What Credit Score is Required for Car Loan Approval?
10 April, 2025
Synopsis
Credit score is an important eligibility criterion along with your income, job stability, and financial stability for a Car Loan.
You require a minimum credit score of 730 to qualify.
You can reach the minimal credit score limit by making timely repayments, working on the credit utilisation ratio, avoiding multiple loan applications, monitoring your credit report, and diversifying your credit.
Buying a car has become a matter of convenience besides being a milestone for many. It sets you free from the hassle of commuting in public vehicles and lets you manage your travel time your way. You can also fast-track this purchase thanks to Car Loans. Getting a Car Loan is easy given you meet the eligibility criteria. Most lenders have differential requirements, but the common parameters include your age, income, employment history, car's value, and credit score. Among these requirements, credit score stands out as a significant component determining your eligibility. What is the ideal credit score for a Car Loan? Learn in this blog.
What is a Credit Score for Car Loan?
Before looking into the minimum credit score for a Car Loan, let us understand what it is and how it works. A credit score is a three-digit number that reflects your creditworthiness. Lenders get a snapshot of your credit history and repayment behaviour through this metric. They can assess the risk of lending based on your credit score.
Minimal Credit Score for a Car Loan
Most lenders require a minimum credit score of 730 or above to approve your Car Loan. With this score, lenders are assured of your credit reliability, and they gain confidence in approving you as a borrower. It improves your chances of getting a competitive rate. If your credit rating is lower than this, you may pose issues with Car Loan approval. In some cases, certain banks and financial institutions may approve Car Loan for low credit scores (typically in the 600-750 range). In such instances, you are required to excel in other eligibility parameters and may incur a higher interest rate and stringent loan terms.
How to Maintain the Required Credit Score for Car Loan?
If you are planning on applying for a Car Loan, it is a good idea to check your credit score and work towards improving it to meet the minimum criterion. Here are some of the ways to boost your credit score for Car Loan:
Make Timely Repayments
Make sure to always pay your credit card bills and equated monthly instalments on current loans on time. Such payment delays are the reason for a low credit score.
Work on Credit Utilisation Ratio
The credit utilisation ratio represents the total available credit to you. You want to keep this ratio low. You want to spend as much as you need as opposed to reaching the credit limit because it is available to you.
Avoid Multiple Loan Applications
As you come across multiple loan offers, submitting applications to multiple lenders may seem like a good idea to increase your chances of approval. However, this is counterintuitive and reflects poorly on your credit report. Hence, apply selectively only to the offers you are sure about.
Monitor Your Credit Report
Check your credit report for any inaccuracies or outdated information. If you find that to be the reason for a low credit score, you can dispute errors promptly to resolve the issue.
Diversify Your Credit
It is recommended to diversify your credit options and pay off small debts earlier to build a healthy credit history. You can maintain a mix of secured and unsecured debts.
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Getting a Car Loan with a Low Credit Score
If none of the strategies are working in fixing your low credit score for a Car Loan, you can try availing a Car Loan without a credit score or a low score. Here are some of the ways:
Negotiate with Loan Providers
You can get a Car Loan for a low credit score by negotiating with lenders. Some lenders may still be open to your application if you explain the reasons and provide your creditworthiness in other ways.
Increase the Down Payment
Lenders finance your car purchase up to a certain percentage and the rest is borne by you through a down payment. You can increase your contribution to reduce the borrowable amount. This may improve your chances of approval despite a credit score for Car Loan.
Opt for a Co-Signer
If you want to make up for your low credit score for a Car Loan approval, you can also opt for a co-signer for your loan. With their credit score into consideration as well, your profile is strengthened.
Improve Income Stability
Demonstrating a sufficient and stable income can help you compensate for a low credit score. So, if you can boost your income and showcase a stable job record, use that for pleading your case to the lender.
Fast-Track Your Car Ownership: Simplify Your Application with HDFC Bank
Owning your car is no longer out of reach with Car Loan. Meet the minimum credit score requirement, have a stable job, and a sufficient income, and you are good to go. If you don't meet the requirement for a credit score, you can still make it through. Just be patient and apply strategies. It may be a matter of trial and error but boosting your profile in other ways is the right approach. If you want to rid of the hassle and get adequate support as you try getting a Car Loan with a low credit score, consider HDFC Bank Xpress Loan. It is specially designed to fast-track your application with minimal hiccups, with support all the way!
Apply for Xpress Car Loan online
*Disclaimer: Terms and conditions apply. The information provided in this article is generic in nature and for informational purposes only. It is not a substitute for specific advice in your own circumstances. Credit at sole discretion of HDFC Bank Ltd. Other charges and taxes as applicable. The offer is unconditionally cancelable without prior notice. Interest rates are subject to change. Please check with your RM or closest bank branch for current interest rates.
