Car finance shocker
How shopping around can affect your credit rating
CAR buyers who shop around for the best finance deal are losing £100million a year, as unregulated lenders damage their credit scores with unnecessary checks.
Motorists who visit multiple loan providers in search of the best rates are being punished the more they hunt for deals, because lenders conduct hard credit checks before providing final interest rates – which act as a serious red flag on your credit profile.
Hard credit checks show up as loan applications, and multiple records of these can lead to buyers being charged higher interest rates or refused finance altogether in the future.
A new report by the TSB Bank found 61 per cent of personal loan lenders were guilty of the practice, with car buyers losing an average of £375 each, totalling around £100million every year.
The impact of these hard checks on car buyers is supported by our exclusive poll, which found 22 per cent of drivers had been refused finance and 17 per cent were quoted APR interest rates of five per cent or higher than the standard. Nick Smith, head of TSB’S personal loans, said hard checks “absolutely” play a role in punishing buyers. He added: “Not only could this result in having to pay a higher price for lending, it could also increase the probability a customer will be declined.” Smith also called on the Financial Conduct Authority (FCA) to require lenders to issue soft credit checks that do not appear on the credit file.
Graham Hill, director of the National Association of Finance Brokers, told Auto Express: “Our credit system, which seems very detailed these days, is in fact very naïve and full of loopholes.”
Hill advised buyers with multiple hard checks on their file to issue a Notice of Correction to improve their chances of obtaining fairer interest rates. “Any entry in the Notice of Correction box forces an underwriter to review your application,” Hill added.
“Lenders conduct hard credit checks on buyers, which act as a serious red flag”
YOU might think car thieves solely target high-end cars, but our data tells us criminals continue to go after more affordable, popular brands, such as Ford, Vauxhall and Volkswagen. In fact, these were stolen in record numbers last year, with the lowest-value car stolen and recovered being a £400 VW Golf.
A third of all stolen vehicles recovered in 2016 were valued at less than £5,000, and half of the cars stolen and recovered were valued at less than £10,000. This suggests age, mileage or brand of a vehicle is becoming increasingly immaterial to criminals and should serve as a warning to the average car owner.
Interestingly, and confirming the demise of the prestige car as the thieves’ number one target, the average value of cars recovered was just over £16,000, down from over £19,000 in 2015.
While the BMW X5 was the most stolen and recovered vehicle for us last year, the top three most expensive cars were all Mercedes, with the £120,000 G63 AMG hitting top spot. But the reality is less than one per cent of stolen cars are worth between £75,000-£120,000.
If you think your car isn’t worth enough to be stolen, remember three out of four stolen cars were worth less than £20,000.