broker you can count on.