How can a credit score affect your car loan?

Your credit score may affect your chances of a successful car loan application – but how does this ‘magic number’ actually work and why does it matter? We’re pulling back the curtain. Here’s how you can use your credit score can influence your ability to get behind the wheel of your dream car, sooner.


Read more: What are your options for financing a car in New Zealand?



Your credit score is like a ‘report card’ for your lending history. A credit score in New Zealand is a number between 0 and 1,000 that summarises your past borrowing behaviour. Your lender will  collect and consider it as part of your loan application. A ‘good’ score ranges from 500 to 700, but generally speaking, the higher, the better.

You can read more about this in our dedicated guide to what’s a good credit score and why does it matter.



Depending on your lender, a higher credit score may increase your chances of:

  • An accepted car loan application
  • A lower interest rate
  • More flexible terms on your loan in general

For a car loan, this may make a difference to the amount of money you will able to borrow and therefore the car you’ll be able to buy.

It’s important to remember that your credit score is just one of the things your lender considers. Poor credit doesn’t mean you won’t be able to get a car loan. You may just have to pay more in interest, buy a less expensive vehicle or be ready to put up additional security. Lenders also have to be sure that the loan is still affordable for you, which higher interest rates/higher borrowing might impact.



Taking on a car loan may also have an effect on your credit score. It works both ways! This may include:

  • Your applications. If you apply for your car loan from lots of different lenders at once, it may negatively affect your credit score.
  • Your repayments. If you pay off your car loan on time and in full, it may positively affect your credit score.
  • Your debt status. if your car loan adds to multiple existing debts, this could negatively affect your credit score.

Generally speaking, having a car loan and paying it back on time will ‘build’ good credit, improving your score and making it easier to get a car loan in the future. If a repayment is missed or the loan is defaulted on, it might make it more difficult to borrow for your next big purchase. This is the same for any loan you take.



Every lender has a different way of assessing your car loan application. Your credit score is just one part of it, and may not be the most important factor. If you can’t show that you’ll be able to afford the repayments, for example, it won’t matter how good your credit is!

That said, a good credit score is still a useful thing to have. It may mean that you are approved for a higher amount, and with a better interest rate. Your car loan will also affect your credit in return, so make sure that you pay it on time and in full if you don’t want to have difficulty getting lending in the future.


Start your car loan application with Avanti Finance today.

This article is solely for information purposes and is not intended to be financial advice. If you need help, please contact Avanti Finance or your financial adviser. Neither Avanti Finance nor any person involved in this article accepts any liability for any loss or damage whatsoever which may directly or indirectly result from any information, representation or omission, whether negligent or otherwise, contained in this publication. References to third-party websites are provided for your convenience only. Avanti Finance accepts no responsibility for the availability or content of such websites.

Call Now Button