The lender will ask for relevant facts concerning home, mortgage, income, bank and credit card accounts and details of any other outstanding debts.
The lender acquires information from a credit reference agency, who use public records to confirm your identity and address.
They check for debts registered over the previous six years, and any county court judgements (CCJs) against you.
Any information on you shared by finance companies, banks and other lenders will be assessed.
Should credit be refused, ask the finance company why your application was turned down, and whether you have failed the credit checks.
You have the right under the Data Protection Act to search your record at the relevant credit reference agency (the lender must supply their details) and to correct any errors in your record.
There is no 'blacklist' as such, just a process called 'credit scoring' based on many different factors. You can find out what these factors are by viewing your credit record.
Most lenders use similar methods of credit scoring, but different lenders have different loan policies. You may be turned down by one lender but accepted by another — although you'll probably pay a higher rate of interest if you are rated a high-risk borrower.
What if the car is faulty?
Keep paying the instalments, otherwise you will be in breach of the credit agreement.
First ask the dealer to rectify the fault. If the car is still within warranty, repairs will be carried out at no cost to the dealer or yourself.
Buying a car via a credit agreement means that the lender has a responsibility to ensure the quality, fitness and description of the vehicle before entering into a contract.
And because the car belongs to them, it is in their interest to rectify any major faults.
Cancelling a credit agreement
Most credit agreements can be terminated, provided you act quickly. There are details on the contract document and notice of your rights to cancel should also follow a few days after signing.
However, if the documents are signed on the dealer's or lender's premises, you lose the five day 'cooling-off' period in which you can cancel without penalty.
The agreement can be legally terminated at any time, if you are not the owner of the car until the last payment is made (as is the case with Conditional Sale and Hire Purchase agreements). Provided you have paid half the credit price of the car, you can simply hand it back.
However, you will lose all the payments you have made to date, and will be liable for further charges if the condition of the car is poor. If you haven't paid half of the credit price of the car, you will lose the car and still be liable for any outstanding payments. Overall, this is the worst result of a credit agreement.
Caution: Don't give a dealer all your personal details before committing yourself to a credit agreement.
They may use the details to 'shop around' other lenders in the hope of earning a higher commission.
If your credit record is less than perfect, all usage of your details may show up as a large number of bad credit checks against your name — making obtaining credit even more difficult in the future.
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