Download CRED
CREDcredit scorearticles
how good credit score can be helpful in buying a car?

how good credit score can be helpful in buying a car?

a good credit score can help you avail a better deal on your car loan and the same is true when someone is looking to avail financing in order to buy a second hand car.
March 22, 2021
6 min read
share facebookshare twittershare linkedinshare whatsapp
how good credit score can be helpful in buying a car

How Good Credit Score Can Be Helpful in Buying a Car

share facebookshare twittershare linkedin

there is no accepted industry-wise benchmark fixed for a good credit score for a car loan. lenders may have different parameters for what they require as a minimum score for car loan approval. generally, a score of 750 and above is accepted as a good score, while a score lower than 600 could reduce the chances of getting a loan sanctioned.

apart from that, what role does your credit rating play in getting approval for a car loan? read on to understand the importance of being credit healthy?

a good credit rating can help you in buying a car in the following ways:

secure your financial health. check your latest credit score.
Check now

1. loan approval

the credit score is not the only factor when it comes to loan approval. many aspects impact your loan eligibility and approval. use a car loan eligibility calculator to find out if you fulfill the eligibility criteria laid down by the lender for getting a car loan. a credit score is an indicator of your creditworthiness; a good rating will help hassle-free and quick loan approval. those between 600 and 750 might face some challenges in loan approval, depending on a host of other factors.

2. interest rate

credit rating also impacts the car loan interest rate. a high rating indicates that you are creditworthy and pose a lower risk of default for the lender. lenders charge interest for the risk they undertake when extending a loan and for the opportunity cost of using the funds. a good rating means lesser risk, which means you can avail of a loan at a lower interest rate than someone with a lower rating.

3. loan amount

when you buy a car, you need to make a down payment; the remaining amount can be availed as a loan. a low rating will reduce the amount of loan you can get, and as a result, you will have to shell out more from your pocket. if you have to pay more as a down payment, then either you will have to dip into your savings or postpone your plans of buying a car till you can save enough for the down payment. applicants with a healthy score are preferred over those with lower scores; banks or nbfcs are likely to offer them bigger loans. a car loan calculator can help you calculate the loan amount for which you are eligible.

4. wider choice of lenders

a low credit score limits your options when it comes to lenders. few banks are willing to extend a loan to those with low credit ratings. a good score ensures that you have more choice and can approach a lender who offers you the most favourable terms like low processing fees, longer tenures, higher ltv ratio and competitive interest rates.


when you do your homework before taking a loan, remember to focus on the fine print, your requirements and your repayment capacity. compare products offered by lenders on various parameters and use a car loan emi calculator to calculate your monthly outflow. being sure of your emis helps you in better financial planning and staying in good credit health.