Borrowing A Car Loan For A Low Credit Score

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Buying and owning a new car is a dream for many but there are obstacles like breaking up your savings, having to borrow a loan and having a good credit score to be able to qualify for the loan. None of these factors mean that you cannot buy a car. There are different ways to borrow for everyone be it someone with a high credit score of 800 or someone with a fair 600 credit score. If you are looking for car loans or ways to borrow a car loan with a low credit score, you must read ahead. In this article, we will look at borrowing a car loan for low credit scores. If your credit scores are poor, we will also help you identify some ways to improve your credit scores for better borrowing options. 

How Is Credit Score Defined? What Is A Good Score?

If you are struggling with credit scores and are not able to understand how these scores work, what accounts for a major part of your score and what is a good score, this section is just for you. Let us take a look at the credit score Canada system. Your credit score is a three-digit number based on your credit report. This number ranges from 300 to 850 and is calculated based on various details from your credit report like your payment history, length of credit history, new credit accounts, types of credits you have borrowed and the amount you owe or the credit utilization ratio. When you apply for a loan, your Credit score is one factor that helps a lender approve or reject your loan application. This score helps the lender in determining whether or not you are credible enough to be borrowing a loan and if you will be capable of repaying the amount that you are borrowing. Other factors like your debt-to-income ratio will also help you figure out whether or not you qualify for a loan and if you must apply for the same. 

Credit scores are classified into different ranges. A person who has a credit score above 670 is more likely to get a loan application approved on their own terms for lower interest rates while a person below 560 credit score might struggle to get their loan approved. For a 600 credit score, you can avail of some loan options but will have to pay a higher interest rate for others. The following credit score range will help you determine which range you fall in:

  • Poor credit score: 300 to 579
  • Fair credit score: 589 to 669
  • Good credit score: 670 to 739
  • Very good credit score: 740 to 799
  • Excellent credit score: 800 to 850

If you are in the poor credit score range, you can work to increase your score. We will share a few tips for you to improve your credit scores in the upcoming sections.

Good Credit Score To Get A Car Loan

When you are financing your car, you have the option to borrow a loan from your car dealership or a financial institution like a bank, a credit union or an online loan provider. The credit score which will help you qualify for a car loan will vary from one loan provider to the other and also be different if you borrow from a dealership and not a bank. A score of 670 or above is considered a good score for borrowing a car loan in general. There are also other factors considered by lenders when you apply for a loan. In Canada, debt-to-income ratio, employment history and credit scores all account for your loan approval and rejection. 

Car Loan For 600 Credit Score

A common question that many borrowers have is if they have a 600 credit score, can they borrow a car loan? This is a valid question as 600 is neither a very good score nor is it a poor score. When you are applying for a car loan, your car is the collateral against which you can receive the required funds to purchase the same. Since this is a secured debt, you may qualify for the loan even if your credit score is 600. The other terms will depend on your lender. There might be lenders who might require a co-signer while other lenders would require you to make a sizeable down payment. You can try financing through your dealership which might offer you a loan option even for a credit score that is 600 or even lower.

Improving Your Credit Scores To Avail Of A Car Loan

“We suggest that a person run their credit report at least six months before making major purchases, such as a house or car. That’s because it gives them time to get any errors corrected or to start correcting any bad credit habits”, says Todd Mark. Improving your credit score to move up from the poor or fair range to the excellent range will take some time and some work on your part. Once you improve your credit score, Canada banks, lenders and dealerships will offer you better loan terms. The following steps will help you improve your scores:

  • Pay all your bills on time. Be it your credit card bills or loan repayments, make sure there are no missed payments and no delays from your end. Paying your bills on time accounts for 35% of your credit score.
  • Do not apply for new credit unless you are sure about getting your application approved and you need the funds. A rejected loan application leads to a lowering in your credit score. 
  • Pay your existing debts to lower your credit utilization ratio. For a low credit utilization ratio, Canada banks and lenders will offer you better chances of loan approval. 
  • Do not close any credit card accounts even after you have paid off the debt. 
  • Keep a check on your credit to spot any eros made by the credit bureau to get them corrected at the earliest. 

Can A Car Loan Help You Build Credit?

If you have the cash to buy a car, you can still choose to borrow a car loan. Why would you do this? A car loan can help you build credit. Borrowing a car loan is a good way to quickly increase your credit score. If you make on-time payments for your monthly installments and pay in full, your credit score will fairly improve and you will be able to see a change within a month. 

How To Refinance Your Car Loan?

In case you are able to improve your credit score, you can connect with your lender to refinance your car loan. Your vehicle’s eligibility will be checked and if you qualify, your lender will offer you lower interest rates owing 


Whether you have savings that could help you pay for a new car in cash or not, financing is a good option. You can take out a loan for purchasing a new car and even get the vehicle without having to pay any amount in the beginning. A significant payment that would have cost you a fortune will easily fit your budget by being divided into monthly installments. You can also manage your credit using mobile apps which makes the overall process easier for you. We hope this article has helped you understand how you can get a loan at a lower interest to finance your car if you have a low credit score. Another benefit of refinancing is that you have the chance to extend the term of your loan and the overall payment you make over the loan period will be lower. Refinancing will also help you build your credit score. 


Just because you have a low credit score you should not feel the need to give up on your dream car. This section will help you further in knowing how you can finance your car with a 600 credit score

Can you get anything with a 600 credit score?

A credit score of 600 is neither too bad nor too good. This credit score might make it difficult for you to borrow certain types of loans but it is not impossible for you to avail of all the possible loan facilities. 

What is the lowest credit score to buy a car?

The lowest credit score for which you can borrow a car loan is 650. For a lower score, you might have to pay higher rates of interest. 

What kind of interest rate can I get with a 600 credit score?

The different rates of interest offered for a 600 credit score on different types of loans range from 4% to 15%.

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