Refused car finance:
what to do next

Getting turned down for car finance can be frustrating, but don't lose hope. Understanding why lenders refused your application and knowing your next steps can significantly improve your chances of approval. Let's explore what you can do to turn that 'no' into a 'yes'.

Understanding why you were refused car finance

Car finance lenders look at several key factors when reviewing applications. Recent industry data shows that about one in three people face initial rejection when applying for car finance. Getting to the root cause of your rejection is the first step toward success.

Each lender sets specific criteria for approving loans. Nearly half of all rejections stem from credit history issues, while a quarter relate to employment and income concerns. Understanding these patterns helps pinpoint areas you can improve.

Here's what typically leads to rejection:

• Missed payments or defaults on your credit file from the past four years
• Short employment history, particularly if you've worked less than three months at your current job
• Self-employed status with less than a year's proven income
• Being under 21 years old with limited credit history
• Mistakes or inconsistencies in your application form

Credit score plays a vital role in the decision process. Scores below 580 face higher rejection rates, though specialized lenders often work with lower credit scores. Each lender weighs these factors differently, which is why shopping around matters.

What can you do if you've been refused car finance?

Take heart - a rejection today doesn't mean you can't get approved tomorrow. Data shows that six out of ten people succeed in getting car finance after making specific improvements to their application. The key is taking the right steps before trying again.

Smart applicants wait at least three months between attempts, using this time to strengthen their financial position. This cooling-off period also protects your credit score from too many hard searches.

• Get a copy of your credit report and fix any errors - they appear in one in five credit files
• Keep up with all your current credit payments to build a positive history
• Build a larger deposit - even 10% more can boost approval odds by 40%
• Look for specialist lenders who focus on challenging cases
• Double-check all application details for accuracy

Numbers tell the story - applicants offering a 15% deposit see their chances jump by more than half. Working with brokers who understand various lenders' requirements can also boost your success rate significantly.

Can you still get car finance after being refused?

The path to car finance doesn't end with one rejection. Most people who initially face rejection successfully secure financing within six months by exploring different options. The key is knowing where to look.

Specialist lenders have created products specifically for people in your situation. They look beyond traditional credit scores, considering your overall financial picture. While interest rates might be higher at first, establishing a good payment history can lead to better terms later.

• Expert lenders specializing in challenging credit situations
• Adding a guarantor, which can improve approval odds by 75%
• Joint applications with someone who has stronger credit
• Local dealerships offering their own financing options

Success rates tell an encouraging story - specialist providers approve about twice as many applications as traditional lenders. They understand that past financial difficulties don't define your future reliability.

How does being refused affect your credit score?

Every car finance application leaves a footprint on your credit file. These hard searches can temporarily impact your credit score, but understanding how they work helps you manage your applications wisely.

Each application typically drops your score by 10-20 points, but this effect fades after a few months of responsible credit use. Planning your applications strategically helps minimize the impact.

Keep these credit impact factors in mind:

• Hard searches stay visible for one year on your report
• Multiple searches within two weeks often count as just one
• Eligibility checks (soft searches) won't harm your score
• Your score usually recovers within 3-6 months

The good news? Most people see their credit score bounce back within six months, assuming they maintain good financial habits. Focus on making regular payments and avoiding new credit applications during this recovery period.

Alisa Dan

6 January 2025