How to Improve Your Credit Score for Better Car Loan Rates
Posted on April 24, 2024
Considering getting a car loan? Having a good credit score is the secret sauce to getting sweet deals with low-interest rates and awesome loan terms, that will surely save you money. So, if you have poor credit score don't worry, this blog post will help you.
There's no set minimum credit score needed for a car loan nowadays. But if your credit score is poor, your options may be limited. Before you go ahead and buy that new or used car in the GTA, it's a smart idea to give your credit score a once-over.
In this post, we'll talk about some practical ways to boost your credit score before you dive into applying for that car loan.
What Credit Score is Needed for a Car Loan?
In Canada, credit scores go from 300 to 900. If yours is over 660, you're in the "good" to "excellent" zone. With a score like that, getting a car loan from any dealership is usually a piece of cake.
What Is a Good Credit Score in Canada?
Your credit score falls between 300 and 900, and the higher, the better. So, imagine a score between 750 and 799 – about 27% of people land in this range, and only around 2% might end up defaulting on loans. ans.
A score below 650 may make it difficult to obtain new credit, although a minimum of 680 is sometimes necessary for the best mortgage rates. The actual formula to calculate points is unknown, although paying payments on time is essential.
Can I Get a Car Loan with a Credit Score Under 600?
Yes, you can. You don't need a certain credit score; but you do need to know how to find banks that are willing to provide that loan. CarHub can help. We have an immense lender network and specialize in helping customers with low credit scores.
While it is not required, putting money down early might boost your chances of approval. This reduces the amount you need to borrow. Having a family member or friend co-sign your loan could boost your chances of getting approved because it makes things less risky for the lender.
Factors That Can Affect the Calculation of Your Credit Score for Car Loan in Canada
Your credit score, that crucial number that tells you how you're doing money-wise, depends on a couple of key things. Let's break them down:
- Payment History: Making sure you pay your bills on time is a solid trick to pump up your credit score. It's a big chunk—like around 35%—of what makes up your overall score.
- Outstanding Debt: Having balances above 50% of your credit limits hurts your credit. Try to keep balances under 35%. This factor makes up about 30% of your credit score.
- Length of Credit History & Public Records: Having a long credit history makes you less risky to lenders. Think carefully before closing old accounts.
- Recent Inquiries: When a lender checks your credit, it generates a hard inquiry on your credit report. Consider applying for new credit carefully.
How Do I Improve My Credit Score for Car Loan?
To improve your credit score after a mistake like a collection or charge-off, focus on adding good info to your credit report. Here are a few easy tips:
- Keep paying your active credit cards or loans on time. Even accounts not reported to credit bureaus count.
- Start a new "trade line" to rebuild credit. You'll need to get new credit to begin the process.
- Consider an auto loan to give your credit a solid boost. It's one of the best ways to improve your score.
- An approved car loan from a reputable lender or financial institution demonstrates your good credit behavior.
Just keep in mind that beefing up your credit score doesn't happen overnight—it's a journey that needs some patience, but don't sweat it, these steps can help you get back on the right path and taking steps to improve it can start to make a difference fairly soon
How A Car Loan Helps You Build Credit
Want to raise your credit score fast? Getting a car loan can help. Just make sure to pay on time and in full. Your payment history counts for about 35% of your score. Stick to your budget and watch your score climb in as little as 30 days.
Consider Refinancing Your Car Loan Later
After you've improved your credit score, try refinancing your auto loan. It's like purchasing a vehicle again without haggling over the price. The lender checks if your car qualifies for a new loan.
If approved, you get a new contract. With a higher credit score, you may be able to get a lower interest rate, which saves you money over time. You may even extend the loan period to lower monthly costs. Use the funds to pay off other bills and enhance your credit score.
Applying for a New Car Loan? Talk to One of Our Experts Today!
Improving your credit score might result in better car loan prices and terms. By following the tips provided in this guide, you may save money and set yourself to success with your next loan.
Got less-than-perfect credit? No worries! CarHub is here to help you secure approval for your next car loan. We'll connect you with top-notch cars, and auto financing offers right in your area. Contact us now.