When applying for car finance in South Africa, your credit score plays a critical role in determining whether your application will be approved and under what terms. Understanding how credit scores affect your eligibility to qualify for car finance can help you prepare better and improve your chances of securing finance. So What Credit Score Do You Need to Qualify for Car Finance?
Understanding Credit Scores in South Africa
A credit score is a three-digit number ranging between 300 and 850, calculated by credit bureaus such as TransUnion, Experian, or Compuscan. This score reflects your creditworthiness based on your credit history, including your repayment record, outstanding debt, credit utilisation, and length of credit history.
Credit Score Ranges and What They Mean
- Excellent (750 and above): Very low risk to lenders. Applicants with scores in this range usually qualify for the best interest rates and loan terms.
- Good (650 – 749): Low risk. You can generally expect approval with favourable terms.
- Fair (600 – 649): Moderate risk. Approval is possible but may come with higher interest rates.
- Poor (550 – 599): Higher risk. Lenders may be hesitant, and you might face higher interest rates or need a co-signer.
- Bad (below 550): High risk. Financing approval is difficult; many lenders will decline applications.
What Credit Score Do You Need to Qualify for Car Finance?
Most South African lenders prefer applicants with a credit score of at least 600 to qualify for car finance. However, the exact threshold varies by lender:
- Major Banks (e.g., Absa, Standard Bank, FNB): Typically require a credit score of 650 or higher for unsecured loans or personal loans to finance cars.
- Dealership Finance: Some dealerships work with alternative lenders and may offer finance to applicants with scores as low as 550, but usually at higher interest rates.
- Specialist Car Finance Providers: Some focus on applicants with poor credit, offering vehicle finance but often with strict repayment terms and higher interest rates.
Other Factors That Affect Car Finance Approval
While a credit score is important, lenders also consider:
- Income and affordability: Proof of stable income and ability to repay monthly instalments.
- Debt-to-income ratio: Lower existing debt increases approval chances.
- Employment status: Permanent employment or stable self-employment enhances prospects.
- Deposit amount: A larger upfront deposit reduces the loan amount and risk for the lender.
Tips to Improve Your Credit Score Before Applying
- Pay all existing debts and accounts on time.
- Avoid applying for multiple credit products simultaneously.
- Check your credit report for errors and dispute any inaccuracies.
- Keep credit utilisation below 30%.
- Regularly monitor your credit score via TransUnion or Experian.
To qualify for car finance in South Africa, aim for a credit score of 600 or higher. While some lenders may accept lower scores, this usually comes at a higher cost. Improving your credit score and maintaining a stable financial profile increases your chances of approval and better loan conditions.
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