A credit score is an analysis of the combined information about your debts, employment history, and financial commitments, payment history etc, that assess your creditworthiness. They are used as a point of reference for banks and lenders to assess whether you are a financial risk and eligible for a loan, mortgage or even a credit card.
A bad or low credit score can be the result of late or missed payments, previous bankruptcies, or submitting too many credit applications. This can lower your likelihood of getting loan applications approved.
Applying a formal inquiry into your credit score can negatively impact your credit. These hard inquiries can lower your credit score by approx 5–50 points every time they are submitted. As a result, most people are not aware of their credit score until they need it, which is often too late.
How do you find out your credit score without hurting it? As brokers, we offer a free credit check that won’t affect your credit rating. By acting on your behalf and accessing your credit file, we can collect your credit information without submitting a formal enquiry (until we lodge your application to a lender), that a lender would submit, if you went to direct or multiple lenders direct. This will protect your credit score as lenders must submit an inquiry to assess your credit history, which is then lodged against your credit rating.
So if you have a bad credit score, a car loan could help you take steps towards improving your credit.
How does a car loan affect your credit score?
Having a car loan opens up a new line of credit. As your credit score is compiled of various lines of credit from credit cards, mortgages and other financial obligations, adding this loan can aid your credit score in itself.
For a car loan to be a viable option to rebuild your credit, repayments must be paid on-time for the loan's entire duration. The consistent payment history creates a reliable credit history as well as a long credit history depending on the duration of the loan. This directly impacts your credit and raises your score.
Bad credit car loans are an option for people with a low credit score or credit history who would otherwise be rejected for loans. Our process involves looking for the strengths within your credit history, whether it be a stable job or residential stability, and highlight them to lenders.
Could a car loan hurt your credit score?
Making late repayments could negatively impact your credit score with a car loan. The longer it takes you to pay your overdue repayments, the more significant the impact could be on your credit file and credit score. Proving to be unreliable will lower your credit rating and strengthen the lender's perception of you as a risk.
Submitting multiple loan applications to lenders could also impact your credit score due to the individual credit check that would be submitted. Using Rapid Finance to access your credit information and letting us match you with the lenders that are most likely to approve your loan applications.
Ready to improve your credit score?
Rapid Finance has helped people with bad credit scores secure car loans for over 20 years. Become one of the many Australians that have improved their credit score and loan applications today, and remember, bad credit score isn’t the end of the road for your car loan applications.
On a side note, don’t forget about our wholesale cars - We offer the one-stop shop where we can help you source a vehicle through our extensive wholesale network - Through our network, we will do some extra checks on your behalf as well as inspecting the vehicle to ensure it’s a great vehicle - We will also check :
•There is no money owing on the vehicle
•The vehicle has not been a repairable write-off
•The vehicle has not in any serious accidents
•We will check everything works on the vehicle
•We will get the roadworthy for the vehicle
•We will do a detailed inspection on the vehicle
Find out more info about our Wholesale Car Network.
Apply for a free finance assessment or reach out to our team at 1300 467 274 today.