Few people can manage without a vehicle these days. Whether it’s a car, truck, or van, a vehicle is a large purchase, and most people want to get a loan rather than pay cash. A good credit score is a huge benefit if you want to finance a vehicle in Canada.

But what is a good credit score? And how does your credit score affect your chances of getting approved for a loan? This article will discuss everything you need to know about auto loans and credit scores in Canada.

What is a Credit Score, and Why is it Important?

Your credit score is a three-digit number that lenders use to decide whether to offer you a loan and the interest rate to charge. The range of scores is between 300 and 900. A high score means you’re a low-risk borrower, which could lead to a loan with favorable terms.

These include easier approval, lower requirement for cash down payment, and lower interest rates, sometimes substantially lower. Even a few percent difference can save you a lot of money over the life of the loan.

A good to excellent credit score tells the lender that you will always make your payment on time. This trust is what makes the difference.

Lower rates and favorable terms are the incentives for you to get your loan through that company. They want the business of people they view as low risk.

Borrowers with low credit scores will likely only qualify for a subprime loan. You’ll pay a higher interest rate on this type of loan. At least 20% of Canadians fall into this category. Most can still get loans, but they may have to settle for a slightly less expensive car to compensate for the high interest.

How Your Credit Score is Calculated

A credit score is calculated based on your credit history. This is the record of how you’ve handled borrowing and repayment in the past. The credit bureaus consider the information in your credit report to generate your credit score.

If you have been timely in paying bills in the past, your score will likely be in the good to excellent range. A late payment that occurred sometime in the past shouldn’t hurt your score significantly, but a habit of missing payments or bankruptcy does a great deal of damage. In addition, this information will stay on your record for at least six years.

If you have had some trouble in the past, don’t worry, though. There are ways to rebuild your credit discussed below.

Other Ways a Good Credit Score Can Help

There are many other benefits to maintaining a high credit score.

A good credit score might also help you get a better car insurance policy. Many insurers use credit scores to help them decide how much to charge for premiums. The higher your credit score, the lower your premium will be.

A good credit score may even help you get a job. Many employers now check applicants’ credit scores as part of the hiring process. This is because they believe people with high credit scores are more responsible and dependable employees.

What’s the Minimum Score to Get Approved in Canada?

You’re probably wondering what the minimum score is to get approved. The answer is that there is no set minimum score, but most lenders like to see a score of at least 650. Generally, 630 or below comes into the subprime range, where available loans have higher rates.

Rates are, to some degree, relative. Often banks have more stringent rules, while alternative lenders may be much more flexible. So if one potential lender turns you down, don’t give up. Also, if you’re in this situation, begin repairing your credit as soon as possible.

Improving Your Credit Score for Easier Approval and Better Rates

There are many things you can do to improve your credit score. Some simple steps include paying down debt, limiting unsecured credit, and always paying your bills on time.

Check your credit report for mistakes or possible fraud. If you find any inaccuracies, report them and get them corrected.

A secured credit card is a simple way to establish good credit. This type of card is like any other, except you must put up some money as collateral to ensure you make the payments. Then you would use it to make small purchases each month and pay the card off in full and on time. In six to twelve months, you will have established a good record of payments which should raise your score.

Finding the Best Lender for Your Next Car

Rates and loan terms vary widely, so your goal is to find the best lender to finance your purchase. There are several things to consider, such as interest rates, loan terms, and down payment requirements. Here are a few tips to help you find the best lender for your next car.

Some lenders may offer pre-approved loans, saving you time in the application process. You may even find 100% financing options, which means no down payment.

Also, some lenders are more open to negotiating rates than others. You can bargain with them to a degree, so don’t hesitate to ask.

Let Us Help You Find the Best Loan

Many savvy Canadians prefer to let the experts at Consumer Auto help them find the best loan for their vehicles. We specialize in matching people who need a car with the best loan available, regardless of credit history.

Fill out the form below, and we’ll work with you. We work with a vast network of dealers and lenders across Canada and may find you a better deal than you’d find yourself. Of course, we’ll also do our best to help you qualify.

Why go it alone? Fill out the easy application, and we’ll be in touch shortly to get you started.

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