What is a good CIBIL™ Score for Car Loan in India

Every individual has a dream of owning a car but not many can afford one easily. Car loans help individuals realise their car dreams. Not only do they help in owning a car but also allow sufficient time to repay the borrowed amount through affordable instalments. However, there are a few pre-conditions, which have to be fulfilled before sourcing a car loan.

In India, the primary eligibility criteria for availing a car loan include a minimum age of 21 years, a minimum monthly salary requirement and reasonable credit history. A good credit history comes from a having good credit score, which can very well be the deciding factor as far as acceptance or rejection of a car loan application is concerned. So, what is considered a minimum CIBIL™ score for car loans in India? Read on to find out more about this.

What is a good CIBIL™ score for a car loan?

Very often, individuals are surprised to find that their car loans are rejected due to a poor credit score. Also, not many are aware of the need for credit score for car loans. In this article, we explain what is a good credit score to buy a car and also share tips on how to improve your credit score to qualify for a car loan easily.

Credit scores are assigned by various credit authorities like CIBIL™. It is one of the four authorized credit bureaus in India which provide a credit score, the others being Equifax, Experian and CRIF High Mark. CIBIL™ Score ranges from 300 to 900 and the higher your score, the better your chances of getting a loan.

First, things first - While, there is no defined minimum credit score for a car loan, it’s always good to have a high credit score. In general, it is advisable to have a score of 750 or above to stand a good chance of being approved for a loan and to secure the best interest rates on it.

Additional Reading: What Is A Good CIBIL™ Score For Car Loan

Can I get a loan without a CIBIL™ score?

Yes, if you have a poor credit score, it is still possible to avail of a car loan as the banks hold the car as security collateral until you repay the full loan amount with interest. While you can get a loan without a CIBIL™ score note that it can be a lengthy process and far more difficult to get loan approval. Moreover, you might only be offered unattractive terms and conditions on your loan. Some of them may include a higher interest rate or a shorter repayment period.

With a good CIBIL™ Score for a car loan, you can get a lower interest rate, longer repayment period, larger loan amount and simpler documentation.

How do I avoid a poor CIBIL™ score?

Here are some of the reasons why your CIBIL™ score is poor and also suggested ways to improve the same:

• Delayed and Missed Payments: If you are regularly delaying your repayments towards either credit cards or loans, it harms your CIBIL™ Score. Ensure to set reminders for making timely payments on all borrowings. This will help in securing a good credit score for car loans in the future and better terms on the loan.
• Overutilizing credit limit: Using up the entire credit limit that is provided to you is a sign that you are not able to control your spending. Try to ensure that you do not use more than 30% to 50% of your total credit limit. This will keep your credit utilisation to a minimum and have a positive impact on your credit score.
• Rejected loan applications: If your loan applications have been rejected, do not apply for a fresh loan immediately. There will be a higher chance of a second loan rejection in such cases. Each loan rejection results in a drop in your credit score. Focus on improving your credit score first and become loan-eligible. Once this is done, you can apply for a fresh car loan at better rates.

While there is no set minimum CIBIL™ score for car loans it is recommended that you have a score of at least 750 before you apply. This will help in avoiding potential loan rejections and to secure the best deals on car loans.

How to check your credit score?

You can easily check your credit score for free online. All you need to do is, register with a trusted website like CreditMantri and check your credit score by following the guidelines. CreditMantri provides your latest credit score for free with just a few clicks.

You can also check your CIBIL™ score through CIBIL™ Credit Information Reports. This can be helpful before applying for a car loan. It is currently a paid service and the charges for the same are Rs. 470 for obtaining the report. The steps to be followed are:

• Apply for a credit score on the CIBIL™ official website.
• Enter information like name, identity proof details and date of birth.
• Enter appropriate contact information.
• Make the payment to complete the process.
• After the application process is complete, the agency will get in touch with you and inform you of your updated credit score.

How can you get a good credit score for a car loan?

A good credit score requires consistency in good credit behaviour. Some activities can help in keeping the credit scores in good health. Here, we have listed them for your reference:

• The easiest thing to do while ensuring a good credit score is to make all credit payments on time.
• Try to keep loans to a minimum since multiple lines of credit can increase your credit utilisation rate, which in turn drops your credit score and increases the chances of loan rejections.
• Make sure you check your credit report often as there might be errors and unless you highlight them, they will not be remediated.
• Always pay your credit card bills in full. Paying just the minimum amount will not abstain you from the rest of the payment and it can pile up in no time.

Can I get a car loan without a CIBIL™ score?

When you apply for a car loan with a good CIBIL™ score, you can enjoy many associated perks like attractive interest rates, longer loan tenure, etc. As credit scores are becoming the main criteria for granting all forms of credit, it may seem impossible to get a car loan without a credit history. However, some financial institutions do consider car loan applications without a credit history but provide the loan at higher interest rates.

EndNote

Even if you meet all the eligibility criteria for a car loan, a poor CIBIL™ score could be a hindrance in owning your dream car. A good credit score also means better interest rates. Therefore, it is important to take extra care of building, maintaining or remediating your credit history as needed.

Good CIBIL™ Score for Car Loan in India FAQs