The minimum credit score needed for a car in Canada will vary by lender. Traditional lenders (like banks and credit unions) tend to have a credit score requirement starting at 600 or 650, while online car loan providers typically have a minimum credit score requirement between 300 to 580.
Even if you have the lowest possible credit score, there are still lenders willing to offer financing, although your loan’s interest rate will be higher. Your credit score is just one of several factors car loan providers use to decide whether or not to approve you for financing to buy a car and what kind of loan terms you can qualify for.
Minimum credit scores needed for car loans in Canada
Below is a breakdown of the minimum credit score requirements to buy a car from different Canadian car loan lenders.
How minimum credit scores for car loans in Canada work
Any score above 650 is considered to be good or excellent credit, and is generally accepted by most car loan providers as the minimum credit score needed for a car. As your score dips below 650 or 600, you may find you need to pay higher interest rates or have a harder time qualifying for auto financing to buy a car.
You can apply for your credit score by filling out an application with one of Canada’s two major credit bureaus, Equifax or TransUnion, or from other companies online. The graphic below outlines the different tiers that the credit score needed for a car loan could fall into.
What is a good credit score in Canada?
A good credit score in Canada ranges between 660 up to 724. In general, credit scores can fall between 300 at the lowest and 900 at the most. Your credit score will differ slightly depending on the bureau, which means your Equifax score will probably be slightly different from your TransUnion credit score. While not set in stone, the general credit tiers are:
Why is my credit score important to car loan lenders?
Your credit score helps your lender determine how likely you are to pay back your car loan on time. Their assessment of your credit score to buy a car affects whether you can qualify for financing and how much interest you’ll pay. Learn more about what interest rates you might have to pay based on what credit score is needed for a car loan in the table below.
Likelihood of car loan approval by credit score
Eligibility for loans
Approximate interest rates
You may have trouble qualifying for a car loan from traditional lenders if your credit score is below 500. If you do manage to get approved, you’ll likely have to pay very high interest rates
20% to 47%.
500 – 660
Having a poor to fair credit score indicates to lenders that you’re more likely to default on your loan. You should be able to qualify with scores in this range, but you’ll pay higher interest rates.
10% to 35%
A score of 660 is usually the credit score needed for a car loan. This score should get you approved for most types of financing with lower interest rates.
0% to 10%
How does your credit affect your access to car loans?
Your credit score affects 2 different elements of your car loan application:
Your ability to get approved. Your credit score will determine whether you qualify for a loan to buy a car. Most lenders will have a minimum credit score for a car loan in Canada that they’ll require you to meet in order to qualify for financing.
The interest rates you’ll pay. You’ll generally get much lower interest rates if your credit score for a car loan sits above 660. You’ll pay higher rates if your score sits below 660 unless you sign up with a cosigner or use an asset to secure your payments.
Can I get a car loan with bad credit?
Yes, you can qualify for a car loan with bad credit, although it will depend on which lender you go with. Some car loan lenders in Canada have minimum credit score cutoffs as low as 300. That said, it’s likely that you’ll have difficulty getting approved for a bad credit car loan from banks and credit unions. Your best bet to qualify for financing with a low credit score is by applying with a lender that specializes in bad credit car loans, which is usually an online lender.
If you’re worried you may not have the minimum credit score needed for a car loan, the following options can help increase your chances of approval:
Secure your loan with an asset. You may be able to get financing if you use an asset such as your home, jewellery or a vehicle you’ve paid off to secure your repayments. This should bring your interest rates down and help you get approved.
Get a cosigner. It may be possible to get a friend or family member with good credit to cosign your car loan with you. Just be aware that the person you ask will be on the hook to make your repayments if you default on your loan.
Apply for a bad credit car loan. Some lenders specialize in offering bad credit car loans to people who can’t meet the eligibility requirements for traditional loans. However, these loans often require you to pay incredibly high interest rates (above 15%) to qualify.
If you’re concerned you may not have the credit score needed for car financing based on the minimum requirements in Canada, you’re not stuck. There are strategies you can use to boost your credit score ahead of applying. These tips can help you qualify for lower rates and get approved for your next car loan:
Make payments on time. Pay your bills on time to avoid late fees and bad marks on your credit report. Any late payments you make will drag down your score.
Mix up your credit types. Take out a variety of credit types if possible (such as credit cards, mortgages and loans) to diversify your debt portfolio.
Try not to apply for too much credit. Avoid applying for too much credit since doing so will result in hard inquiries on your file (which can lower your credit score).
Avoid new debt. Avoid taking out new loans or credit cards wherever possible since these debts are seen as “immature” and can bring down your credit score.
Correct errors in your credit report. Correct mistakes or errors on your credit report with one of Canada’s major credit bureaus to make sure you get the right score.
Consolidate debt.Consolidate your debt into one easy payment to qualify for lower rates and make sure you have a good handle on the money you owe.
Other factors that affect your car loan application
Having the perfect credit score needed for a car loan won’t guarantee that you get approved for financing. Lenders will also want to assess these other factors:
Income. Lenders will want to see that you regularly bring in enough money to afford repaying your car loan. Typical income requirements for car loans in Canada can range from $1,500 to $3,300 per month.
Employment. Employment requirements vary among lenders, but some will want to see full-time employment, while others accept part-time or self-employed applicants who can meet the minimum income requirements.
Assets, debts and expenses. You’ll have to list all of your assets, debts and expenses. Lenders use that information to calculate your debt-to-income ratio (DTI). The lower your DTI, the better.
What is a debt-to-income ratio?
Debt-to-income ratio (DTI) is a number that summarizes how much debt you pay per month compared to your gross monthly income. It helps lenders see how well you can manage repaying all of your debt. Borrowers with a debt-to-income ratio over 43% are generally considered to be going through a financial hardship, while an excellent debt-to-income ratio is about 20% or lower.
Let’s say you have a total of $1,000 in bills each month and your gross monthly take home pay is $3,000 – your debt-to-income ratio is 30%. With a 30% debt-to-income ratio you would appear as a relatively responsible borrower. Calculate your DTI.
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Does financing a car build credit?
Yes, financing a car can help you build credit over the long run as long as you consistently make your payments on time. Credit bureaus tend to attribute around 35% of your credit score to your payment history, so making on time car loan payments could definitely help build up your score.
Your credit score could take a small dip when you first apply for a car loan, since the lender will likely do a hard credit check during the approval process. Fortunately, credit inquiries only account for around 10% of your score, so as long as you make your payments on time, you credit score should recover quickly.
The minimum credit score for a car loan in Canada is typically 650 or above for lower interest rates. However, the lender you opt for will determine what credit score is needed for a car. For example, online lenders can often provide auto financing to buy a car for people with the lowest possible credit score of 300, albeit at a higher interest rate.
If you’re having trouble qualifying for a car loan with bad credit, you may want to improve your chances of getting approved by securing your loan with an asset or signing up with a cosigner. You can learn more about how car loans work in our comprehensive guide here.
FAQs about credit scores needed for a car
You'll usually need a credit score of at least 650 to qualify for a car loan with decent interest rates. However, you may be eligible to qualify with a lower score if you're willing to pay higher rates. You'll likely have difficulties getting approved for any loan if your credit score is below 500.
Your credit utilization ratio is the amount of debt you've borrowed divided by the amount you have access to. This is an equation that gets used to assess your creditworthiness. Ideally, your credit utilization ratio should be lower than 30% if you want to improve your credit score for a car loan.
It can take anywhere from months to years to rebuild credit in Canada. The amount of time it takes will depend on what your credit score is currently and what strategies you use to build your credit. If you're worried you may not have the minimum credit score needed for a car, you can start rebuilding your credit at least a few months before you're ready to apply.
Yes. There are some reputable websites that offer free copies of your credit report. Additionally, you can request free paper copies of your credit report from one of Canada's two major credit bureaus, Equifax or TransUnion.
Each credit bureau uses different calculations to determine your credit score. That said, your scores should be similar with both bureaus. If your scores are wildly different, there could be an error on your credit report that you need to rectify. Lenders typically only work with one of the two credit bureaus to pull your information and determine if you have the minimum credit score needed for a car.
Claire Horwood is a writer at Finder, specializing in credit cards, loans and other financial products. She has a Bachelor of Arts in Gender Studies from the University of Victoria, and an Associate’s Degree in Science from Camosun College. Much of Claire’s coursework has focused on writing and statistics, with a healthy dose of social and cultural analysis mixed in for good measure. In her spare time, Claire enjoys rock climbing, travelling and drinking inordinate amounts of coffee.
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