Having a good credit score (one above 750 or higher) can be very important when looking for a car loan. This is because the higher your score, the higher are your chances of getting a car loan approved, as lenders will see that you have been a responsible borrower in the past.
Your credit score is also important as it can determine many other factors, such as:
- Determines approval or rejection: CIBIL scores and other credit scores are a measure of your creditworthiness, and thus help lenders decide whether or not to approve your loan requests based on your repayment behavior in the past.
- Determines the rate of interest: Having a higher score also reflects greater financial responsibility. Thus lenders are more likely to offer you a lower interest rate, and you will also be able to negotiate on the rate of interest. However, lower scores pose a risk to lenders resulting in them raising the rate of interest.
- Determines the loan amount: Proof of your creditworthiness and a good repayment history can allow you to avail of a larger car loan amount, while a low CIBIL may not allow you to get the desired loan amount.
Having a good credit score will also provide you with better access to special offers, like zero down payment, lower processing fees, and more. While a low score can result in car loan requests being denied, or offers that have a higher interest rate, or higher down payments.