Has your recent application for vehicle finance been declined? If so, your credit score wasmost likely one of the reasons that you were unsuccessful. Alan Quinn has compiled this guide that offers you pointers on the most common problems that may be pulling down yourcredit score – and steps you need to take to fix your credit profile.

Your credit score is calculated by a credit bureau. A credit bureau has spent years building up data on you by talking to all the banks, a myriad of credit providers, lenders and service providers. If you have a store card at Truworths, for example, and if you have a DStv, Vodacom or MTN account, the bureau knows about all of these. The bureau gets data from all of these places and does some fancy mathematics to work out the probability that you will be successful at paying back any vehicle-finance agreement that you are applying for.

However, because your score is calculated from a wide variety of sources, there are a wide variety of places where a simple error, misunderstanding or “seemingly suspect” financial conductcan make your score worse than it should be. Therefore,it can be VERY valuable to takea few minutes to check the underlying data from the accounts listed against your ID number at the credit bureau.

Your credit score is a critical component of your vehicle-finance application and there are free tools available to help you understand it.Cars.co.za has partnered with a company called Just Money, which will show you your credit score for free and provide some useful information about what that score will mean when you apply for different types of credit, plus good advice about how to improve that score.You can register for a free JustMoney profile using the link below.

Click on this link to register for Just Money

Learn More: What is a Credit Score and why is it important for vehicle finance?

Fix #1: Zero score & the debt review trap

If your credit score on the Just Money dashboard is zero, you are likely to be under debt review. Look under the My Accounts tab under the debt-counselling section to make doubly sure. If it lists the name of a debt counsellor then you are definitely under debt review. Debt counselling – or debt review – is a process created by the National Credit Act to assist and protect consumers who are over-indebted. If you are undergoing debt counselling you WILL know about it and your debt counsellor should have informed you that you cannot apply for car finance when you are undergoing debt counselling. Simply put, if you are under debt review, you WILL NOT get vehicle finance or ANY other form of credit.

You may be quite surprised to find out you are in debt counselling, believe it or not. Despite being regulated by the National Credit Act, it is an industry with a very poor reputation and there are many consumers who have fallen victim to unscrupulous debt-counselling practices. If you believe this may have happened to you,the article below can provide more detailed guidance.

Also Read: The Dark Side of Debt Review

If you are aware that you are Debt Counselling but have lost touch with your debt counsellor or don’t want to be in Debt Counselling any longer, then please know 2 things:

The Debt Review block on your credit profile will NEVER go away unless you do something to make it go awayYou can only exit Debt Counselling when you have paid off, in full, ALL the loans which made you get into Debt Review in the first place.

Start with the article above to get more info on what to do next.

Fix #2:Thin File or little tono Credit History

Your credit score is calculated based on your credit history. If you have never borrowed funds from a financial institution, which is especially true of younger people, then you will not have much credit history – a“thin file”–and that meansyour score will be lower. It may even be that the credit reference agency can’t generate a score for you at all in this case.

Another very common problem is when you have used small loans such as store cards in your recent past. People can be very sloppy about paying these loans on time. They are small and if you pay them this month or next, then what does it matter? WRONG, WRONG, WRONG

Banks are not generous or forgiving. They won’t ignore the little things and focus on the bigger picture of you needing a new car. Be real here!! If you are being sloppy about little loans, why should the banks trust you with a really big loan? Every loan matters. Every payment, every month matters.

These scenarios can be very frustrating because you might feel that you’re put at a disadvantage even though you clearly can afford the vehicle and have not done anything that wrong. There is no point complaining about the stupidity of the system, because nobody is going to listen to you! You need to prove to the Credit Providers that you know how to take a big loan AND pay it back. You need to build your credit score. The article below explains the problem in more detail and proposes solutions. It will take 3 to 6 months to build a credit history.

Also Read: The Problem with living debt free

Fix # 3: Arrears, Defaults and Judgements Removal

This is the most common cause of a poor credit score, so you MUST actively check your Just Money credit profile under the My Accountstab. A recent report by Eighty20 and XDS indicated that 60% of credit-active under-35s have an account in defaultand, statistically,over 90% of those are clothing accounts.

If you have any accounts more than 3 months in arrears then say goodbye to getting vehicle finance. It is that simple – nobody will give you a big pot of money to buy a new car if you haven’t paid back the last guy you borrowed money from. This is common sense. If you lent money to someone and they did not pay you back and now they want more – what are you going to do?

But how do they know about it? That is what Credit Bureaus do for a living – they go and find out where you have loaned money in the past and whether you paid it back nicely. Every loan – from anywhere, is reported to the Credit Bureaus. They are real snitches – they will tell any credit provider who you apply to about all your naughty secrets, and they know everything!!

It gets worse – if you were late in a payment in the last 2 years but have caught it up recently, then these late payments where you were behind in a payment or two will still be visible to the credit providers. This does not mean it is hopeless – catching up on your debts is the BEST thing you can do – but just be aware that it will not solve your problems immediately. Once you are caught up, your credit score will improve – but slowly over time. It will be a while before a bank will trust you to pay back hundreds of thousands of Rands. It is easy to forget how expensive cars can be – it’s a LOT of money. Would you lend a lot of money to someone who has a chequered past?

Hopefully I have proved to you that any arrear or missed payment is the DEVIL himself when it comes to getting car finance. Find out where you are and fix it. The article below will help you get started.

Read More: How to remove Arrears, Defaults and Judgements

One last piece of advice

Whichever route you take, don’t let the situation slide. The problems we have highlighted here will not go away if you ignore them. Use this guide to get started.