Representative Example: You could borrow £10,699 over 60 months with an initial payment of £495.89 (including £199 Admin Fee) followed by 58 monthly payments of £296.89 with a final payment of £495.89 (including optional £199 Option to Purchase Fee). Total amount repayable will be £19,012,40. 26.1% APR, annual interest rate (fixed) 13.3%.
Credit Checks and Car Finance
Your credit history plays a major role in determining whether you are approved, and on what terms. Car finance lenders use different types of credit checks to assess your financial situation, creditworthiness, and ability to manage repayments. In this guide, we’ll explain the types of credit checks, such as soft and hard searches, that may be completed during your HP car finance application.
A credit check is a review of your financial history. When you apply for car finance, the lender uses it to see how reliable you’ve been when borrowing money before. They want to know if you’re the kind of person who pays back what they owe, on time.
Your credit check gives them insight into how you’ve managed money in the past, things like whether you’ve kept up with payments, how much debt you have, and if there have been any serious financial problems. It helps lenders decide whether to approve your application, how much they’re willing to lend, and at what interest rate you will be given.
This process helps protect both you and the lender. It reduces the risk of you borrowing more than you can afford, and it helps lenders make fair and responsible decisions.
There are two types of credit checks used when applying for car finance: soft checks and hard checks. It’s important to understand which type of check a lender carries out, as it can affect your credit file.
Soft Credit Check:
A soft check is a quick look at your credit report. It’s usually done when you’re just checking if you’re eligible for finance, sometimes called a “pre approval” stage. The good news is that a soft check doesn’t affect your credit score, and it isn’t visible to other lenders.
This means you can compare offers or see if you might qualify without worrying about damaging your credit file. It gives the lender a general idea of your financial health without going into too much detail. Soft checks are helpful when you’re still shopping around and not ready to commit.
Hard Credit Check:
A hard credit check is a more in depth look at your credit history. It usually happens after you’ve submitted a full application. This type of check will be recorded on your credit file, and other lenders will be able to see that you’ve applied for finance. It can have a small impact on your credit score usually, just a few points, but if you have several hard checks in a short time, it might make lenders think you’re having trouble getting approved.
It can have a small impact on your credit score, usually just a few points, but if you have several hard checks in a short time, it might make lenders think you’re having trouble getting approved. That’s why it’s a good idea to avoid applying to too many lenders at once.
At the start of your application, a soft credit check helps lenders decide if you meet their basic requirements. They’ll look at your name, address, date of birth, credit score, and general history with things like loans or credit cards. If everything looks okay, they might give you a pre approval, meaning you’re likely to be accepted if the rest of the information checks out.
However, a full approval requires a hard credit check. This gives the lender a complete picture, including details about your current debts, payment history, and how much of your credit you’re using. This deeper review helps them assess whether you can afford the repayments and whether it’s responsible to lend to you. If your report shows missed payments, high debt, or financial trouble, it could affect your chances of getting approved or change the interest rate you’re offered.
When you apply for car finance, the lender will usually carry out a credit check to review your financial history. This check shows your personal details, such as your name, date of birth, and current and previous addresses. It also includes information about your existing credit accounts, like loans, credit cards, and mobile phone contracts, along with your payment history, showing whether you’ve made payments on time or missed any.
Lenders will also see your current balances, any County Court Judgments (CCJs), bankruptcies, or Individual Voluntary Arrangements (IVAs), as well as whether you’re registered to vote at your address (electoral roll information). Finally, the credit check will include a record of any previous searches by other lenders. All of this helps lenders decide if you’re likely to manage car finance responsibly.
It might be tempting to apply to lots of lenders to find the best deal, but this can backfire. Every time you submit a full application that triggers a hard credit check, it leaves a mark on your file. If a lender sees several applications in a short time, they might think you’re struggling to get approved or taking on too much debt.
A better approach is to use soft-check tools that let you see if you’re likely to be approved without affecting your credit score. Once you’ve compared your options, you can then choose the one that suits you best and go ahead with a full application.
If you do apply more than once, try to leave some time between each application. This gives your credit score a chance to recover and shows lenders that you’re not applying recklessly.
If you’re planning to apply for car finance soon, there are a few things you can do to boost your chances of getting approved and maybe even qualify for better terms.
Start by checking your credit report. Make sure all the information is correct and up to date. Mistakes can hurt your score, so it’s worth fixing them before you apply. If you have any debts, try to reduce them where you can, especially credit card balances. This shows lenders you’re managing your money responsibly.
Make sure you’re paying all your bills and debts on time, as recent missed payments can harm your application. Avoid taking out new credit just before applying for finance, as this can raise red flags. And if you’ve been refused credit recently, wait a little while before applying again. Taking these steps helps improve your credit profile, which makes it easier to get approved and gives you access to better finance deals.
When you first apply, we run a soft credit check. This allows us to review your eligibility without affecting your credit score or appearing on your credit file. You’ll be able to see what kind of loan you might qualify for, how much you could borrow, and what the interest rate is.
If you decide to go ahead, we’ll then carry out a hard credit check, once the application has been processed. This is a normal part of the final application and helps us confirm the details we need to make a responsible lending decision. It will show on your credit report and may slightly impact your score.
