Credit checks and your car subscription

Before taking out any form of credit, you’ll usually need to go through a credit check so that lenders can assess your creditworthiness.

When applying for credit cards and loans, for example, lenders use this information to assess risk, see how reliable you are as a borrower and confirm your identity.

Similarly, car subscription services often carry out credit checks to make sure you can afford your monthly payments and to check your previous borrowing history.

Understanding how credit checks affect your car subscription application is essential for anyone looking to subscribe to a vehicle. This comprehensive guide will explain how providers evaluate your creditworthiness and help you determine if you're eligible for a car subscription.

What is a credit score?

Your credit score is a numerical rating based on your financial history. The specific score range depends on the credit agency, but with all agencies, the higher the credit score, the better. A “good” credit score usually showcases that you have a good payment history and are likely to be less of a risk to lenders. This also usually means you’ll get better deals and rates.

All credit reference agencies in the UK let users check their scores for free.

Do car subscriptions do credit checks?

Yes, car subscription companies will assess your past credit history to check whether you will be able to  afford your monthly payments. 

When you apply for a car subscription, providers will evaluate your application through either a soft or hard credit check. This process helps them determine whether to approve or decline your application. The evaluation considers various factors beyond just your credit score to verify your reliability as a customer. A soft credit check doesn’t leave a mark on your credit report and won’t affect your credit score. It’s often used to prove your identity and gives lenders a snapshot of your credit history.

However, some subscription companies may run a ‘hard’ check when you apply for an all-inclusive car subscription. A hard check does leave a mark on your credit record and can reduce your credit score. This type of search reveals your full credit past, including payment history, open and closed accounts, CCJs (county court judgements) and more.

Before getting a subscription car, it may be a good idea to sign up with the major credit check agencies before you attempt to get a subscription. This way, you can see if there are any potential red flags which may prevent you from passing affordability checks. Although subscriptions aren't as stringent as other types of car finance, you can still be rejected.

You could also try CheckMyFile for free for 30 days (then £14.99 a month), and you can cancel online anytime. They give you access to all the credit information held on you by Experian, Equifax and TransUnion.

Car subscription, no credit check: does it exist?

Yes, some car subscription services don't require a crecit check. You'll have to pass affordability checks which may include a soft credit search on your report.

What is a credit score?

Your credit score is a numerical rating based on your financial history. The specific score range depends on the credit agency, but with all agencies, the higher the credit score, the better. A “good” credit score usually showcases that you have a good payment history and are likely to be less of a risk to lenders. This also usually means you’ll get better deals and rates.

All credit reference agencies in the UK let users check their scores for free. Here’s what a good credit score looks like with each one:

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What credit score is needed to get a car on subscription?

Car subscription providers don’t usually look at your actual credit score, but rather how well you have managed your financial accounts in the past.  Providers review multiple factors to determine if you qualify for a car subscription. While they'll evaluate your credit history, many offer flexible terms and conditions that make their services more accessible than traditional car financing agreements.

What's more, the cost of the monthly car subscription is usually fixed and doesn't depend on your credit score, which means you won’t benefit from better deals even if you have an ‘excellent’ score.

You may be asked to provide the following documents and information when getting a car on subscription:

• A scanned copy of your UK driving licence.
• Information on past driving convictions.
• Confirm whether you have been disqualified from driving in the last five years.
• Utility bill dated within the last three months.
• Employment details.

Car subscription with ‘bad credit’

If you have a bad credit history or score, chances are you’ve had issues repaying credit in the past. Sometimes it takes time to ‘repair’ your credit and increase your score.

Young people with no credit history or people who’ve never opened a credit account in the UK would also fall into this category, simply because lenders cannot assess risk and your ability to make payments on time.

So if you don’t want to get a car with bad credit there are a couple of things you need to keep in mind.

• Monthly affordability - It’s very important to work out what you can comfortably afford to repay each month. Then compare subscription cars from different companies to find one that best fits your financial circumstances and needs.
• Stay away from more debt – If you’re already in a difficult financial position, try to avoid taking out more credit as this can put even more strain on your finances.
• In trouble? Speak to your provider – Car subscription companies are usually quite flexible so you may be able to cancel early and return the car before your financial situation worsens.

Below is a full list of negative factors which may lead to bad credit:

• Late payments - Missing one payment might not decrease your score drastically, but it could be a dealbreaker for some lenders. Being consistently late and continually missing payments can lead to a default.
• Defaults - If you miss too many payments, a creditor will provide you with a default notice asking you to keep up with payments. If you don't, they will then close the credit account and the lender may sell your debt to a debt collector or take you to court.
• County Court Judgements (CCJ) - Lenders are able to apply for a CCJ against you if you aren't repaying your debt. If the court rules in favour of the creditor, you'll be issued a judgement and asked to repay what you owe. If you ignore this, the court has the right to use bailiffs to recover the debt.
• Debt repayment plans - Debt Relief Orders (DROs), Debt Management Plans (DMPs) and Individual Voluntary Arrangements (IVAs) appear on your credit report and can influence lenders' decision-making.
• Bankruptcy - Bankruptcy is a legal status for people unable to repay money they owe. It's generally known to be a last resort option for people with debts worth over £5,000.
• Hard searches - Some lenders, including some car subscription companies, may run a hard search which can temporarily affect your credit score. Normally this lasts 3-6 months so you should avoid applying for credit too often.

All of these factors can stay on your credit report for up to six years. This means your chances of getting accepted for credit can be affected for a very long time. Learn how to improve your credit score and be subscription-ready!

Preparing for your car subscription application

Before you apply for a car subscription, taking some simple preparatory steps can improve your chances of approval. Unlike traditional car finance, subscription services often have more flexible requirements, but it's still important to be well-prepared.

Document checklist

Before starting your application, make sure you have:

• A valid UK driving licence, 
• Proof of address dated within the last 3 months (a utility bill or bank statement will do), 
• Employment details including your employer's contact information,
• Bank statements from the last 3 months showing your regular income,
• Details of your address history for the past 3 years,
• National Insurance number,
• Information about any driving convictions or penalty points.

Steps to improve your approval chances

There are also some simple things you can do to improve your chances of getting approved! 

Check your credit

Report Request your credit reports from the main credit reference agencies (Experian, Equifax, and TransUnion) and:

• Look for and dispute any errors,
• Check for fraudulent activity,
• Ensure all your personal information is correct,
• Review any negative markers that might affect your application.

Register on the Electoral roll

Being on the electoral register at your current address makes it easier for providers to verify your identity. If you're not registered, visit the government's website to sign up - it usually takes about 5 minutes.

Stabilise your finances in the months before applying:

• Avoid making multiple credit applications,
• Ensure all existing bills are paid on time,
• Keep your bank account in good standing,
• Set up direct debits for regular payments,
• Close any unused credit accounts. 

Alternative options for vehicle access

If you're struggling to pass a credit check, several practical alternatives are available to you:

Private vehicle sharing

Car sharing has grown significantly in the UK, with services like HiyaCar which offer more relaxed requirements than traditional providers. These platforms connect you with local car owners and typically:

• Focus more on your driving history than credit checks,
• Let you hire vehicles for days or weeks at a time,
• Offer straightforward booking processes,

Local car clubs and rental options

Many UK cities and towns now have excellent car club services. Companies like Co-Wheels and Enterprise Car Club provide:

• Simple membership schemes for occasional driving,
• Pay-as-you-go options with hourly rates,
• Vehicles parked in convenient neighbourhood locations,
• Flexible hire periods to suit your needs.

Building your credit rating

While you work on improving your credit score, consider these options:

• Begin with a basic subscription from providers with more flexible criteria,
• Ask a trusted family member to act as your guarantor,
• Use local transport services while establishing your credit history,
• Look into UK credit-building cards from providers like Vanquis or Capital One.

How to get a car with no credit check

Proceed with caution if considering no credit check car finance in the UK due to potential risks. Some companies offering such loans may take reckless or even illegal measures for repayment as they cannot know your ability to repay the loan​. Beware of loan sharks who are not registered with the Financial Conduct Authority (FCA) and lend illegally, resorting to intimidation for repayment​.

Opt for a loan from an FCA-registered lender, even if it requires a credit check. These lenders ensure you understand the loan terms and deal with you transparently​. A credit check assesses your creditworthiness, protecting you from unmanageable debt. It involves the lender seeking information about your financial situation and history​.

Credit reference agencies use this data to calculate a credit score, which affects your finance options and interest rates​. When comparing finance costs, prefer a soft check, which doesn't affect your credit score, unlike multiple hard checks.

If your credit score is low, consider improving it to qualify for better car finance options. Always check the lender's FCA registration before applying for a loan. A car subscription can be a viable alternative too. Other options include saving for a car or seeking help from family or friends.

Can you get refused when applying for a subscription?

You probably won’t be refused a car subscription because of a poor credit history per se but rather if the lender cannot match your details and prove your identity.

It’s possible that in the future subscription services will start using credit history to offer better deals, but right now, the chances of getting refused are low.

Do car subscriptions appear on your credit report?

Cars on subscription do not appear on your credit report.  

By contrast, cars bought on finance (PCP or HP) will always show up in your credit history. Even cars on lease are reported to credit bureaus, such as Equifax, TransUnion and Experian.

Your report will also show the amount left to pay, the number of months remaining and any missed payments. If you don't want to leave a long-term mark on your credit report, you could consider comparing the best EV salary sacrifice schemes currently available on the market!

However, as car subscriptions do not appear on your credit report, this also means they don't directly help improve your credit score either. That said, services like Experian Boost look at your monthly subscriptions (such as Spotify and Netflix) which can actually improve your Experian credit score.

Will a car subscription hurt my credit score?

Most providers carry out a ‘soft’ search when you apply and this won’t affect your credit score. Others, like Wagonex, run a ‘hard’ search which will have a temporary negative impact on your score. This means it’s important not to make too many credit applications in a short space of time. 

Does my credit score affect the cost of cars on a subscription?

No, it doesn’t. The monthly cost is usually fixed so even if you have the highest score possible, you won’t benefit from a cheaper subscription cost.

Would cancelling my subscription affect my credit score?

No, cancelling a subscription and returning the car will not hurt your credit score. Even swapping cars every few months isn’t going to be an issue (it’s even encouraged by some companies).

Usually, once you’ve created an account with a subscription company and they have your details on file, they won’t carry out any credit checks again.

Which UK car subscription companies require a credit check?

When you compare car subscription providers, it's important to review their credit check policies. Some services are more affordable and flexible than others, with comprehensive eligibility criteria that make them accessible even to those with lower credit scores. Here's a breakdown of the subscription services currently available in the UK and the type of credit search they carry out:

Getting help with your debt

If you're worried about your debts, you can get free advice from debt charity organisations. They will look at your financial situation and help you set up a more manageable repayment plan to help you pay off your debt, as well as help you make better financial decisions in the future.

You can seek help from the following organisations:

• Money Helper - a free government service.
• National Debtline - free independent debt advice.
• Step Change - a debt charity.