While one of the best ways to finance your luxurious new boat is to secure a boat loan, there are some factors that will determine whether you can afford the vessel or not. The main factor is your credit score.


Although the credit score requirements will vary from lender to lender, understanding what credit score you need to get a boat loan can help you better prepare for the application process and even secure better rates and terms.


Let’s take a look at what credit score is necessary for a boat loan, as well as the credit factors affecting your loan application, and how to increase your chances of getting approved.


What to Know About Credit

Credit refers to a person’s financial history and their ability to manage credit and debt responsibly. In other words, a credit score is a number that represents an individual’s creditworthiness, based on their credit history.


Credit scores typically range from 300 to 850; the higher the score, the better your credit history. To lenders, higher scores also mean a lower lending risk. Credit scores are determined by several factors, including payment history, credit utilization, length of credit history, types of credit accounts, and recent credit inquiries.

Why does this matter? Because boats are an expensive, ongoing expense. Being that yachts and other large vessels are considered luxury purchases, lenders view them as high-risk loans. When you opt to purchase a boat using a loan, the lender wants to see that you have an acceptable credit score to offset some of this perceived risk. Furthermore, a good credit score means that you have a stable financial history and will be financially responsible when it comes to repaying the loan back in a timely manner.


What Credit Score Do You Need to Get a Boat Loan?

The credit score required to finance a boat will vary, though the minimum credit score requirement is usually between 600-700. Some institutions take lower credit scores while others require higher ones. At Atlantic Horizon Capital, we generally accept good scores of 670 and up.


Now, here is something to consider: The size of the boat (and its price tag) will often impact the minimum credit score you need to be able to secure a boat loan. Although the exact credit you need is going to vary depending on the lender’s criteria and your financial situation, you can anticipate that a $3 million luxury yacht is going to require a better credit score than a $500,000 cabin cruiser.


Additionally, larger boats may also require larger down payments, which could impact your ability to get approved for a loan if you don’t have enough savings or equity to make a substantial down payment. Lenders may also consider other factors, such as your income, employment history, debt-to-income ratio, and other debts and financial obligations, when assessing your creditworthiness for a boat loan.

How Your Credit Score Can Affect Your Boat Loan Application

A score of 700 or higher is not only going to determine whether you can apply for a new loan. Your score is also going to impact other sections of the application, as well as the end result of your repayment plan.


Take a look at the ways your credit score can affect the application process:


  • Approval: Lenders use credit scores as an important factor in determining whether to approve your application for credit or a loan. Generally, a higher credit score makes it more likely that you will be approved for credit, while a lower credit score may result in a denial or higher interest rates and fees.


  • Interest Rates: Your credit score can also impact the interest rates and fees you are offered. A higher credit score usually translates to lower interest rates, which can save you money over the life of the loan. On the other hand, a lower credit score may result in higher interest rates and fees, which can make the loan more expensive.


  • Loan Terms: Your credit score may also affect the loan terms that you are offered. Lenders may offer different loan terms, such as the length of the loan and the size of the down payment required, based on your credit score.


  • Credit Limits: When applying for a credit card or line of credit, your credit score can also affect the credit limit you are offered. A higher credit score may result in a higher credit limit, while a lower credit score may result in a lower credit limit.


  • Security Deposits: Some lenders may require a security deposit or collateral to secure the loan, especially if your credit score is low. This can be a significant burden, as it requires you to put down a substantial amount of money or assets upfront to secure the loan.


Again, while most lenders have their unique requirements for various credit and loan types, the better your credit, the better your chances of approval and decent terms. Aim to get the highest possible credit score you can prior to your application, as it can save you money on fees and interest rates in the future.

Does Applying For a Boat Loan Impact Your Current Credit Score?

When you apply for a boat loan, the lender you choose is going to pull your credit. What does that mean? When someone “pulls your credit,” it means that they are accessing your credit report from Equifax, Experian, or TransUnion to review your credit history and assess your creditworthiness. This is also known as a “credit inquiry” or a “credit check.” A credit check is an important part of the approval process and cannot be bypassed, unless you plan on paying for your yacht outright.


There are two types of credit inquiries: hard inquiries and soft inquiries. A hard inquiry occurs when a lender or creditor accesses your credit report as part of a formal application for credit, such as when you apply for a loan or a credit card. A hard inquiry can affect your credit score and can stay on your credit report for up to two years.


A soft inquiry occurs when someone accesses your credit report for a non-credit related purpose, such as when you check your own credit report or when a potential employer or landlord checks your credit as part of a background check. A soft inquiry does not affect your credit score and is not visible to lenders.


With a boat loan, it will be a hard inquiry that impacts your score for about a year. Fortunately, many credit scoring models will not penalize you for rate shopping, and so you will not take multiple hits when applying through various lenders. Your credit score will only be impacted once when searching within the given rate shopping window (such as the FICO 8 Score 14-day window), preventing your credit score from being irreparably damaged.


Looking for a Flexible Lender for Your Boat Loan?

Before any lender approves you for a new boat loan, you will have to meet a credit score requirement. For most, you need a credit score of 700 or higher, though some lenders are more flexible. Keep in mind that your credit score is one of the biggest factors in the terms and rates you are offered with the boat loan.


If you are looking to finance your next cruiser or yacht, Atlantic Horizon Capital invites you to experience the exceptional with our pre-qualification process and competitive boat loans. We work quickly to prove your loan so you can begin enjoying your boat sooner. Get in touch with our experienced team today at 609-365-1540 or start filling out your application online.

Recommended Posts