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What's The Minimum Credit Score for a Car Loan in Canada?

What's The Minimum Credit Score for a Car Loan in Canada?

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Just about everyone in Canada needs a vehicle to lead a normal life. This country is vast, and the lack of adequate public transportation forces us to purchase our own vehicles. With both new and used car prices rising, you will need to secure financing, but there are a few items that you will need to address before you can drive home with a vehicle. Like your credit score. So, what's the minimum credit score for a car loan in Canada?


Understanding the Role Your Credit Score Has in Your Car Buying Options


The first thing we need to look at is what is the minimum credit score for a car loan in Canada.


The short answer to that question is “it depends” we are not trying to avoid the question, each lender sets its own respective car loan underwriting criteria, and it can vary.


Generally speaking, you need a credit score of at least 600 to qualify for a conventional car loan. By the way, we don't care what your credit score is, we'll get you approved for a car loan no matter what.


2021 Auto Loan Rates. Source: CarFinder


Anything under 600 and you are classified as sub-prime and would end up paying a considerably higher interest rate.


If you are not sure what your credit score is, you can gain free access to your credit report by signing up with TransUnion and Equifax.


These companies do provide paid services like identity theft protection, but for the sake of this conversation, you just need free access to your credit score and report.


Making sense of your credit report


You need to access your credit report with both agencies. TransUnion could have your score at 650, but Equifax could be reporting a score of 590!


Since each of these reporting agencies utilizations its own scoring model and gathers your financial data from different sources, you have to be on your toes.


If your credit score is low, you can improve it by following a few simple to understand guidelines.


  • Pay your debts on time, even if it is only the minimum amount due. Your payment history is the biggest influencer of your credit score, and even missing a single payment can wreak havoc on your score.
  • Reduce the total amount of debt you are carrying. This will save you money on costly interest over the long term. But lenders look at the total amount of debt you are carrying when determining the maximum car loan you can afford. Typically, the maximum amount of debt you can carry, factoring in the new car loan, is forty percent of your gross pre-tax income.


How credit score is calculated. Source: Canada Drives


By sticking with these suggestions, your credit score is going to improve in the next 60-90 days.


Where to get a car loan with weak credit today


If you are in a situation where you need a car loan today and cannot wait for your credit score to improve, you still have options available.


Your best course of action is to work with a dealership in your area that specializes in helping drivers with credit challenges.


This dealership will be able to find the lenders that are going to give you a good deal and get you behind the wheel of a new car today.


If you need help or advice on anything to do with auto loans contact Car Nation Canada today where there is no minimum credit score for a car loan, we can help!

Categories: Car News