Loan application

Does Your Credit Score Affect Your Auto Loan Application?

If you’re about to apply for a car loan, you might be wondering what impact your credit score might have on the success of your application.

As with any financial product, it is important to agree before starting the application process. This can help strengthen your application and your chances of being approved for your preferred loan.

This may include ensuring that all required documents are complete and correct, confirming that you meet the eligibility criteria for the car loan you are applying for, and checking your credit score and record.

In fact, not only can your credit score impact your approval for a car loan, but also the interest rate you may be offered.

This is because your credit score and the contents of your credit report provide information to lenders to determine the level of risk you pose as a borrower.

For example, if you have an average to low credit score with a recorded default on your file and several recent credit applications, the lender evaluating your application may take this as an indication that you have not been a responsible borrower in the past. past. The lender may determine that you pose a high level of risk in terms of repaying the amount you requested to borrow.

Depending on a range of other factors, the lender may decide to deny your car loan application or approve it, but with a higher interest rate to balance the risk they would be taking.

Some lenders will only approve applications for borrowers with very good to excellent credit, so it’s important to check the loan criteria before applying.

How can I improve my credit rating?

Borrowers with excellent credit ratings will generally have the most success applying for an auto loan and will generally be offered the most competitive interest rates.

For this reason, if your credit score isn’t ideal, it may be worth working to improve it before applying for a car loan. Here are some handy ways to do it:

1. Make a habit of checking your credit history

Regularly checking your credit score is a good start, but don’t forget to regularly request a copy of your credit history from the major reporting bureaus – Experian and Equifax. This will allow you to ensure that it is accurate and to dispute any discrepancies you may find that could negatively affect your credit score. According to Moneysmart.gov.au, you have the right to request a free copy of your credit report every three months.

2. Limit the number of credit applications you submit

Each time you apply for financing, the lender will perform a credit check which will be recorded on your file. If you recently applied for one or more other credit products and then applied for a car loan, the car loan provider may see the other credit applications on your file and fear that you are borrowing too much or desperate for funds. .

To avoid this, it may be worth delaying applying for a new credit card or similar if you plan to apply for a substantial financial product like a car loan.

3. Prioritize paying off existing debts in a timely manner

If you have outstanding debts, focusing on paying them off and consistently meeting due dates can positively impact your credit score and strengthen your credit history. This will let lenders see that you understand the importance of paying off your debts and that you are reliable when it comes to making payments on time.

If you have a habit of forgetting to pay your bills by the due date, consider setting up direct deposit or setting a reminder in your calendar so it’s one less thing you have to rely on. your memory.

Compare popular auto loan products

New – Premium Special (Variable)

special

You could win a $1,000 fuel voucher ~ Ends with 5 months

special

You could win a $1,000 fuel voucher ~ Ends with 5 months