So, you either want to buy a new car or need to buy a new vehicle; we’re down with that. Wouldn’t it be great if you could just visit a dealership, pick a vehicle, and drive away? Of course, it would, but, it’s (unfortunately) not that easy. It’s also not as challenging as some people make it. By some people, we mean certain lenders and car dealerships.
Whether you are considering a used car or a new one, the process is relatively similar. If it’s your first vehicle and you aren’t a seasoned veteran when it comes to purchasing a vehicle, don’t worry, we’ve got pro tips on buying your first car and what you need to know.
First things first, though. Unless you have a big pile of cash saved and can buy your vehicle with it, you most likely have to take out a car loan, and as a borrower of money, one of the top factors lenders look at is your credit history and whether you have excellent credit or bad credit. Okay, don’t start panicking, thinking you can’t get a vehicle if you are someone who has poor credit. We’re here to guide you and provide insight as to what the ideal credit score is to buy a vehicle.
Is There An Ideal Credit Score For Purchasing A Vehicle in Canada?
There are a couple of ways to look at the question of what is a good credit score or what is the minimum credit score to buy a vehicle. The obvious answer to it, and it would be the same answer when it comes to any personal loans or personal finance situations, is that the ideal credit score is the highest credit rating, which in the credit bureau’s eyes is having a credit report that shows a score over 700. Rest assured, very few people actually have a perfect credit score. When it comes to auto lenders, anything 670 and above is considered great.
Don’t be discouraged. If your credit score range is below 670, it’s okay, you can still get an auto loan. In fact, one of the easiest loans to get is a vehicle loan. How does that work, you ask? Well, getting a car loan isn’t so much about getting approved for one, it’s about what sort of loan terms you will qualify for based on your credit history. The higher credit score you have, the better interest rates you will get. Not to mention, getting approved is easier than ever. You no longer need to drag yourself down to a dealership and sit in front of some finance person for hours; you can see what your approval rate is from the comfort of your own home.
If You Have A Lower Credit Score It’s Okay
Not all hope is lost if you have a below-average credit score, as there are lenders who specialize in these types of loans. We won’t lie to you and tell you that your credit rating doesn’t matter because it does. But, we can tell you that it isn’t the only thing lenders look at. The average person (in their lifetime) makes some sort of poor financial decision that can impact their credit rating, but those people shouldn’t be punished until the end of time by constantly being denied personal loans or given ones with higher interest rates.
When determining loan rates for a new car loan, lenders such as dealerships, banks, and credit unions, also look at things like your credit utilization, which is how much of your available credit limit are you using, what kind of debt you have, i.e., student loans or debt from credit accounts, and what your payment history is like.
If you are concerned about your credit score increasing the interest rate, which will also increase your monthly payments, the best thing you can do is have a down payment. Having a down payment won’t necessarily give you better rates, but it decreases the amount you need to borrow, ultimately lowering your car payments. The other option to help with your loan terms is to have a co-signer. This isn’t everyone’s first choice as it’s nice to be able to do it on your own; however, if you have someone with amazing credit who is willing to help you out, it might be worth it.
Work To Build Credit
Time is your friend and if you have time before you (absolutely) need a vehicle, take it and use that time to build your credit. Since you can’t magically make your credit score higher overnight, you will need to be patient. A good starting place is to know what your credit score is and what on your credit report is lowering your score. Two companies in Canada can provide detailed information about your credit history: Equifax and TransUnion.
Credit building tip number one; pay your bills on time. Always. Period. Missing a payment or making late payments - whether that’s a loan payment or a monthly bill payment like a cell phone - can dramatically harm your credit score, especially if it’s done over and over. We understand that we all need access to money via credit once in a while, but before you rush into applying for a bunch of loans and credit cards, stop and think about it. When you apply for multiple credit accounts, you are known as a credit seeker, which is someone who can’t keep their daily or monthly financials in order; making them a high-risk borrower. No lenders want to work with those types of people.
Meet Us, FFUN Cars
Consider FFUN Cars for your next vehicle. Why? Well, we're awesome, and we specialize in helping people get approved for a vehicle loan no matter what your situation; new to Canada, first vehicle, or you're in a credit rebuilding stage. We also make car buying fun and convenient. For us, it's all about you. You have the option of buying your car online or in-store, or heck, a combination of the two; start at home, and finish at the store. We also offer a promise of ONE. One price, no haggling - our staff is non-commission based so it's not about them making money off of you, it's about finding you the right vehicle without having to negotiate. We have a ONE-person promise, where you will work with one person from the start of the car buying process, until the end, so there's no being bounced around from office to office. Finally, we do it in ONE hour. You will be in and out in one hour or less. We're a new dealership backed by years of automotive industry. Visit us online or in-person, we'd love to meet you!
