Five Things to Know About Loans for Caravans and Campers

Buying a car can be a big deal, which often requires a big financial commitment.

If you are looking at accessing car financing to get behind your next set of wheels, you’re probably wondering what credit score you need to apply for a car loan.

Credit scores can be confusing, we get that. That’s why we’ve written this guide on what credit score you need to be able to buy a car.

How do credit scores work?

Let’s start at the beginning.

In Australia, your credit score is a number that represents how credit worthy you are as a borrower. It’s based on your personal information like whether you’ve paid your bills on time, how much debt you have, and how often you apply for credit. It also factors in considerations such as length of credit report, personal details such as employment term, age, and how long you have resided at an address.

There are three main credit reporting agencies in Australia:

• Equifax
• Experian
• illion

The three main credit bureaus are responsible for determining your rating (otherwise known as your credit score) and will range anywhere from 0-1200 depending on the credit reporting agency.

Each agency calculates your score slightly differently, and the ranges can vary. The ranges below are based on the information from each agency’s website at the time of this article:

Equifax Scores

Illion

Experian

An excellent credit score typically sits anywhere from 800 up to 1,200 points. A good credit score is upwards of 600, with any score usually under 500 considered a low credit score or bad credit. Having a bad credit rating may not necessarily reflect your current financial health, but, unfortunately, if your credit file has some blemishes, it can make it tricky to access the credit you need to buy a car.

Wanting to apply for a loan?

While you may find it more difficult to borrow money through traditional lenders when you have bad credit, there are car loans available for those with a poor credit score through Finance One. Our car loans for people with bad credit have been developed to suit many Australians who find it challenging to access the finance they need to get them ahead.

Apply Online Now

Why does your credit score matter for a Car Loan?

When you apply for a car loan, lenders assess several factors to determine the risk of lending to you. One of the key factors they look at is your credit score. It helps them decide:

• Whether to approve your loan
• What interest rate to offer
• How much to lend you
• What loan terms to apply

Generally, the higher your credit score, the better your loan terms. A good or excellent score shows lenders that you’re likely to repay the loan on time, while a poor score may mean they view you as a higher risk.

That said, having a low credit score doesn’t mean you’re automatically disqualified, especially if you apply through specialised bad credit lenders.

What causes a bad credit score?

When you take out a credit product, such as a loan or credit card, or even a post-paid mobile phone plan, your conduct around your account will reflect on your credit file. If you miss payments, default on the loan (which means missing repayments for more than 60 days), enter into a debt agreement or bankruptcy; these are all factors which can lead to a bad credit score.

However, if you’ve never had a credit product before or are applying for a personal loan or car loan for the first time, it might surprise you that you could have a low credit score from the get-go! This, of course, hasn’t been caused by missing repayments, but having no credit history can be seen as risky in the eyes of the lender this is because, you’ve not yet demonstrated how reliable you are as a borrower!

Other actions that many people don’t realise can lead to a bad credit score are:

• Applying for too many credit products in a short time, such as payday loans.
• Having too many credit accounts open at once or having a credit limit that’s too high for your reasonable affordability.
• Having no credit products open or a short credit history.
• Overdrawing a bank or credit union account.
• Late payments on utility bills such as water, council rates, electricity or gas bills.
• Incorrectly reported information by a service provider.

Can I access my credit report?

Credit reporting bodies in Australia are legally required to allow you to access a free copy of your credit report once every three months. This is great news for borrowers who want to keep an eye on their credit reports, or understand how their financial conduct is affecting their credit rating.

Given that your prospective credit provider will be looking at your credit report when they run a credit check as part of the car loan application process, it pays to get a free credit report to see whether there is any information on there that might be incorrect.

What credit score should I aim for if I want to get a Car Loan?

While there is no fixed minimum credit score for car finance, most standard lenders will look for an Equifax credit score of around 600 or higher. The higher credit score an applicant has, the better chance of approval they have, and they will often have access to more attractive interest rates than those with bad credit scores. But there’s no magic number for the car loan credit score! If you have an average credit score or even bad credit, it’s not the end of the world. Lenders like us at Finance One are willing to give people with bad credit another go.

How lenders assess your car loan application beyond your credit score

While your credit score is important, it’s only one piece of the puzzle. Lenders consider several other factors when reviewing your car loan application, especially if your score isn’t ideal. These include:

• Income and employment stability. Lenders want to see consistent income, whether it’s from a job, business, or government payments.
• Living situation. Homeowners or long-term renters may be viewed more favourably than someone frequently moving.
• Bank statements and spending habits. Lenders may review your recent bank transactions to assess how you manage money day-to-day.
• Existing financial commitments. If you already have multiple debts or large monthly expenses, this may impact your borrowing capacity.
• The car itself. Newer vehicles or those from reputable dealers are often preferred, especially in secured loan arrangements.

Understanding how lenders view your overall financial situation, not just your credit score, can help you prepare and strengthen your application. At Finance One, we don’t have a minimum credit score requirement, we prefer to look at every scenario on a case-by-case basis.

What to know before applying for a Car Loan with a poor credit history

So, what happens if your previous payment history has tarnished your credit score? The good news is that you don’t necessarily need a high credit score to access car loans. This is because car loan eligibility criteria don’t solely rely on credit ratings.

Here’s what you should know before applying for a car loan in Australia with a lower credit score:

You may pay a higher interest rate

If you’ve been researching your personal loan options or are experienced at borrowing money, you’ll be familiar with the fact that interest rates will vary depending on your financial situation. How much interest you pay depends on your loan term, interest rate and loan amount. So, remember that the best car loan for you may not come down to the best interest rate.

Access secured car finance

Car loan rates tend to be lower than other personal loans, as they are often ‘secured’. This means that the car is used as collateral against the loan, which reduces the financial impact on the credit provider, in the case you default and are unable to repay the loan.

Strive for financial stability before applying

We understand that the allure of a new car can be enticing. Still, if you don’t need a car immediately, it can pay to strive for more stability in your financial situation before applying for new credit. While 6-12 months may not leave a drastic credit score impact on your file, proving your financial discipline to a car loan lender can make a big difference.

Examples of better financial stability might be:

• Pay bills on time.
• Hold a secure form of stable income (even if this is Government benefits or self-employed income).
• Put a regular amount of money away in your bank account each week, fortnight or month. Even if this is only a small amount of money, it will bode well when indicating to a lender that you can meet the monthly repayments.
• Consider paying down or paying off any existing debts such as credit card balances or other smaller loans (this includes Buy-Now-Pay-Later schemes).
• Managing a diverse credit mix could help boost your score by showing that you’re responsibly keeping on top of various types of credit.

Common mistakes to avoid when applying for a Car Loan

Applying for a car loan (especially with a less-than-perfect credit score) can be stressful. But making smart choices throughout the process can increase your chances of approval and save you money in the long run. Here are some mistakes to avoid:

• Not checking your credit report first. Applying without knowing what’s on your credit file can lead to surprises and unnecessary rejections, which further impact your score.
• Applying with too many different lenders at once. Each application may trigger a credit enquiry, which can harm your score if done in quick succession.
• Focusing only on the monthly repayment. A lower monthly repayment might look attractive, but it can mean paying more in interest over time due to a longer loan term.
• Underestimating running costs. Don’t forget to factor in insurance, registration, fuel, and maintenance when setting your budget.
• Financing extras into the loan. Adding insurance, warranties, or accessories to the loan can increase your repayments and total interest paid.

Avoiding these common traps can help you make a more informed, confident decision when securing car finance.

Seek out lenders who specialise in bad credit

While you may find it more difficult to borrow money through traditional lenders, car loans are available for those with a poor credit score through lenders such as Finance One. Our car loans for people with bad credit have been developed to suit many Australians who find it challenging to access the finance they need to get them ahead.

Help improve your credit score, with a loan from Finance One

Contact our team to learn more about how we can help you access the finance you need for your next car, despite your credit score. Talk to us Now

Content prepared by an external writer covering topics that may be of interest to our customers. The content does not necessarily represent the views or opinions of Finance One. 

Normal lending criteria, terms and conditions, fees and charges apply.

Disclaimer: The information above is of a general nature only and does not consider your personal objectives, financial situation or particular needs. You should consider seeking independent legal, financial, taxation or other advice to check how the information relates to your particular circumstances.  We do not accept responsibility for any loss arising from the use of, or reliance on, the information.

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