So, you want to buy a second-hand vehicle or new car and it dawns on you, “I’m blacklisted - what happens now and can I purchase a vehicle?”.
The long and short answer is that you won’t qualify for a loan (now) and if you do, the interest rates will be extremely high. This is because a credit score is a determining factor between receiving vehicle finance or a home loan.
However, being blacklisted can be resolved and your credit score can be restored. Although, this will come at a hefty price. Here is what you need to know in order to qualify for car financing.
What Is My Credit Score?
Your credit score is a three-digit number ranging from 0 to 999. And as a requirement, you need a credit score of 600 and above to be considered for vehicle finance or a home loan. This is how your credit score is broken down.
0 - 486 = Your credit score rating is considered poor and most likely not be approved for car finance.
487 - 526 = Your credit score is considered unfavourable.
527 - 582 = It is considered below average.
583 - 613 = It is considered average and climbing towards favorability.
614 - 680 = It is considered favourable and a subprime borrower. This means, you are considered high risk and if a loan is given, you might pay higher interest rates.
681 - 766 = You have a good rating, finance will be approved as you are unlikely to default on your finance agreement.
767 - 999 = Your credit score is excellent and most likely to receive better interest rates and good acknowledgement from creditors.
You can check your credit score online at one of South Africa’s four credit bureaus, namely:
Understanding your financial situation is important before committing to lifelong decisions such as vehicle purchases. It also requires being financially savvy to keep up with the monthly payments and maintenance of the car.
How To Improve Your Credit Score?
The first step is to try and “clear your name” and be taken off the credit bureau’s list.
And this will require financial and self-discipline. And educating yourself more on how to retain a good credit score. Here’s how:
Don’t Miss Payments - paying your debts on time is crucial in helping you build a good credit profile. To maintain this, you will need to make sure you don’t miss a loan or credit payment in a month. Payments that are 30 days late will be reported to the credit bureau and impact your credit score negatively.
Pay Past Due Accounts - speak to creditors where repayment is late and negotiate an arrangement to pay the required amount on time.
Limit New Accounts - Only take out new accounts that you need and can afford to pay back on time.
Pay your Revolving Loan - This is your current credit ratio and the revolving credit you’re using. Simply put, it's how much you currently owe divided by your credit limit. A good rule of thumb is to keep your credit utilisation ratio at 30% or lower.
Once you have built a good credit score and are ready to purchase your vehicle, Auto Pedigree has over 4000 used quality vehicles for sale as well as financial arrangements with all the major banks in South Africa to help you find the best package for your needs.