What is a Good Credit Score to Get a Car Loan?

What is a Good Credit Score to Get a Car Loan?

March 22, 2019    Bad Credit Car Finance

Your car buying experience will likely be determined by the strength of your credit score. Knowing what score you need to get approved can make it easier to purchase a new vehicle.


Why does credit score matter for a car loan?

Your credit score is three digit number that indicates your reliability as a borrower. In Canada, credit scores range from 900 (highest) to 300 (lowest). Most lenders will take your credit score into account when considering your application.

A low score makes it harder to get a car loan because you’re often seen as a riskier borrower.

Credit score also plays a role in how much interest you pay on a car loan. Customers with bad credit are usually charged more in interest than those with excellent credit. This interest rate penalty is insurance that the lender won’t lose money if you default on your car loan.


Average credit score needed to buy a car

The frustrating reality (or great news) is that there isn’t an agreed upon credit score cutoff for car loan approval. This means that you could apply for a loan through 10 lenders with the same credit score and get a different answer from each.

That said, most lenders are likely to approve financing for prime borrowers or someone with a credit score of 681 or higher. If your credit score is in this range you’re seen as a responsible borrower with a track record of repaying your debts on time.


These are Equifax Canada’s credit scoring categories:

Super Prime — 741+

Prime — 681-740

Near Prime — 621-681

Subprime — 541-620

Deep Subprime — 320-540


However, keep in mind that not every credit bureau uses the same credit scoring model or classification system. By the same token, different lenders rely on different bureaus and may place more or less importance on the credit score category you fall into.


Will I be able to get a car loan with a bad credit score?

If your credit score is lower than 681, don’t worry. There are many lenders out there that work with borrowers with credit scores below what is considered prime. You just have to prepare yourself for the some of the realities of shopping for a vehicle with a low credit score.


  • Be realistic: If you’re a subprime borrower you probably won’t be able to access a low interest rate. Take a look at your finances to see if you can still afford a car loan with higher interest.


  • Watch out for shady lenders:  Unfortunately, there are bad credit lenders out there that target folks with low scores and charge exorbitant rates. Read the online reviews and ask a lot of questions to find a reliable lender.
  • Prepare for denials – Don’t let your fear of getting denied stop you from filling out an application — you might be surprised what you qualify for.


Tips for improving your credit score before you shop

While it is possible to get approved for a car loan with virtually any credit score, the cons might outweigh the pros if your score falls in the subprime or deep subprime categories. Taking some time to improve your credit score and your borrowing habits can save you stress and money when shopping for a vehicle.


Here are some easy ways you can improve your credit score quickly:

  • Check your credit report;
  • Make your payments on time and in full;
  • Carry a low balance on your credit card;
  • Set up automatic bill payments; and
  • Use your credit more often (but responsibly).

Depending on your credit situation, you could see an improvement in your credit score within a few months to a year.


The connection between credit scores and car loan approvals

Your credit score can be a deciding factor in whether or not you get approved for a car loan. While the jury is out on the minimum credit score required for a car loan, most lenders will approve financing for prime borrowers or those with a credit score of 681 or higher.

You can still get approved for a car loan with a lower credit score, but you’ll end up paying higher interest rates.



At Birchwood Credit Solutions we look beyond your credit score when determining car loan approvals. Since we lend our own money through in-house financing we can approve bad credit car financing for those customers typically turned away by traditional lenders. Give us a call today to find out how we’re different.