Until you go to apply for credit, you really do not realize just how many things your credit score influences.
From credit cards to mortgages and loans to car finance agreements, there really is so much that you will need a good credit score for. And that is why your credit score is so important.
If you are thinking of purchasing a new car, and do not have the cash to pay for your new vehicle up front, then your credit score will impact whether or not you can purchase that vehicle. So do I need a high credit score to buy a car?
Well, that’s a good question! In this guide, we’ll be taking a look at what credit score is needed to buy a car. So keep on reading to find out more!
Why Do You Need A Good Credit Score To Buy A Car?
So first things first, let’s take a look at why a good credit score is needed to buy a car. Well, the first thing to note is that you do not need a good credit score to buy a car.
If you have the cash to pay for your vehicle, then your credit score will not impact your ability to buy a car. However, if you are purchasing a car with credit, your credit score will influence the terms.
The reason why you will need a good credit score to buy a car is simple, and that is because when you purchase a car on finance, you are essentially buying a car using a loan.
You do not have the money to pay for the car, so a finance company purchases the car for you, and then you repay the debt for that car.
When you set up a finance agreement for a car, you will have pre-set terms to the credit agreement. This will include the amount that you will repay each month and how long it will take to pay off that loan.
Before you are granted a finance agreement for your vehicle, your credit score will be checked to see your creditworthiness. This is why you need a credit score to buy a car, so let’s take a look at what credit score is needed.
What Credit Score Is Needed To Buy A Car?
In order to purchase a car on a finance agreement, you will need to have a fairly decent credit score. Cars are not cheap, so the “loan” that you are taking out to purchase the car will likely be fairly high.
In order for credit agencies to be happy to offer finance agreements to individuals, they have to be confident that the individual will repay the money. So, most agencies will expect individuals to have a minimum credit score.
The specific credit score that credit agents ask for will depend on who you are taking the finance agreement out with.
However, generally speaking, most agencies will ask for a minimum credit score of 661 in order to qualify for a finance agreement. So, a score of 661 or higher is needed to buy a car.
If you have a credit score that is higher than this, then you will typically be auto-granted a loan by the credit agency. If your credit score is lower than this, then you likely will not be auto-approved.
However, if your credit score is close to the credit score that the agency requires, then you may be approved if you shop around for a finance agreement.
Is It Possible To Buy A Car With Bad Credit?
So, most credit agencies will require you to have a credit score that is either 661 or higher in order to buy a car with a finance agreement. However, 661 is actually a fairly high credit score, so you may have a credit score lower than this.
With Experian credit scores, 661 is high in the “fair” category, so you may have a lower credit score as many people fall into the fair category.
If you have a poor credit score, you might be wondering if it is still possible to buy a car, so, is it? Well, yes, of course, it is. If you have the cash to purchase a car, then your credit score will not matter.
Even if you need to apply for a credit agreement to purchase your car, then it might still be possible to buy a car with bad credit. It will just depend on whether or not you buy within your means.
Many different credit agencies offer finance agreements for the purchase of vehicles, so you have a fairly good chance of buying a car, even if you have bad credit. But it will depend on your personal circumstances.
Ways To Quickly Improve Your Credit Score
If your credit score is close to the parameters required to buy a car, but a little low, then you may be looking for ways to improve your credit score quickly.
While the best way to improve your credit score is over a prolonged period, there are some ways to improve your credit score quickly, so let’s take a look at what they are.
One of the easiest ways to quickly improve your credit score is to expand your available credit.
You can do this by applying for additional credit cards. You can also improve your credit score by paying off your loans and ensuring that you always pay your repayments on time.
Summary
If you are looking to apply for a finance agreement to purchase a new car, you will be aware that your credit score will influence this process.
Credit agencies want to be able to trust you to repay the money they are lending you, and your credit score allows you to look at their creditworthiness.
This is why most credit agencies require a score of 661 or more when it comes to car finance agreements.
Thanks for reading!
As a current Mortgage Underwriter with 15 years of experience, I have seen my fair share of money-related issues. Whether that be high levels of debt, not enough credit, or simply a lack of funds - I’ve had clients who fit into these categories.
Here I will share tips, tricks, and experiences on how you can get yourself back in control of your finances.
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