Did you know that using a hire purchase (HP) car finance deal can actually improve your credit score, opening up further opportunities for finance deals later down the line?
Of course, while it is possible to improve your credit report, there is also the potential for you to damage it. It all depends on how you manage and look after your credit score. Carry on reading to find out how you can use a hire purchase car finance deal to improve your credit score.
What is Hire Purchase Car Finance?
With a hire purchase deal the loan is secured against the car so you won't legally own the vehicle until the deal is complete and the final payment has been made. So, officially, you are just hiring the car from the lender until you've paid for it in full. However, you can pay off your outstanding balance at any time in the agreement by requesting a settlement figure.
Boost Your Credit Score with HP Car Finance
When you take out a hire purchase agreement, you will see the new credit account appear on your credit report. It will show the agreement length and start date, the name of the lender, your outstanding balance, your personal demographic details, and – more importantly – a record of your repayments. This documented repayment history will show when you’ve made a payment, missed a payment and when you’ve been late with payments. There really is no hiding when it comes to your payment history!
Your repayment history carries the potential to help or hinder your credit file. It is used to gauge your creditworthiness, so lenders can ascertain how reliable you are and how likely you are to repay the amount borrowed, and on time. Whenever you apply for credit, this will be checked for any evidence to demonstrate you are a dependable customer.
To put it simply, a hire purchase car finance deal can improve your credit score as long as you keep up to date with your payments. One late payment can be a minor negative marker that may harm your credit rating just slightly. Multiple missed payments, arrears and account defaults are significantly more harmful. With regular and on-time payments, the older the account becomes, the more positive influence it will have on your overall credit rating.
Worried About Your Credit? Look into Bad Credit Car Finance
Bad credit car finance allows those with low or poor credit to obtain a car finance deal – whether this is HP, PCP, PCH, or any other form of car finance a lender is willing to give to those with poor credit. This allows the borrower to spread the total amount of buying or leasing car over a fixed period of time, without the need for a deposit. An ideal option if you have a poor credit score and wish to obtain a hire purchase car finance deal.