Credit where it’s due
Financial worries or just looking for better value for money? Consumer champion Fergus Muirhead answers your questions Finance firm offer Eureka moment for buyers with poor payment history
I READ the article you wrote a couple of weeks ago about credit reports and I’m looking for some advice.
I know that my credit report is not very good because of a couple of debt issues I have had in the past. But I want to buy a new car and wonder if there are any options you can recommend that will help someone like me who has a poor credit history. I don’t have the cash to buy without some form of credit but think that most lenders would reject me. Bob Ross (name changed by request)
AS I said a few weeks ago, credit reports contain all sorts of information about the way you have handled loans and other regular repayments in the past. They will have details of your mortgages, credit cards and other finance repayments and, if you have missed repayments in the past, then your credit history might be so poor that you may be unable to get a new loan. There are certain things that you can do to improve your credit score if you have had problems in the past and I am going to offer some tips to help you get a better credit score in a few weeks. But improving a poor credit score is necessarily a longer-term solution and won’t help you go out and buy that car that you really want today.
For that, you’ll need to find a lender prepared to take you on while you have a poor credit score.
As it happens, there are several new companies appearing in the car finance market who reckon they take a different approach to the way they source loans for people with poor credit ratings.
One of them is Eureka Leasing, whose director Kevin Bann explains the problem some customers face.
He said: “People who have had difficulty paying back a loan, and have then received a default or a CCJ
registered against their file, will have what is called a “sub-prime” credit rating.
“There are hundreds of thousands of people in the UK in this position and when they don’t have the cash to buy a car – or do manage to gain access to some form of credit – they are left buying a used model, which can be four or five years old.
“In the past, people with poor credit ratings have also been subjected to high interest rates and long contracts.”
Kevin explained that what he does at Eureka Leasing is almost the opposite.
He continued: “We supply customers with a brand new car, a short-term contract, and we give them the opportunity to re-establish their credit rating without paying over the odds. Our infrastructure is set in such a manner to minimise costs and to pass the benefits and efficiencies on to our customers.
“People who have a bad credit rating usually won’t be able to get finance anywhere else and we specialise in that sector.”
Eureka Leasing will still carry out checks in the same way as a traditional business. But Kevin added: “Whenever you apply for credit, the lender will do a credit search to check your background.
“But we do a ‘soft search’ that lets us know whether we will fund someone or not without it being registered on their credit file – therefore, the customer is not adversely affected.” Many consumers today want to purchase a new car rather than something that is four or five years old, and Kevin reckons that the Eureka model can help these buyers.
He added: “When people are left with only the choice to buy a used car, they are usually tied into a finance contract for, typically, four or five years.
“We think that’s too long. Eureka Leasing contracts are typically two and three years, which means the customer has a brand new car for that time, and at the end of the contract we collect the car and drop off a new car at the same time, if they want to continue.”