Minimum credit score to get a car loan: Key factors to know for quick loan approval

Have you set your sights on a brand-new car but find yourself questioning whether your credit score will influence your loan approval? You're not alone in this dilemma. Your credit score is a key determinant in securing a car loan. A clear understanding of the credit score required for a car loan can help you in choosing the most suitable offer.

By familiarising yourself with the minimum credit score needed for car financing, you can navigate the loan application process with greater confidence and clarity.

The importance of your credit score

Your credit score for car loan applications reflects your creditworthiness, summarising how well you've managed credit cards and loans in the past. A strong credit score can not only increase your chances of securing a loan but also improve the terms of that loan. For most lenders, a credit score of 750 and above is considered favourable to obtain a car loan. However, with a credit score of 600 and above you may still get some offers depending on the lender's policies.

In India, credit scores range from 300 to 900, with a score of 300 indicating poor creditworthiness and a score of 900 reflecting excellent creditworthiness.

You can easily check your credit score for free and apply for a new loan on digital lending platforms like Moneycontrol. You just need to login to the Moneycontrol app and website to check the credit score. The users can also apply for loans up to Rs 15 lakhs on the Moneycontrol app and website in a 100% paperless process. The loans start at as low as 12% per annum.

Minimum credit score to get a car loan in India

For most lenders in India, the minimum credit score required for a car loan is around the 750-mark. A score above this threshold indicates to lenders that you have a history of responsible credit behaviour. Achieving this score increases your likelihood of not only securing a car loan but also obtaining favourable loan terms.

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How does my credit score affect car loan approval?

When you apply for a car loan, your credit score is the first thing lenders evaluate. It acts as your financial report card, indicating how responsible you've been with credit.

Here's how your credit score can impact your car loan journey:

• Loan approval: A high credit score (750 and above) makes lenders more inclined to approve your car loan application. In contrast, with a lower score, you might still receive a loan, but it could come with higher interest rates.


• Interest rates: The interest rate you are offered is directly influenced by your credit score. A better score usually leads to a lower interest rate. A lower score, in contrast, could result in higher interest rates.


• Loan terms: Borrowers with excellent credit score may be eligible for better loan conditions from lenders, such as longer repayment periods. This can make your monthly payments more manageable and give you added flexibility in your budget.


• Down payment: You may be able to secure a car loan with a lower down payment if your credit score is high.


• Loan amount: Your credit score can also influence the maximum loan amount you're eligible for. A higher score may qualify you for a larger loan, enabling you to buy a more expensive vehicle.

ALSO READ: Can you get a loan with a low credit score? Here’s what you should not miss

How a higher credit score can help for a car loan

If you're keen on speeding up your car loan application process, it’s important to know that a higher credit score can be hugely beneficial. Here’s how:

• Speedy processing: Lenders often prioritise applicants with strong credit history. With a high credit score, your application is likely to move to the front of the queue, giving you a better chance at the loan approval.


• Streamlined verification: A strong credit score shows responsible financial behaviour. Lenders are more likely to trust you, leading to quicker verifications and fewer hurdles to clear before you receive your loan.


• Reduced documentation: Lenders may require less documentation from applicants with high credit scores, making the approval process even faster and more efficient.


• Expedited disbursement: Once your loan is approved, having a stellar credit score often means that the funds are released faster, allowing you to take ownership of your dream car sooner than expected.

Steps to improve your credit score

It just needs a few simple steps and financial discipline to improve your credit score. Check these tips:

• Check credit report: Start by reviewing your credit report regularly. Check for mistakes or inconsistencies that can be lowering your score. Correcting these issues can provide an instant boost to your score.


• Make on-time bill payments: A higher credit score for car loans is also dependent on timely bill payments. To make sure you never miss a deadline, set up automated payments or reminders.


• Lower credit card balances: Your credit score may suffer if your credit card balance amount is too high relative to your credit limit. To raise your credit score, try to maintain your credit utilisation for each card under 30%.


• Avoid closing old accounts: Your credit history is important. As such, try to keep old credit card accounts open, even if you aren’t using the old credit card. Your overall credit score is positively impacted by these accounts.


• Diversify credit types: Having a mix of credit types, such as credit cards, instalment loans, and mortgages, can show your ability to manage various financial responsibilities effectively.


• Limit new credit applications: Each time you apply for credit, it can slightly reduce your score. Limit new credit applications, particularly when you're planning to apply for a car loan, to maintain a healthy score.

Overall, understanding credit score requirements for car loans is important for buying your dream vehicle. A poor credit score can impede your ability to secure financing, while a solid score can significantly enhance your chances of approval. To keep yourself on the right path, regularly conduct a credit score check for errors, pay your bills punctually and reduce credit card balances.

On Moneycontrol, you can avail multi-purpose personal loans up to Rs.15 Lakhs through a 100% digital process. Interest rates start at 12% per annum and you can avail the best offers from top lenders in the industry.