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Car finance ›
Can you get car finance with a default?
Updated: Monday, 18 September 2023
So you’re looking to get vehicle finance but are concerned you might struggle because of a previous default. What should you do?
We’ll explain what a default is and some of the steps you could take.
What is a default?
A default means that, at some stage, you have failed to make the required repayments to a lender, and that this information has been added to your credit file. If you’re in arrears with a lender, you might receive a ‘default notice’. This is a letter telling you that you’ve failed to stick to repayment terms, and gives you a set amount of time (usually 14 days) to repay the debt. If you can’t settle the outstanding debt, the account may officially default.
Defaults will impact your credit score and ability to get a finance agreement in the future. This is because lenders are hesitant to offer finance to people who might not make their repayments.
A default notice doesn’t directly affect your credit score. However, when the account defaults, it gets recorded on your credit file.
By settling any outstanding debts, you can protect your credit rating and the chance of a poor credit report. A great way to start is by paying a little bit more on your monthly repayments until the outstanding debt is settled.
How can a default affect your credit score?
When a lender cancels your credit agreement due to missed payments, credit reference agencies get sent a default notice to add to your credit report. A default stays on your credit report for six years from the date of the default. If you settle the outstanding debt, it will not be removed, but will show as ‘satisfied’.
You might find it hard to get credit with unsatisfied defaults on your credit file. If there was a specific reason why you missed payments (job loss, long-term illness), you could contact the credit reference agencies to add a note to your credit report so that lenders understand why you got into the debt.
To reduce the impact of a default, you could try to pay it off as soon as you can and get it marked as satisfied. A lender might be more willing to offer you finance when your defaults are satisfied, and as a satisfied default gets older, it may become easier to get credit.
How does a default affect your ability to get car finance?
Everyone’s eligibility for car finance is different. When you apply for car finance, a lender will look at all aspects of your personal circumstances. This includes affordability, credit score, and credit history. They’ll examine your financial history and assess the risk of offering you finance.
It’s best to avoid having any defaulted payments on your credit report. The more defaults you have, the less likely you’ll be to have lenders approve your application.
Don’t worry though, as you can still be approved for car finance even if you default, but you’ll probably have to put down a higher deposit or face higher interest rates.
What to do if you’re looking for car finance with a default
Let’s look at what you can do that might make getting car finance easier if you have a default against your name.
Find out your credit score
Before you do anything else, find out exactly what potential lenders will know if they check your credit rating. It helps to do this even if you believe you have a good credit score, as you may have forgotten something.
Knowing your credit score means there’ll be no nasty surprises. If you do have a default, you’re already better prepared to do something about it.
We’ve written a guide that explains the three credit reference agencies, and what scores are considered good. Find out more in our guide: what is a good credit score.
Don't ignore a default
If you’ve recently received a notice of default, make sure you look into it as soon as possible. If you ignore it, you may end up with a County Court Judgement (CCJ) against your name, which is far worse than unpaid debt.
A CCJ will likely impact you in other ways, not just any finance application you make. If you check your credit score and realise you have a default you were unaware of, you should contact the lender or company that issued the default to understand your options.
If you’re experiencing financial difficulties and aren’t sure what to do, then there are a number of not for profit debt advisory services you can contact:
- StepChange Debt Charity – debt advice throughout the UK
- National Debt Helpline – debt advice and information for those in England, Wales and Scotland
- MoneyHelper – easy to access money tools, information and advice.
Learn more about CCJs from our blog – What is a CCJ? or discover more about CCJ car finance if you have a County Court Judgement against your name.
Let your lender know
When you become aware of a default, contact your lender immediately to arrange repayment of the unpaid default. You should discuss a payment plan to settle the default amount, as any communications and attempt to rectify the problem can stand you in good stead if you try to get car finance in the future.
Issue a correction notice
If you’ve come across a default that’s affecting your credit rating, you can add a statement to your online credit file. This short statement, known as a “Notice of Correction”, should be less than 200 words to explain why you missed any repayments.
The correction notice gives you a chance to explain your previous problems with payments to lenders. Showing this proactivity could have a positive impact on your future attempts to have a car loan approved.
Start improving your credit score
Your credit score is one factor that can help you get default car finance approved, so begin building your credit score in any way you can.
There are some quick things you might be able to do to improve your score:
- Make sure your credit report is up to date and correct
- Register for the electoral roll if you haven’t already
- Avoid moving home too often
- Try to ensure you get no late or missed payments.
If you want to learn more about your credit score, these guides will come in handy:
FAQs about getting car finance with a default
What are the consequences of defaulting on a car loan?
If you are struggling to make repayments, contact your lender as soon as possible to discuss your options. If you fall behind on your payments and aren’t able to find a solution with your lender, they may issue a notice of default which may lead to the vehicle being repossessed.
How many years until a default is removed?
Defaults remain on your credit file for six years, even if you’ve settled the repayment associated with the default. Although this default is visible to lenders and could affect your ability to obtain finance in the future, there are plenty of steps you can take to improve your credit score and boost your likelihood of getting car finance, even with a default.
So you’re looking to get vehicle finance but are concerned you might struggle because of a previous default. What should you do?
We’ll explain what a default is and some of the steps you could take.
What is a default?
A default means that, at some stage, you have failed to make the required repayments to a lender, and that this information has been added to your credit file. If you’re in arrears with a lender, you might receive a ‘default notice’. This is a letter telling you that you’ve failed to stick to repayment terms, and gives you a set amount of time (usually 14 days) to repay the debt. If you can’t settle the outstanding debt, the account may officially default.
Defaults will impact your credit score and ability to get a finance agreement in the future. This is because lenders are hesitant to offer finance to people who might not make their repayments.
A default notice doesn’t directly affect your credit score. However, when the account defaults, it gets recorded on your credit file.
By settling any outstanding debts, you can protect your credit rating and the chance of a poor credit report. A great way to start is by paying a little bit more on your monthly repayments until the outstanding debt is settled.
How can a default affect your credit score?
When a lender cancels your credit agreement due to missed payments, credit reference agencies get sent a default notice to add to your credit report. A default stays on your credit report for six years from the date of the default. If you settle the outstanding debt, it will not be removed, but will show as ‘satisfied’.
You might find it hard to get credit with unsatisfied defaults on your credit file. If there was a specific reason why you missed payments (job loss, long-term illness), you could contact the credit reference agencies to add a note to your credit report so that lenders understand why you got into the debt.
To reduce the impact of a default, you could try to pay it off as soon as you can and get it marked as satisfied. A lender might be more willing to offer you finance when your defaults are satisfied, and as a satisfied default gets older, it may become easier to get credit.
How does a default affect your ability to get car finance?
Everyone’s eligibility for car finance is different. When you apply for car finance, a lender will look at all aspects of your personal circumstances. This includes affordability, credit score, and credit history. They’ll examine your financial history and assess the risk of offering you finance.
It’s best to avoid having any defaulted payments on your credit report. The more defaults you have, the less likely you’ll be to have lenders approve your application.
Don’t worry though, as you can still be approved for car finance even if you default, but you’ll probably have to put down a higher deposit or face higher interest rates.
What to do if you’re looking for car finance with a default
Let’s look at what you can do that might make getting car finance easier if you have a default against your name.
Find out your credit score
Before you do anything else, find out exactly what potential lenders will know if they check your credit rating. It helps to do this even if you believe you have a good credit score, as you may have forgotten something.
Knowing your credit score means there’ll be no nasty surprises. If you do have a default, you’re already better prepared to do something about it.
We’ve written a guide that explains the three credit reference agencies, and what scores are considered good. Find out more in our guide: what is a good credit score.
Don't ignore a default
If you’ve recently received a notice of default, make sure you look into it as soon as possible. If you ignore it, you may end up with a County Court Judgement (CCJ) against your name, which is far worse than unpaid debt.
A CCJ will likely impact you in other ways, not just any finance application you make. If you check your credit score and realise you have a default you were unaware of, you should contact the lender or company that issued the default to understand your options.
If you’re experiencing financial difficulties and aren’t sure what to do, then there are a number of not for profit debt advisory services you can contact:
- StepChange Debt Charity – debt advice throughout the UK
- National Debt Helpline – debt advice and information for those in England, Wales and Scotland
- MoneyHelper – easy to access money tools, information and advice.
Learn more about CCJs from our blog – What is a CCJ? or discover more about CCJ car finance if you have a County Court Judgement against your name.
Let your lender know
When you become aware of a default, contact your lender immediately to arrange repayment of the unpaid default. You should discuss a payment plan to settle the default amount, as any communications and attempt to rectify the problem can stand you in good stead if you try to get car finance in the future.
Issue a correction notice
If you’ve come across a default that’s affecting your credit rating, you can add a statement to your online credit file. This short statement, known as a “Notice of Correction”, should be less than 200 words to explain why you missed any repayments.
The correction notice gives you a chance to explain your previous problems with payments to lenders. Showing this proactivity could have a positive impact on your future attempts to have a car loan approved.
Start improving your credit score
Your credit score is one factor that can help you get default car finance approved, so begin building your credit score in any way you can.
There are some quick things you might be able to do to improve your score:
- Make sure your credit report is up to date and correct
- Register for the electoral roll if you haven’t already
- Avoid moving home too often
- Try to ensure you get no late or missed payments.
If you want to learn more about your credit score, these guides will come in handy:
FAQs about getting car finance with a default
What are the consequences of defaulting on a car loan?
If you are struggling to make repayments, contact your lender as soon as possible to discuss your options. If you fall behind on your payments and aren’t able to find a solution with your lender, they may issue a notice of default which may lead to the vehicle being repossessed.
How many years until a default is removed?
Defaults remain on your credit file for six years, even if you’ve settled the repayment associated with the default. Although this default is visible to lenders and could affect your ability to obtain finance in the future, there are plenty of steps you can take to improve your credit score and boost your likelihood of getting car finance, even with a default.
For a better road ahead
Moneybarn is a member of the Finance and Leasing Association, the official trade organisation of the motor finance industry. The FLA promotes best practice in the motor finance industry for lending and leasing to consumers and businesses.
Moneybarn is the trading style of Moneybarn No. 1 Limited, a company registered in England and Wales with company number 04496573, and Moneybarn Limited, a company registered in England and Wales with company number 02766324. The registered address for these companies is: Athena House, Bedford Road, Petersfield, Hampshire, GU32 3LJ.
Moneybarn’s VAT registration number is 180 5559 52.
Moneybarn Limited is authorised and regulated by the Financial Conduct Authority (Financial Services reference No. 702781)
Moneybarn No. 1 Limited is authorised and regulated by the Financial Conduct Authority (Financial Services reference No. 702780)
