Purchasing a car is a significant financial transaction. Although your income and employment status are important, your credit score for car loan approval is an essential factor that determines whether you are eligible for a car loan and the rate of interest you will be charged.
Borrowers frequently ask this question: What is the minimum credit score required for car loan approval in India? The answer is not straightforward. Each lender has its own set of rules, and your credit score will also impact your loan.
In this blog, we will discuss the minimum credit score required for a car loan, the impact of car loan interest rates by credit score, and what you can do to increase your chances of approval.
Why Credit Score Matters for a Car Loan
A credit score reflects your past repayment behavior. It tells lenders how responsibly you have handled credit.
When banks evaluate your credit score for car loan approval, they look at:
- Past EMI repayment history
- Credit card payment discipline
- Loan defaults (if any)
- Credit utilization ratio
- Number of recent loan applications
A higher score means lower risk. Lower risk means faster approval and lower interest rates.
What Is the Minimum Credit Score for Car Loan in India?
In India, the credit score ranges from 300 to 900.
There is no fixed number, but this is a rough idea of the minimum credit score for car loan approval:
- 750 and above – Excellent
- 700–749 – Good
- 650–699 – Average
- 600–649 – Below average
- Below 600 – High risk
Most banks would like a credit score of 700 or higher for a smooth approval process. But some banks might consider your application from a credit score of 650, although the interest rates might not be that favorable.
If your credit score is lower than 600, it would be difficult to get an approval, but you could consider providing additional security or a co-applicant.
Car Loan Interest Rates by Credit Score
Your credit score not only determines whether you get an approval or not, but it also determines the interest rate you pay.
Here is a simplified explanation of how car loan interest rates by credit score could differ:
Credit Score Range
| Credit Score Range | Risk Level | Estimated Interest Rate | Loan Amount (Example ₹8 Lakh) | Approx EMI (5 Years) |
| 750+ | Low Risk | 8.5% | ₹8,00,000 | ₹16,400 |
| 700–749 | Moderate Risk | 9.5% | ₹8,00,000 | ₹16,800 |
| 650–699 | Higher Risk | 11% | ₹8,00,000 | ₹17,400 |
| 600–649 | High Risk | 13% | ₹8,00,000 | ₹18,200 |
Note: The figures are approximate and may differ from lender to lender.
As you can see, a small variation in your credit score for a car loan may greatly affect your EMI and the total amount you repay.
Over five years, a higher rate of interest may result in paying an additional ₹50,000 to ₹1,00,000.
Can You Get a Car Loan with a Low Credit Score?
Yes, but with conditions.
If your score is between 600 and 650, lenders may:
- Offer a higher interest rate
- Ask for a larger down payment
- Require a co-applicant
- Reduce the loan amount
If your score is below 600, approval becomes difficult. In such cases, it may be better to improve your credit profile before applying.
Understanding the minimum credit score for car loan helps set realistic expectations.
Factors Beyond Credit Score
Although the credit score is important, lenders also consider:
- Monthly income
- Employment stability
- Existing loan obligations
- Debt-to-income ratio
- Type of car (new or used)
For instance, even if your credit score is 680, good income and job stability can help.
Also, a high credit score and unstable income can result in a loan rejection.
New Car vs Used Car Loan Score Requirements
The minimum credit score for car loan may vary slightly depending on whether you are purchasing a new or old car.
- New Car Loan – Slightly flexible approval criteria
- Used Car Loan – Stricter assessment due to higher lender risk
Used car loans often have higher interest rates compared to new car loans, even with the same credit score.
How to Improve Your Credit Score Before Applying
If your score is not ideal, consider improving it before applying.
Here are simple steps:
1️. Pay EMIs on Time
Late payments reduce your score significantly.
2️. Reduce Credit Card Utilization
Try to keep utilization below 30% of your credit limit.
3️. Avoid Multiple Loan Applications
Too many applications can lower your score.
4️. Clear Outstanding Dues
Settling pending dues improves your credit health.
5️. Check Your Credit Report
Make sure there are no errors that might impact your score.
Some financial services, such as Olyv, enable you to track your credit report and know your eligibility before applying. This will help you plan better instead of applying without knowing the chances of getting accepted.
Should You Wait to Improve Your Score?
If your credit score is less than 650 and you are not in an urgent need of a car, you can wait for 3-6 months to improve your score, which will save you a lot of money in interest.
For instance:
- At 13% interest, EMI ≈ ₹18,200
- At 8.5% interest, EMI ≈ ₹16,400
This is a difference of ₹1,800 per month. Over 60 months, this translates to a savings of ₹1,08,000.
Improving your credit score to get a car loan approval might help you save money on your total loan amount.
How Lenders Calculate Risk
Lenders classify borrowers based on credit risk categories. A strong repayment history lowers perceived risk.
Higher risk =
- Higher interest rate
- Stricter documentation
- Lower loan-to-value ratio
Lower risk =
- Faster approval
- Better negotiation power
- Lower interest cost
This is why the minimum credit score for car loan matters so much.
Common Myths About Credit Score for Car Loan
Myth 1: 750 is mandatory for approval
Not always. 700+ is usually sufficient for good terms.
Myth 2: Checking your own score reduces it
No. Self-checks do not affect your score.
Myth 3: Income is more important than credit score
Both matter. A good score improves your interest rate.
Final Thoughts
Understanding the credit score for car loan approval helps you prepare better before applying. While the minimum credit score for car loan consideration may start around 650, aiming for 700 or above can significantly improve your loan terms.
More importantly, car loan interest rates by credit score directly impact your EMI and total repayment amount. Even a small improvement in your score can save thousands over the loan tenure.
Before applying:
- Check your credit score
- Review your financial obligations
- Compare interest rates
- Improve your profile if needed
A well-planned application not only increases approval chances but also ensures you borrow responsibly and affordably.
