What Credit Score is Needed For a Car Loan Approval?

If you’re in Ontario and thinking about buying a car, you’ve probably wondered, “What credit score is needed for a car?” As a dealership, we want to help you understand how credit scores work when financing a vehicle. In this article, we’ll explain what credit score you need, what lenders look for, and how you can still get a car even if your credit isn’t perfect.

 

 

What Is a Credit Score?

A credit score is a number that shows lenders how trustworthy you are when it comes to borrowing money. It’s like a report card for your financial habits. Credit scores in Canada typically range from 300 to 900. The higher your score, the better you look to lenders.

Your credit score is influenced by factors like:

• Payment history: Have you paid bills on time?
• Credit utilization: How much of your available credit are you using?
• Credit history length: How long have you had credit?
• Credit mix: Do you have different types of credit (credit cards, loans)?
• Recent inquiries: Have you applied for new credit recently?

 

What Credit Score Is Needed for a Car?

The credit score needed for a car depends on the type of loan and the lender. However, here’s a simple breakdown for Ontarians:

• Good Credit (660-900): With a good credit score, you’ll likely qualify for the best interest rates and flexible loan terms. This means lower monthly payments and more options for the vehicle you want.
• Fair Credit (560-659): If your score falls in this range, you can still get approved for a car loan. However, the interest rate may be slightly higher.
• Poor Credit (300-559): If your credit score is low, don’t worry—you’re not alone. Many people in Ontario can still get a car loan, but the terms may be stricter, and the interest rates will be higher.

As a dealership, we work with various lenders to find financing solutions for all credit situations.

 

Why Does Credit Score Matter?

Lenders use your credit score to decide if they should lend you money and at what interest rate. A higher score shows that you’re less risky, so lenders are more likely to offer lower interest rates.

For example, if you have a credit score of 750, you might get an interest rate of 5% on a car loan. If your score is 580, the rate could be 12% or higher. Over time, this difference can add up to thousands of dollars in extra payments.

 

What If My Credit Isn’t Great?

Having a low credit score doesn’t mean you can’t buy a car. Here are some tips to improve your chances:

1. Save for a Down Payment: A larger down payment reduces the amount you need to borrow, making lenders more likely to approve you.
2. Get a Co-Signer: If someone with good credit co-signs your loan, lenders may offer better terms.
3. Choose a Budget-Friendly Car: Opt for a vehicle that fits your budget to keep monthly payments manageable.
4. Work with a Dealership That Understands: Some dealerships, like ours, specialize in helping people with less-than-perfect credit. We can guide you through the process.

How Can I Check My Credit Score?

You can check your credit score for free through services like Equifax Canada or TransUnion Canada. Knowing your score before visiting a dealership can help you understand your options better.

 

So, what credit score is needed for a car? While a good score (660+) makes the process easier and cheaper, people with fair or poor credit can still buy a car. The key is working with a dealership that understands your situation and finding a loan that fits your budget.

We’re here to help all Ontarians, no matter their credit score, get behind the wheel of a car they love. If you have questions or want to explore your options, visit us today. Let’s make your car-buying experience as smooth as possible!