Can van finance improve your credit score? We explain how…

When managed properly, a Hire Purchase (HP) agreement can have a positive impact on your credit score over time, as it demonstrates to credit agencies that you are a responsible credit customer. At First Response Finance, we specialise in helping people with bad credit get the vehicle they need, and we’re here to explain how van finance can work in your favour.

1. Building a positive payment history

Your credit score is largely based on how well you manage credit agreements – this could be a credit card, a loan or even a mobile phone contract. Making your van finance payments on time each month shows lenders that you’re reliable and responsible. This consistent track record can help boost your credit score over time.

2. Adding variety to your credit mix

Lenders like to see a mix of different types of credit, such as loans, credit cards, and finance agreements. If you only have one type of credit on your file, adding a Hire Purchase agreement can show that you’re capable of managing different forms of borrowing, which can be beneficial for your score.

3. Demonstrating financial responsibility

Taking out finance for a van and keeping up with repayments proves to lenders that you can handle a financial commitment. The longer you maintain the agreement without missing payments, the more positively it reflects on your credit profile.

4. Avoiding payday loans and high-cost credit

If you need a van for work or personal use, opting for an HP finance agreement could be a smarter choice than using high-cost payday loans or credit cards. These short-term, high-interest borrowing options can negatively impact your credit score, whereas an affordable and structured finance plan is designed to be manageable.

5. Managing your credit utilisation

Credit utilisation refers to how much of your available credit you’re using. If you’re relying too much on credit cards, taking out a Hire Purchase agreement instead could help spread costs more efficiently and reduce the amount of revolving credit you use. This can also have a positive impact on your score.

Things to Keep in Mind

While van finance can help improve your credit score, it’s important to be aware of potential pitfalls:

• Missed payments can hurt your score – If you don’t keep up with your repayments, your credit score could be negatively affected. Always make sure your finance agreement is affordable before committing. If we have any concerns that taking out a finance agreement could put you under financial strain, we will not provide you with finance.  
• Applying for too much credit at once – Making multiple finance applications across a range of businesses can result in many hard credit checks being made on your details, which can temporarily lower your score. Try to avoid making multiple applications in a short period.
• Your score won’t improve overnight – Credit scores take time to build, so be patient and focus on making regular, on-time payments.

If you manage your van finance well, it can be a useful tool for rebuilding or improving your credit score. By making timely payments and demonstrating responsible borrowing, you can boost your credit profile while getting the van you need.

At First Response Finance, we understand that everyone’s credit history isn’t always perfect, but we believe in second chances. If you're considering van finance and want to learn more about how it could work for you, get in touch with our friendly team today.

Looking to finance your next van? Let’s help you get on the road.