Are you considering buying a car with a car loan in Canada? If you are, then you should start thinking of the minimum credit score for car loans Canada accepts. Banks, for instance, will never process your loan request when you have a negative credit score.
You should start working towards a positive credit score of above 630 to secure a car through a car loan quickly. While there may be no minimum credit score for a car loan today, you’ll still need to have a higher score for better loan options and terms.
So, what credit score is needed for a car in Canada? Let’s find out in this guide.
What Credit Score is Needed for a Car in Canada?
While the credit score range for a car loan will differ with different financiers, you won’t wish to have a score lagging below the bare minimum.
The Acceptable Credit Scores
Canada’s credit score ranges from 300 to 900 points depending on the financial institution offering the loan. A rating above 650 is an excellent score to have and will probably earn you a car loan with ease.
A credit score ranging from 560 to 660 is considered a fair rating. With that rating, you may experience some challenges when trying to secure a loan with financial institutions.
In general, if your credit score is below 630, you are potentially going to have trouble securing a car loan in Canada.
There is hope with Credit Scores Lower than 600
All hope is not lost when your score is below 600 or is staggering just above 300. Many lenders are willing to help you secure a car, even with the small scores in an instant. The lenders will connect you with the right dealerships when you come knocking.
Essentially, it is upon you to look at the right places to find these lenders. They will use other chances available to build trust and offer the loan you need. You may have to part with a deposit and bring a family member as a co-signer to boost trust and increase your chances of securing the loan.
What Next After Securing a Car Loan
Whether you secure a car loan with a credit score below 600 or almost 900, you still need to work for better scores. Here are some of the things to do
Work on Building Credit
Securing your first car loan is a great success. But after that comes the responsibility of making prompt payments to help you build your credit scores, mostly if the scores were initially lower. Your credit score will grow faster and increase your loan limits.
If you maintain prompt, full payments on time, you attract better scores by 35 percent. That means you should take a loan that falls within your budget to avoid failing to meet deadlines and further dropping your credit scores.
You also need to consider additional costs, such as insurance, before applying for the loan. Firms like Surex can help you get cheap and reliable insurance services in Calgary and other Canadian cities. That will help you save a lot on insurance.
Within 30 days of prompt payments of your loan, you will start seeing a progression in your credit score. The more you keep up with good payments, the faster you climb the ladder and become more qualified for better loan terms.
Refinance Your Car Loan
Another noble thing to do after securing your first car loan is to try to refinance it to get better terms of the contract. You will essentially be buying your car all over again, but this time with a better credit score than you first secured it.
This time the lender will assess your car’s eligibility for financing, and if they approve it, they will provide you with a new financing contract for the amount you still owe them. This process comes with various goodies such as:
- Lower interest loans
- Lower monthly payments
- A reduced overall cost of the entire loan
If you have other loans, you can use the savings you have secured from the refinancing deal to settle them. All these help you to continue building your credit scores for better loan terms in the future.
How to Check your New credit Score in Canada
After working diligently to improve your credit scores, the first thing you want to do is to check what your credit score looks like. In Canada, you will have to do so either by phone or mail. Have a look.
Requesting Your Credit Score and Report
You will have to part with about $10 if you need to check your credit scores from one of the major credit bureaus. Getting a credit report is free, but you need to pay for the credit score if you are looking for a car loan.
For the phone option, the numbers to use are: 1-800-465-7166 Equifax number and 1-800-663-9980 / 1-877-713-3393 TransUnion number. With the email option, you will have to request the following forms:
- The Equifax credit report request form
- The TransUnion credit report request form
When you download and print one of these forms and fill them, you will get all the information you need on your credit report and scores. You can present these copies with the photocopies of your identification documents’ front and back to your dealership.
Mistakes with Credit Score Reports
You may expect some errors with your credit reports that are associated with the resemblance of personal data. If you share similar names or social security numbers with someone, you may mix with your credit score results.
There is a high possibility that the information may get switched or confused in the report’s compilation. To avoid such mistakes affecting your score negatively, you should ensure you regularly check your account to ensure everything is okay.
Final Words
If you have a low credit score, you might be wondering, “Will I get approved for a car loan?” Now that you know you can get a loan with a low credit score, you have little to worry about the minimum credit score for car loan Canada will ask. However, that doesn’t mean you shouldn’t work hard to improve your credit score.
