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What Can You Do After Being Refused Car Finance?

Compact Cars, Bridgend

March 21, 2019 at 10:51 AM

Being refused for car finance doesn't necessarily mean you won't be able to fund a car on a monthly basis. After getting rejected, there are a number of steps you need to take.

Step 1: Find Out Why You Were Refused Car Finance

It's very important to understand the reason(s) why your application for car finance was declined. You can ask the lender why they refused you and what information this is based on, but they don't have to give you a detailed answer.

Instead, you need to find out what credit referencing agency the lender used. You can then approach them for a copy of your file which will help to identify the next steps you need to take to ensure you aren't rejected the next time you apply.

Here are some of the main reasons that people are refused car finance:

  • Poor credit score
  • Too many credit searches
  • Not on the electoral role
  • No history of borrowing
  • No full driving license
  • Employment status (unemployed, part-time or self-employed)
  • Don't fit lender criteria


Step 2: Don't Keep Applying For Other Loans Or Finance Agreements

Having a finance application declined is not like being turned down for a job; you can't employ a scattergun application approach because every time a prospective lender views your credit report, they leave a 'footprint' - too many of these in a short space of time can seem like you're desperate for finance.

As the list above suggests, having multiple credit searches in a short space of time can impact the success rate of future applications. In addition, if you were refused due to a poor credit score, this strategy could lead to an even worse credit rating making it even more difficult to secure car finance.

Step 3: Work Towards Improving Your Credit Score

Depending on the reason your finance application was declined, the fix can be relatively simple. For example, you might need to just register on the electoral role or wait until you've passed your driving test.

Similarly, if you don't have a history of borrowing, you could consider getting a credit card. By using it to pay for small items and clearing the balance every month, you will build up an excellent payment history. You could also take out a mobile phone contract in your name which will have a similar effect.

However, if you have a poor credit score, improving it is not a quick fix. There are a number of steps you can take:

  • Check for mistakes on your file (e.g. address)
  • Check if you're linked to another person (e.g. via a joint account - if they have worse credit than you, it could be dragging your rating down)
  • Check for fraudulent activity

Once you've thoroughly checked your profile for inaccuracies, the other methods for improving your credit score are more long term:

  • Pay your bills on time - this helps to prove to finance lenders that you're responsible and trustworthy
  • Clear outstanding debt - before applying for new finance, it's advisable to eliminate any existing credit
  • County Court Judgements (CCJs) - typically a CCJ will remain on your record for around six years. If you're having trouble keeping up with payments, there's free debt advice online

Getting Car Finance With Bad Credit

If you've been refused car finance because of a poor credit rating, but need to get a new car immediately, you still have a few options available to you.


All car finance companies have their own guidelines when it comes to lending credit which will differ from company to company. Indeed, there are specialist lenders willing to accept applicants with bad credit who have previously been rejected.

Typically, these subprime lenders will charge higher APR rates when offering car finance to high-risk customers. It's important to ensure you can comfortably afford your monthly payments before agreeing to any bad credit car finance deal - if you fail to make payment, it will only make your credit score worse and the car could be taken away.


If you can't afford to pay the higher interest rates associated with bad credit car finance companies, an alternative could be to assign a guarantor to your loan or finance agreement.

A guarantor acts as your financial back-up - if you fail to make a payment, they will then be responsible for your debt. Guarantors need to be over 21 with a good credit profile and be able to cover any instalments you potentially miss.

Having a guarantor in please should make it easier to obtain a finance agreement with the added advantages of borrowing a higher amount and being offered a lower APR.

Almost anyone can act as your guarantor, as long as they're not financially linked to you (i.e. a spouse). Parents are usually the most popular guarantors, but it could be another family member, friend or work colleague.

Being a guarantor is a big responsibility and shouldn't be entered lightly. If your guarantor is unable to make the payment you missed, you could both face legal action.



Pay As You Drive is a relatively new car finance product that is primarily designed for people with bad credit that struggle to get accepted for traditional finance agreements.

The car you want to finance is fitted with a black car payment box - this is not the same as black box car insurance because it doesn't monitor your driving behaviour.

The car payment box will flash red three days before your next payment is due. Upon successful payment, you will receive a code which will turn the light from red to green for the rest of the month.

If you fail to make a payment (even after a five day grace period), the car will be remotely immobilised when it's in neutral with the engine switched off. The car won't start again until the next payment is made.

At the end of the agreement, once you've made all monthly payments, you become the official owner of the car. This product has helped to reduce car finance default rates by up to 500%.


Although this isn't specifically a car finance product, you could use the money to purchase a car outright. A secured personal loan is guaranteed by something valuable you own (as opposed to a guarantor).

Usually, the valuable item is some form of property. If you fail to make payment, the lender has the right to repossess the asset you provided as security.

As a result, you could be without a home, so you need to be absolutely certain you can afford the monthly repayments before entering into a secured personal loan agreement.

Tags: bad credit refused car finance pay as you drive bad credit car finance guarantor loans secured loans improve credit rating
Category: Blog