A Numbers Game: What is a Good Credit Score for a Car Loan?
Some things may be nothing but numbers (such as age), but your credit score is much more than that. Those three digits are like keys to a door, allowing or not allowing you to buy or apply for certain things, such as a car loan.
If you’re in the process of buying a car with financing in mind, you’re likely thinking about your credit score, especially if your finances aren’t the greatest.
So what is a good credit score for a car loan, you ask?
The Magic Number – The Best Credit Score for a Car Loan
If you want a “cut-off” point, a number that serves as a bare minimum, then the number you’ll want to remember is 630, however, if your score is lower, you may still able to get a loan or simply fill in their information on the right registration form to find out. If your score sits there or higher, you’ll more than likely qualify for a loan.
But that’s just the short answer. You could get approved for a car loan if your credit score is lower (in special cases), and of course, you can get a loan with great rates with a high score. Remember too, though, that a healthy credit score doesn’t even guarantee you a car loan.
For the sake of this topic, take note of the following ranges and how they can impact your application outcome.
Reach 760 or above, and you’re among the “elite”, the credit sweetspot. A number of 760 or more shows that you are a very responsible person when it comes to your finances. A lender seeing such a number will trust you more with a loan of any kind. Assuming other aspects of your finances look good, you will also qualify for the lowest rates possible.
Very Good (725 – 759)
You’re still sitting pretty in the “very good” range. You shouldn’t have any problems with getting a car loan if your credit score sits here, and lenders will likely take a “risk” on you with a loan.
Good (660 – 724)
If you’re in this range, you shouldn’t have too much difficulty with securing a loan. You should have no trouble finding affordable rates, although they may not be the lowest. Be careful if you’re at the lower end of this range, however. Slipping too low can make a lender more hesitant to approving you, or at least, approving you for the low rate you want.
Fair (560 – 659)
Once your credit score has dipped into the “fair” territory, trying to get approved for a car loan gets tricky. In fact, credit card companies and lenders start to consider people with fair credit as “higher risk” individuals. A score under the 630 limit we mentioned makes it very tough for car shoppers to get approved for a low-interest loan.
Poor (300 – 559)
At the low end of the scale, sits the “poor” category. It’s not a pleasant place to be in since the only option are loans with very high interest rates, sometimes in the double digits. This is true whether you want a car loan, business loan or mortgage. Fortunately, there are options if you are in this bracket, and they can help you improve your credit score if you commit to regular and timely payments.
Higher Credit Score = Lower Car Loan Rates
Now, let’s get back to the question of having a “good credit score” for a car loan. Earlier, we mentioned that a score of 630 is generally the minimum for getting approved with few issues, but considering the fact we said that higher scores mean lower rates, it would be better if your score is the 700s or higher.
With a score in the “excellent” or “very good” range, you’ll find the lowest rates. The same is true if you’re on the opposite end of the spectrum. A lower score excludes you from the lowest rates; that’s usually the case for those who have fair or poor credit.
Keep in mind too, that the minimum standard for lenders differ, even if slightly. Some will only work with those who have outstanding credit, others will cater to those with challenged credit and some, unfortunately, have no standards at all (the ones who take advantage of their customers). However, most companies will set their limits in the mid-600 range, somewhere 620 – 650.
Credit Score Takeaways for Good & Bad Credit Car Loans
- The cut-off point for a prime car loan approval is a credit score between 620 – 650 (630 typically)
- Car loan approvals for people with lower credit scores are available at slightly higher interest rates
- Regardless if your credit score is excellent, fair or poor, there are car loan options available to you
Here at Auto Loan Solutions, we work with multiple Canadian banks, and will help you get the lowest interest rate for a car loan regardless of your credit score. Apply here.
Reminders for a Healthy Credit Score
Regardless of your credit current score, there are some basic practices that can help you maintain a good or repair a damaged one, no matter who you are.
- Avoid missing payments – Forgetting your monthly payments is one of the fastest ways to lower your credit score. Make it your goal to pay your bills and debts on time.
- Don’t carry a balance (if possible) – You might not be able to pay a debt in full, all at once, but don’t believe the myth that holding onto a balance can improve your credit score. Do it for too long, and your score will drop!
- Keep loan applications to a minimum – Too many applications works against you in two ways: 1) More credit inquiries lower your score, 2) Lenders who are hesitant to grant you a loan due to a perceived lack of responsibility. The lesson? Don’t apply for too many loans at once.
Aim for a Higher Credit Score
Ultimately, the answer to having the right credit score, is to have the highest number possible. If you can stay in the excellent range (760+), great. Even if you can maintain a score in the very good range (725 – 759), you won’t have any problems securing a loan that offers you great rates and discounts. By means of responsible payment habits, you’ll find it easy to maintain a score that gets you nothing but the best deals on car loans.