What checks are done for car finance?

A car is likely to be one of the biggest purchases you’ll make in your lifetime, so it’s understandable that several checks need to be carried out as part of the car finance process. When you apply for a car loan, the lender needs to know that you are who you say you are, and that you will be able to afford to make fixed car finance repayments over a set period.

5 min read
businessman looking at paperwork

Not all lenders will employ the same eligibility criteria to approve applications. Despite these variations, you can expect to undergo the following standard checks before securing a car loan:

Proof of identity

The first thing you’ll need to do is tell the lender exactly who you are. When you complete an application form, you’ll be asked to share a few key details, including your full name, date of birth, marital status, and residential status. You’ll also be asked to provide proof of identity to reassure lenders that you’re not applying for car finance on someone else’s behalf, or fraudulently using another person’s details. Valid documentation which can be used as proof of ID includes a full UK or EU driving licence, or a copy of your passport.

Driving licence

While some lenders can provide car finance for people with provisional licences, the majority will ask that you have a full and valid UK or EU driving licence. You’ll need to share a copy of your photo licence during the application process, and the lender may also contact the DVLA to confirm all the details are correct.

Address history

You don’t have to be a homeowner to be eligible for car finance, but lenders may require you to have up to three years’ address history in the UK. Make sure that you’re as accurate as possible when entering these details, as even a small mistake with your old postcode or house number could lead to your application being refused.

You’ll also be asked to provide proof of your current address. This typically means sharing copies of your council tax bill, recent utility bills, or bank statements.

Employment history and proof of income

Sharing your employment history and providing proof of income can show lenders that you have a stable form of income and will be able to afford your monthly car finance payments while still having enough money left over to pay for essentials. This also applies if you’re self-employed and have a variable income.

Lenders will typically ask you to provide your current job title and salary as well as your employer’s details. You may be able to prove your income by supplying copies of your payslips or three months’ worth of bank statements.

Credit score

Your credit score isn’t the only factor that lenders consider when you’re hoping to get car finance accepted, but it is one of the criteria they assess. It can provide insights into your financial behaviour and help lenders understand whether you’re likely to be a reliable borrower or not.

Your credit score is dictated by your financial history, and your full credit report will highlight your past repayment habits as well as how much you currently owe, your application history, financial links, and any relevant court records, such as CCJs (County Court Judgements) or IVAs (Individual Voluntary Arrangements).

There are three main credit reference agencies in the UK – Equifax, Experian, and TransUnion – and they each use different information to calculate your score. Lenders may use any one of these agencies, so it may be worth taking the time to check your score with each of them before making a car finance application. The stronger your credit score, the better your chance of being approved for car finance.

When are car finance credit checks carried out?

When you check your eligibility for car finance or get a quote, a soft credit check will be carried out. This won’t affect your credit score in any way but does provide enough information for the lender to find out how you currently manage your loans and what kind of borrower you’ve been in the past.

If the details you’ve provided satisfy a lender’s criteria, you’ll be offered an approval in principle. An approval in principle isn’t final. The success of your application still depends on factors such as the documentation you supply, the type of car finance you choose, and the vehicle you want to buy, but it can be a good indication that you will be approved for a loan.

If you choose to proceed with the car finance option offered, a hard credit check will take place. Hard credit searches are visible on your credit file. Having too many hard searches over a certain period might affect your chances of being approved for finance in the future.

Can I get car finance without a credit check?

In the UK, every car finance applicant needs to undergo a credit check to be accepted for a loan. However, this doesn’t mean that you need to give up on securing car finance if you have a bad credit score or limited credit history. Different lenders have different criteria, and at Ocean, we work with lenders who can offer car finance agreements with an APR that reflects the risk of a poor credit score.

It’s also important to remember that your credit score is not set in stone, and you can take steps to improve it. In addition to making all your repayments on time, you can register on the electoral roll, keep hard searches to a minimum, and limit your credit utilisation to around 25% (this means using only some of the total credit available to you at any given time).

The good news is that you can check your eligibility for car finance before making an application. When you get a quote, a soft credit check will be carried out. This won’t affect your credit score in any way. It’s only if you choose to apply for car finance that a hard credit check will take place.

Will I be accepted for car finance?

Every car finance application is considered individually based on the lender’s criteria. Car finance eligibility changes depending on the provider, so you might find that your application is rejected by one but accepted by another. It’s not all about your credit score, either; your age, income, financial commitments, past missed payments, borrowing amount, loan term, and application history can all affect whether you’re approved for finance or not.

You can use our calculator to check your eligibility for car finance. Simply enter the amount you’d like to borrow and the loan term to get started. You can then find out how much your estimated monthly repayment might be and request a quote. To improve your chances of being accepted, make sure that you supply accurate, up-to-date information. You could also work to improve your credit score ahead of applying if your score could do with a boost.

How long does it take to get car finance?

Soft credit checks tend to be very quick, and you may receive an initial decision in minutes. However, it can take up to two working days for a full credit check to be completed, and even longer for all your documents to be processed. The lender might also ask you to supply further information, which can delay your application. Even so, if you have all your paperwork ready to go, it’s possible that you could be driving away in your new car within days!

Get Car Finance up to £100,000

  • Check your eligibility without impacting your credit score
  • No deposit needed
  • Rates from 9.9%* APR
Get a deal

*Representative example: Borrowing £6,500 over 5 years with a representative APR of 19.9%, an annual interest rate of 19.9% (Fixed) and a deposit of £0.00, the amount payable would be £166.07 per month, with a total cost of credit of £3,464.37 and a total amount payable of £9,964.37. Rates may differ as they are dependent on individual circumstances. Subject to status. We're a credit broker, not a lender.

Disclaimer: All information and links are correct at the time of publishing.