When you are gearing up to buy a new vehicle, understanding the role of your credit score for Car Loan approval is paramount. This three-digit number doesn't just influence your loan eligibility; it forms the basis for the kind of car loan terms and interest rates you're offered. Timely loan repayments can enhance your credit profile, while missed payments can cause a significant dip.
Determine the credit score for a Car Loan
A credit score is an important factor that banks use to assess your creditworthiness before approving any loan, including a Car Loan. The higher your score, the better your chances of getting your loan approved.
In India, credit scores are typically provided by credit bureaus and range from 300 (indicating poor creditworthiness) to 900 (indicating excellent creditworthiness). For obtaining a Car Loan, banks look at a credit score of 750 or higher to consider you for one. A score below 650 is often deemed insufficient for loan approval.
This score is derived from your payment history across all forms of credit, including other loans and Credit Cards, emphasising the importance of maintaining a good credit record. Understanding how much credit score required for Car Loan can guide you in managing your finances to meet or exceed the threshold necessary for favourable loan terms.
Steps to increase your credit score for Car Loan
1. Review your credit reports: Start by obtaining a free copy of your credit reports from credit bureaus. Look for any errors or discrepancies that might be pulling your score down and dispute them if necessary.
2. Pay down existing debt: Your credit utilisation ratio — how much credit you're using compared to your limits—significantly impacts your score. Pay your Credit Card bills and other outstanding debts to improve this ratio.
3. Ensure timely payments: Your payment history is a critical component of your credit score. Set up reminders or automate your payments to ensure you never miss a due date.
4. Avoid new credit inquiries: When you apply for a new loan, it can lead to a hard inquiry on your report, which might temporarily lower your score. If you're preparing to apply for a Car Loan, avoid applying for new other loans.
Also Read:What is the minimum CIBIL Score required for a Car Loan?
Conclusion
Improving your credit score for a Car Loan is a powerful strategy to secure better financial terms and reduce the overall cost of purchasing a vehicle. By following the steps to increase credit score for Car Loan, you can enhance your financial health and drive away with a better deal.
As you rev up to make your purchase, consider Axis Bank's Car Loans to fuel your ambitions. With options starting from ₹1 lakh and the flexibility of up to 100% on-road funding for new cars, Axis Bank ensures that your Car loan is tailored to your needs. For a used Car Loan, get financing up to 95% of the valuation amount, making pre-owned cars more accessible. And if you're already an Axis customer, take advantage of pre-approved loans for a swift transaction.
Disclaimer: This article is for information purpose only. The views expressed in this article are personal and do not necessarily constitute the views of Axis Bank Ltd. and its employees. Axis Bank Ltd. and/or the author shall not be responsible for any direct / indirect loss or liability incurred by the reader for taking any financial decisions based on the contents and information. Please consult your financial advisor before making any financial decision.
