How to Improve Your Credit Score for Car Loan

16 Jun, 2025
2 min read
user Aruna Singh

Your Car loan dreams are just 3 digits away. Imagine walking into a showroom, test-driving your dream car, and driving it home the same day, with the lowest possible interest rate. That dream becomes reality when you master your credit score. Unlike what many believe, you don’t need to wait months to see improvement. With the right strategies, you can boost your credit score in just 30-60 days and save lakhs on your car loan.

Why Your Credit Score Matters for a Car Loan

Whether your score is stuck in the 600s or you're starting from scratch, this 2025 guide reveals 5 proven steps to fix errors, optimise credit utilisation, and build a strong credit history, all without costly agents or gimmicks. Plus, we’ll share free tools to compare the best car loans from top Indian banks and find ideal insurance options, because a great score deserves equally great deals. 

 

Your Credit Score is your financial passport for car loans. A good score (750+) gets you:

✅ Easy approval – Banks say "yes" faster.
✅ Lowest interest rates – Save ₹2+ lakh on a ₹20 lakh loan.
✅ Zero stress – Better loan terms, lower EMIs.

A 100-point jump can cut your interest rate by 1-2%!

Step 1: Check Your Credit Score & Reports


Before you can fix your credit score, you need to know where you stand. Here's how to get started:

Look for these common errors (found in 1 out of 4 reports!):

  • "Late payments" you never actually missed (hurts your score the most).

  • Loans or cards you didn’t apply for (could be fraud).

  • Old debts still dragging you (should drop off after 7 years).

Banks reject applications for scores below 750, so even small errors matter!

Step 2: Fix Credit Card Balances NOW

CIBIL’s #1 Rule: Use less than 30% of your limit (e.g., ₹30,000 on ₹1,00,000 limit).

Killing your score: Maxed-out cards (₹90,000/₹1,00,000 limit = 90% = bad)

  • Pay before bill generation (not due date!)

  • Ask for limit increase (lowers utilisation %)

Step 3: Never Miss Payments (Set Alerts!)

Payment history = 35% of your score. Just 1 missed payment = 50-100 point drop!

Set reminders:

  • Mobile alerts for due dates

  • Auto-pay minimum amount (safety net)

Step 4: Stop Applying for New Credit!

Every loan application = 5-10 point drop. Avoid:

  • New credit cards

  • Personal loans

  • "Buy Now Pay Later" schemes

Compare car loans within 45 days = counts as 1 inquiry.

Step 5: Build Credit Fast

If your score is below 650, try:

  1. Secured credit card (e.g., SBI Unnati)

  2. Credit-builder loan (Bajaj Finserv, etc.)

  3. Become an authorised user on a family member’s card

How Fast Can You Improve?

Action Time to See Results
Paying Overdue bills 30-60 days
Lowering card balances Next billing cycle
Fixing CIBIL errors 1-2 months

Aim for: 50-150 point boost in 3 months!

Before Applying for Your Car Loan

✔ Check the latest CIBIL score (not older than 30 days).
✔ Get pre-approved (HDFC, SBI, ICICI offer online approval).
✔ Compare best interest rates - Use MoneySync free comparison tool to scout deals from top Indian banks.

Improving your credit score isn’t just about ticking boxes; it’s about empowering yourself for one of life’s most exciting milestones. Every point you boost your Credit score puts you closer to that moment: The effort you put in now will pay off for years, not just in savings, but in financial freedom. So take these steps, track your progress, and get ready to turn the key on your next big adventure.