Car Finance - Don't Let Your Credit History Become A Millstone

Have you given up looking for car finance? With the financial world on its knees, businesses in turmoil, the banks in crisis and the finance and credit companies panicking, there seems to be no worse time to consider buying a new car and getting cheap car finance or a car loan.

If you had planned on buying a car during the last few months, then you may well have suffered from a disappointing and embarrassing string of experiences within the world of car finance. The only reassuring point to make is that you are by no means alone. More and more of us are struggling to obtain cheap car finance or car loans. Even the idea of finding guaranteed car finance seems to be a lost cause in many cases.

Certainly the credit companies are tightening up much more than ever. The happy days of a few years ago when credit companies and loan companies would welcome almost anyone with welcome arms are gone. Today the finance companies have had to face reality, and for this reason, they are being more cautious than ever before. But there is a problem with caution, and that is that it is very easily misused.

Almost certainly you are aware of the fact that most if not all of these car credit finance companies use something called your credit history to determine whether or not they should offer you finance. The credit history determines the level of risk which you represent, or at least, that is the theory. If a car finance company notices that you have had several late or missing payments in the past, perhaps even a default or two or even a County Court Judgement (CCJ), then they will almost immediately dismiss you as a risk.

You can easily understand the logic behind this - if someone has deliberately avoided making payments to other finance companies, has got into difficulty or proved to be unreliable, then in today's economic climate, that makes the person too high a risk, and the underwriters will simply not consider it viable.

But this means that anyone who has a credit history that isn't spotless could be considered a risk, meaning that very few people will be able to get car finance, or at least cheap car finance. In some cases car loan companies may decide that a customer is borderline - there are some missing payments or late payments and the credit history is not spotless, but there's not that many problems, and perhaps they were a year ago, since when the credit history is clean.

In such cases people may be offered car credit or car loans, but perhaps at a higher rate of interest than advertised. This increased interest rate is the way the car credit finance company offsets the degree of risk which they perceive. But all this means that for the vast majority of us we are facing the grim prospect of not being able to buy a new car because we cannot get car finance.

The last year or two has been dismal, but the truth is that it has not merely been dismal for the big corporations, the banks, the financial institutions or the businesses and shops. The impact has been felt in virtually every home in the land. As a business becomes bankrupt or sold off, many if not all of the employees find themselves suddenly without jobs and without incomes. Tens of thousands of people have lost their jobs, had their pay cut or had their full time jobs reduced to part time, and this has necessarily impacted on their finances and their credit history.

But let's just remember for a moment that this document which feels like a millstone around each of our necks is called a credit history - in other words, it is no more and no less than a record of our financial past. It tells car finance and car loan companies nothing more about our circumstances than the payments we have made in the past, and whether they have been on time or not. But although the recession is still with us, and although finances are not superb, the country is slowly picking itself back up, and households are slowly sorting out solutions, getting new jobs and putting things right.

In many cases the credit history that has doomed your chances of getting car finance tells only half the story. Perhaps you lost your job unexpectedly, and like many people had to choose between feeding your kids or paying off a credit card. But since those days you've found new employment, you have an arrangement in place with the credit company, your payments are being made again, and your prospects are looking much brighter.

Your credit history won't show this - so what should you do? The good news is that there are a few car finance companies out there who will look at much more than just your past, and will base a decision on your current circumstances, and not just what you went through several months ago. If you've struggled to get car finance or a car loan, it's worth talking to a car finance company that sees you as you are, rather than what you were.