In Australia, there is no minimum credit score for a car loan, which is good news for potential buyers who wish to apply for a loan with bad credit.
However, because lenders use your credit score to assess the risk of lending to you, a low score may make them hesitant to do so. As a result, they may charge you a higher rate of interest to mitigate their risk, or they may reject your application entirely. So, if you're thinking about financing a car, your credit score is something you should know about and keep track of.
Continue reading to know more about the credit score for a car loan and where to find the auto loan in Sydney.
What Does a Credit Score Entail?
A credit score represents your borrowing history. It's calculated using information about your financial history from your credit report.
Lenders utilize credit scores to evaluate your likelihood of repaying a loan. The lending company will determine how much money they are willing to lend you and the terms based on your credit score.
From lenders' viewpoint, the higher your credit score, the more creditworthy you are, making you more eligible for financing options at cheaper rates.
What Role Does My Credit Score Have in Determining My Interest Rate?
Borrowers with stronger credit scores, on average, are offered cheaper interest rates. This is because lenders believe that if you have a high credit score, you will be able to repay the debt.
In contrast, a low credit score may not prevent you from getting a car loan, but it may limit your financing possibilities. You might expect a larger deposit and higher interest rates than borrowers with good credit. For example, if you apply for a car loan with a 700-credit score, you may be eligible for a low-interest rate.
If you apply for a car loan with a credit score of 560 or lower, you can assume to pay a higher interest rate than the industry average.
Before applying for any form of credit, it's good to check your credit score with one of the four credit agencies.
For a Vehicle Loan, What Is a Good Credit Score?
Experian and Equifax, Australia's two largest credit bureaus, divide their credit scores into five categories, ranging from "below average" to "fair" to "good," "very good," and "excellent."
According to the levels, Experian credit scores of 625 to 699 and Equifax credit scores of 622 to 725 are deemed good. Anything higher than this is preferable. So, applying for an auto loan with a credit score above 620 will give you a better chance of getting approved and acquiring a better rate.
Bad credit brokers will help you acquire the most economical vehicle finance plan available, regardless of your credit score. They've worked with thousands of Australians like you and diligently work to get the finest possible results.
Wealthy You is an Australian mortgage company serving Sydney for almost a decade. We provide you with an extensive range of mortgage options to match your financial demands. We make refinancing your home simple as an alternative finance specialist. Contact us to know how to apply for a loan with bad credit.