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What credit score do I need to get a car loan
Can you get a car loan with an average credit rating? What does an average credit rating even mean? Is it better than fair or good? You’d be surprised to find out how your credit score is actually viewed by lenders when applying for a car loan.
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How your credit score affects your car loan
Credit scores are split into five ranges, from low to excellent. Each of the three main credit rating agencies in Australia uses slightly different ranges for credit scores, so we’ll break each of them down below for you.
| Credit score | Experian | Equifax | Credit Simple |
|---|---|---|---|
Excellent | 800-1000 | 833-1,200 | 800-1000 |
Very good | 700-799 | 726-832 | 700-799 |
Average | 500-699 | 622-755 | 625-699 |
Fair | 300-499 | 510-621 | 550-624 |
Low | 0-299 | 0-509 | 0-549 |
Excellent Credit Rating Car Loan
Getting a car loan with an excellent credit rating is the optimal choice. With an excellent credit rating, lenders will generally give you full access to credit, allowing you to borrow more for your car loan and dictate the terms that suit you best.
In this category, you’re a prime borrower and lenders will compete for your application because it’s almost guaranteed that you’ll repay the amount without any issue. An excellent credit rating car loan will usually come with the best interest rates and most-favourable loan terms.
You may even be able to ask for discounted fees or negotiate better interest rates with your current lender - so if you’re even close to getting up to the excellent credit score tier, make it a priority before you apply for a car loan.
Very Good Credit Rating Car Loan
Provided you are able to make repayments you should be able to secure a car loan easily with a very good credit score.
You may not get rates as good as those with an excellent credit score, but you’ll still get great access to a wide number of car loan options and individual lenders.
A very good credit rating car loan is by no means bad - the difference between excellent and very good credit car loans will be minimal, but that doesn’t mean you can’t improve your credit score before applying to ensure you get a better deal than is currently available.
Average Credit Rating Car Loan
An average credit rating car loan may come with higher rates and stricter terms than very good and excellent scores, but you’ll still have access to a decent number of competitive car loans from a good pool of lenders.
While it’s still possible - and relatively easy - to find a car loan with an average credit rating, it’s certainly not going to be the best deal you can find, especially if you were to take the time to improve your credit rating before applying.
Average credit rating car loans is where the balance of ‘risk’ begins to sway - if you aren’t providing lenders with additional positive financial activity or collateral, you can expect to see fees getting higher along with interest rate charges if you choose to apply at the credit rating level.
Fair Credit Rating Car Loan
A fair credit score may affect your ability to secure finance. We’re not quite yet at the lowest rating for a car loan (and there’s still good news!) but a fair credit rating car loan is definitely not the best offer you’ll get.
Lenders may offer you higher interest rates and look very closely at your finances to ensure you have the ability to make repayments. At this level, you’ll need to put much more attention to your application and supporting documents.
The very last thing you want here is to have made progress in improving your credit score and to find yourself knocked back by a hard credit check and a declined application.
Low Credit Rating Car Loan
A low credit rating car loan isn’t where you want to be. Sure, it’s still possible to get a car loan, and if this is your only option then you’ll simply have to take more time to compare car loans, and lenders, and seek financial advice to ensure your car loan application is as strong as it can be.
Low credit ratings indicate to lenders that you have bankruptcies, defaults or other negative events in your credit history. In short, you’ll have to do a lot of work to convince a lender that you’re not a high-risk borrower.
Traditional lenders may deny your applications for finance or charge you higher interest rates, and in some instances, you may require a guarantor on your loan before you can get approval.
You may need to consider a lender that specialises in bad credit car loans and will work with you to improve your credit rating with that car loan.
How can you check your score?
You can check your credit score for free and without any impact on your credit score with Money Matchmaker ®.
You'll need to create an account with these details:
- Full legal name
- Driver Licence number
- Residential address
- Date of birth
Your score won't be negatively affected and we protect your data with encryptions.
Ways to improve your credit score
If you find yourself with a below-average score, never fear, there are ways to improve it. Things to do to get your number higher are:
- Pay credit card balances strategically
- Stop applying for credit
- Meet your loan repayments on time
- Speak with your bank
- Schedule your utility payments
- Don’t use one type of credit
We all have slip-ups from time to time and money can get tight. To avoid your credit score dropping you should try to avoid negative financial events like late payments and defaults.
Consistency is key - aim for progress and not perfection and you’ll find both your credit rating and your car loan options improving over time.
A key to a good credit score is to monitor what is going on and report any problems when you see them. You can do this with the help of Money Matchmaker® for free.
Written by
Loans Expert
Shaun McGowan
Reviewed by
