What Credit Score Do You Need for PCP Finance?: An Insider's Guide

If you're wondering about the credit score needed for PCP finance, our expert team at Car Finance 247 is here to help. Credit checks are a necessary part of car finance - the better your credit history, the more likely it is you'll be approved for a fitting PCP finance deal. Conversely, having a bad credit score may limit your options, making it difficult to find a suitable agreement.

However, it can be hard to work out exactly what credit rating you need for PCP (Personal Contract Purchase) finance, as it's dependent on a number of factors:

• The model of car you're going for

• The price of the vehicle

• The lender

Here, we'll dive deep into the world of credit scores, giving you all the information you need to get the perfect PCP deal for your needs.

PCP finance: The basics

Personal Contract Purchase (PCP for short) finance deals are one of the most popular forms of finance on the market at the moment. Statistics show that in 2016, the PCP car market reached a peak, taking 86.6% of all new car sales that year. 

Whilst the cost of living crisis and the coronavirus pandemic have reduced the amount of people buying cars in recent years, PCP deals are still extremely popular. This means that if you're searching for a new car at the moment, there's a good chance you'll be eyeing up a PCP deal.

With a PCP agreement, you take out a loan to cover the cost of your chosen vehicle, paying a set of regular monthly payments (usually for a period of 2-4 years). At the end of your deal, you have three options:

1. You can pay the balloon payment and own your vehicle outright.
2. You can return the car to the dealer
3. You can trade your vehicle in for a new one, before taking out another finance deal

PCP agreements are extremely flexible, which is one of the main reasons why they're so popular at the moment. 

A Personal Contract Purchase deal could be the perfect option for you if you like to change your car often, don't have a high mileage and want to keep your monthly payments low. However, you'll usually have to agree to a mileage limit. If you’re returning your car at the end of the contracted period, you may also be required to repair any damage to the vehicle before handing it back.

The ideal credit rating for PCP finance

So, what credit score do you need for PCP finance?

It's a tricky question to answer, as there isn’t a universal credit rating required to take out a PCP deal. Most lenders will prefer applicants with either a perfect or good credit score. However, this doesn't mean that people with lower scores are unable to find a suitable finance deal - you just might have a higher interest rate or face less favourable terms.

There are three main credit reference agencies based within the UK at the moment, each of which has a different scoring system:

Credit Reference Agency	Very Poor	Poor	Good	Very Good	Excellent
Experian	0 - 560	561 - 720	721 - 880	881 - 960	961 - 999
Equifax	0 - 438	439 - 530	531 - 670	671 - 810	811 - 1000
TransUnion	0 - 550	551 - 565	566 - 603	604 - 627	628 - 710

Your credit report may differ depending on which agency you use to conduct your credit check, with each company having its own definition of what a good credit score is.

If you’re not sure what your credit score is and you’d like to find out more, please see our Free Credit Check page.

Why does your credit score matter for PCP deals?

Credit checks are a key component of all finance deals, including PCP agreements. Your credit report is a reflection of your financial reliability, allowing lenders to assess the risk of lending you money. 

A good credit score indicates that you are a low-risk borrower, making it more likely that you will be approved for a PCP deal and gain more favourable terms for your agreement. On the other hand, a lower credit score suggests that lending money to you is riskier, which can lead to higher interest rates and even refusal of your finance application. Understanding your credit score and how it affects your finance eligibility is a crucial factor when considering a new PCP deal.

A strong credit score can also provide more leverage when negotiating your finance deal, although not every lender will allow you to debate the terms. 

Tips for sourcing better PCP finance offers

If you have a poor credit history and you want to apply for a PCP finance agreement, it's a good idea to try and boost your credit score. 

So, how do you do it?

You're in luck, as there are several ways in which you can improve your credit rating:

• Pay your bills on time - Missing just one payment could hurt your credit score, so it's important to pay your bills on time. If you have trouble remembering to keep up with your payments, setting up direct debits when your bills are due may be helpful.
• Check for mistakes on your credit report - Occasionally, you may find that mistakes crop up on your credit file. If something shows up that you don't recognise, it's important to contact the credit reference agency as soon as possible, as mistakes could hinder your PCP application.
• Register to vote - Registering to vote is an easy step to boost your credit score. Registering on the electoral roll is free and only takes a few minutes, making it an essential step for anyone wanting to boost their chances of finding a suitable PCP deal.

• Check your financial links - If you’ve taken out credit with another person (for example, a mortgage) and the other party has a low credit score, it could also affect your rating. This is something you need to keep in mind when trying to raise your credit score - particularly if you’re regularly asked to be a guarantor.

• Limit your credit applications - The more hard searches you make in a short period of time, the more marks are made on your credit file. Having a lot of hard searches on your file can be perceived negatively by lenders - particularly if you’ve been rejected for car finance recently.

• Don’t use all your available credit at once - Maxing out your lines of credit each month will not be viewed favourably by lenders. If possible, you aim to leave some of your credit lines open without using them, as this approach will show you to be a responsible borrower.

If you follow the steps laid out above, you should be able to improve your credit score, as well as your chances of getting a decent PCP loan. 

However, if you need a car right now and don’t have the time to wait, you may still be able to source a poor credit score car finance deal - see what your quote could look like here.

Start your PCP finance journey today

After reading this, we hope you now know the credit score required for PCP finance. The higher your credit rating, the more likely it is that you’ll be approved for a PCP deal. However, some lenders will provide finance loans for people with bad credit, so a poor credit score doesn’t necessarily have to be the end of the line.

At Car Finance 247, we're happy to state that we can source PCP finance deals for people with bad credit. Whilst we can't promise a guaranteed agreement, we'll do our very best to find the perfect deal for your needs. 

If you’d like a PCP car finance quote, all you need to do is get in touch, and we'll consult our broad panel of lenders for you.