It isn't easy to arrange van finance if you have a bad credit score, but it is possible. We explain how you can do it.
Leasing is one of the most popular ways to acquire a van, but it isn't easy if you have a bad credit score. There are things you can do to improve your chances, though, and we've explained the ins and outs of van leasing with bad credit below.
What's the criteria for business van leasing?
Lenders will want to know a number of things before they approve you for a van lease. Exactly what they want to see can vary depending on the firm, but generally, a finance company will want details of the following:
If you're a business:
- At least three years' address history
- A balance sheet, accounts history and proof of positive trading
- Evidence of any County Court Judgements (CCJs)
- A full UK driving licence
- A director that can act as a guarantor
If you're a sole trader/leasing the van personally:
- At least three years' address history
- At least three years' employment history
- Details of your marital status and number of dependents
- Recent bank account history showing monthly income and expenditure
If they're happy that you can afford to lease a van at their rates then they'll offer you credit, but they may ask for more or different information before they do. They may also turn you down if they don't think you can afford the monthly repayments.
What credit score do I need to lease a van?
There is no magic credit score number that says you can or cannot get finance for a van, because it's ultimately down to the finance company; some will be willing to lend money to people with a bad credit rating, but others won't. However, the better your score, the greater your chances of a low-cost lease rate.
According to credit specialist Experian, a good credit score starts at 670, very good at 740 and exceptional at 800. A very poor credit score is 300 to 579, while a fair one is 580 to 669.
Can I make a joint application?
It is possible for two people to apply for van finance together, which is known as a joint application. This usually happens when one of the two people has a poor credit history but the other does not, which increases the former's chance of successfully applying for a loan.
Quite simply, some lenders will accept joint applications and some will not, so it's totally dependent on the finance provider.
Can I use a guarantor?
It's sometimes possible to apply for van finance using a guarantor, which is when another person agrees to cover the cost of your repayments if it turns out you can't afford them. If you do this, the leasing company will usually ask to see the guarantor's financial information as well as yours.
It can strengthen your application, especially if you have a poor credit rating or if you have not borrowed money before. Again, it's down to the individual finance company as to whether or not they'll offer you a guarantor loan.
Can someone else lease a van for me?
If you are the main driver or operator of the van then it's generally best if the finance contract is in your name. However, it may be possible to arrange for someone else to lease it - but it's vital that everyone involved is clear and in agreement about exactly what is happening.
A business partner or spouse, for example, may be able to lease a van for you to use, although they will need a good enough credit rating to be offered the finance. It's important to make sure the contract allows other people to drive the vehicle - check with the lender if you're unsure about this - and that anyone planning to drive the van is fully insured before they get behind the wheel.
I can't get credit - what do I do now?
If your credit score is so bad that you simply cannot get finance for a van, the first thing to do is get a credit report. This will tell you exactly what your credit score is and point out what you need to do to improve it. You can get a copy for free from Experian, Equifax and Callcredit.
If you've been turned down for finance, it's best not to make any further applications until you've attempted to improve your credit score, because they can make it even worse. Your credit report will help you work out what you need to do to improve matters, but there are some general things you can do to brush it up.
Registering on the electoral roll makes you more visible and acceptable to finance companies and it's also a good idea to cut financial ties with other people who have a bad credit history. It sounds simple, but paying off existing debts will make a world of difference, as will increasing the size of your deposit.