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Yesterday I managed to speak with someone within the finance industry who is pretty clued up when it comes to cars, finance and the stock markets. He was saying that the although the amount of finance and credit currently being available from the lenders is less than it was six months ago, he said that the people qualifying for loans etc are those that are less of a risk and that their criteria should have been the basis for all applications many years ago. Instead, he said that the companies were so keen to offer credit to customers that even though there were huge elements of risk involved with such applicants, the higher rate of APR and interest they would gain would deem it beneficial. However, currently, those with a bad credit score are struggling to find a financial institute that will loan them the monies for a car, general purpose loans and credit card bills etc. He said that things should be how they were in past time where vigorous checks were carried out and very specific criteria needed to be met in order for a car dealership to issue car credit for example. The problem therefore lies with those that instigated this changed of criteria and therefore contributed to their own downfall in that those people who qualified under the new rules appear to now be the ones that are not making the repayments regularly.

Depending upon the credit score of car buyer, there are two categories that they will fall into. These are prime or sub-prime. Prime customers, have a better chance of receiving credit as these types of people have a good or above average credit score. Those who fall into the sub-prime category however, it means that they will find obtaining car credit a little bit more difficult as it means that they will have a poor credit rating. They can still obtain finance though, albeit at an increased rate of APR. The reason for this is due to the fact that the lender is taking more of a risk in providing a loan to someone who has a history of bad credit. Often, these types of deals are referred to as being a bad credit car loan. Most car dealerships offer finance to their customers and it is seen as a double bubble if they buy the car and take out a finance option with them given the amount of profit both generate. It is possible though that certain companies will only take on prime customers and so if you wish to buy the vehicle, finance needs to be given from somewhere else. There are many people online that offer sub-prime finance options so it won’t be too much trouble. Just a bit of research is needed.

Ok so we know that here in the UK we love to spend money and that can often leaves us with credit card bills and exceeded overdraft limits! After a while, things can catch up on us and we therefore get “in debt”. Yes, the dreaded word; debt! With debt and a lack of repayments being made, we are then tarnished with having bad credit. This is then recorded on our credit report, which is available to all financial institutes and subsequently we are given a lower ‘credit score’. Once these are official, it then affects certain things such as applying for car credit, loans, mortgages and even mobile phone contracts. It can be a real pain and very difficult to get any type of credit unless you are willing to pay extortionate amounts of interest / APR rates on borrowed monies. Luckily I have quite a good track record in terms of credit and so am not affected. However, I have seen many people suffer because of this and believe me, having bad credit isn’t a nice situation to be in. Eventually it could lead to a CCJ (county court judgement) being placed against your name and then things really do become more difficult.