Thinking of buying a car? Here’s the credit score you need to do so

What is a good credit score to buy a car?

No matter your credit score, someone will be willing to lend you money for a car.

While some lenders may deny you based on your credit, rest assured others will be happy to give you a loan — at least for the right price.

The riskier you are as a borrower, the more interest you’ll pay. And, you'll have to jump through more hoops to be approved.

To avoid the worst hassles, you’ll need to make yourself less risky to lenders.

Lenders start to offer better interest rates once your score breaks 600. If you don't know your current credit score, you can check it online for free.

For the lowest rates, you should aim for a score of 725 or higher.

And, if 725 feels light-years away, take comfort in knowing most car buyers don't quite fall into this category.

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What if I have a score lower than 700?

You can still get a car loan with a score lower than 700, but there will be questions.

A lender will likely grill you about the negative marks on your credit report. This may seem intimidating, but it’s actually an opportunity to plead your case.

There are also lenders out there that are suitable for people who have lower credit scores. And Loans Canada — an online lending platform — connects you to them.

Loans Canada specializes in finding the best loan rates for people with poor credit scores, whether you’re looking for a car loan, personal loan, or even a debt consolidation loan.

You may be asked to bring in a co-signer

If you have poor credit, you can increase your odds of approval (and even get better rates) by recruiting a co-signer.

A co-signer lessens the lender’s risk — if you fail to repay your loan, your co-signer will be responsible.

Still, this can be a big favour to ask. If you screw up, you could damage the co-signer's finances (and potentially your relationship with them).

Lastly, remember not all car dealers are created equal. Some are more accommodating than others, so if one denies you, move on to the next.

Try improving your score

Instead of using a co-signer or accepting outrageous interest rates, you’re often better off taking the time to build your credit score.

Here are some credit-boosting tips to get you started:

Use a secured credit card

Using credit cards to build a reliable payment history is one of the easiest ways to improve your credit score. The problem is, if you have poor credit, it can be difficult to be approved for a credit card in the first place.

That’s where secured credit cards come in.

They are designed to help riskier borrowers prove themselves and build credit. The catch is you’ll have to provide a security deposit that the issuer will take if you don’t pay your bills.

A car loan will also help your score

Once you are finally approved for a car loan, you can leverage it to build your score even more.

The biggest influence on your credit score is payment history. When you make your car payment on time every month, your lender will report it to the major credit bureaus (so don’t be late).

Car loans also boost your score by helping with your credit mix. If the only type of credit you currently have is credit cards (i.e. revolving credit), adding an installment loan will help improve your score.

As you continue to strengthen your credit, it may make sense to refinance your auto loan in the future when you qualify for better rates.

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Waiting isn’t a bad idea

Waiting to take out an auto loan allows you to:

• Hunt for better deals and discounts
• Spend time building your credit score
• Build up a history of on-time bill payments
• Save more money for a down payment

All of these actions will help you secure a more affordable loan.

While you're waiting, avoid applying for any other forms of credit. If hard inquiries are made on your account, your score will take a temporary hit.

Lastly, when the day comes to buy your ride, go for a used car, keep the financing term to a maximum of four years and put down as big of a down payment as possible (shoot for 25% or more).

This will minimize interest payments and help you avoid negative equity (owing more than the car is worth).