What Credit Score Is Going to Help You Get a Car Loan? (2024)

If you're trying to buy a new or used vehicle, you may want to finance it instead of paying the full price upfront. It can be confusing to know how your financial information affects your loan details. Lenders use credit scores, or FICO scores, to determine what kind of car loan they can give you.

Credit scores are numbers based on credit scoring models that auto lenders use during the financing process. This number helps them assess your financial situation and determine how to structure your auto loan. Your FICO score can vary depending on various factors.

A bad credit score can affect auto loans. It can increase your interest rates and make the loan more expensive. Having a lower credit score can also make it more difficult to secure financing.

Curious What Car Loan You Are Eligible For With Your Credit Score? Compare Rates Right Here:

Credit scores are often big indicators of what kind of car loan you can secure. It can be helpful to better understand what a credit score is and what score you need to get a car loan. Though having a lower credit score can make it more difficult to find the auto loan that works for you, you do have options.

There are steps you can take to improve your borrowing experience. There are also steps you can take to improve your credit score prior to financing a vehicle if you have the time. So what credit score do you need for a car loan? Here's everything you need to know about how your credit score plays into auto lending.

How Do Lenders Use Credit Scores?

Lenders use your credit score as one tool to determine your credit risk. The score helps them learn more about your financial situation and whether you're likely to default on the car loan. Credit bureaus use information about your current credit accounts and credit card accounts to generate your credit score.

Credit scores are numbers between 300 and 850 that represent your credit profile. Though your credit score is an important part of the lending process, it isn't all the lender considers. For example, they may also consider your FICO auto score, which is a number focused on your auto loan risk.

Minimum Credit Score for Buying a Car

The minimum credit scores that are best for purchasing a vehicle can vary depending on the lender you choose. There's no universal minimum credit score. Each financial institution has different qualifications for minimum credit scores when offering auto loans. A new lender may consider your debt-to-income ratio.

The credit union you bank with may consider how long you've been a member. When purchasing a car, the minimum credit score requirement may be around 500. Those with average credit scores lower than 500 can still get financing, but they may have higher rates.

Most used auto loans go to borrowers with minimum credit scores of at least 675. For new auto loans, most borrowers have scores of around 730. The minimum credit score needed for a new car may be around 600, but those with excellent credit often get lower rates and lower monthly payments.

Improving Your Credit Can Lower Costs

Lower credit scores may result in less-than-favorable loan terms for the car you want to buy. Having a car loan with a high interest rate can make it more difficult to pay it off. If you're already struggling with low credit, adding a car loan with high rates may not be helpful.

If you can, consider postponing your car purchase. This can give you more time to improve your credit score. Postponing your purchase can also help you time the market and buy when dealerships have high inventory.

A car loan with high interest rates can make a big difference in your monthly payment. Taking some time to improve your credit can also help you save money in the long term. Lower rates can reduce the total cost of the vehicle by thousands of dollars.

How to Improve Your Credit before Buying

If you can, take time to improve your credit score before purchasing a new vehicle. Even improving your credit score by 50 to 100 points can help to improve your lending options. These are some steps you can take to improve your FICO score before purchasing a car.

Assess Your Report

To improve your credit score, start by assessing your credit report and disputing errors. Your report is the document that contains all your credit information, and sometimes major credit bureaus can make mistakes. They may add the wrong information, which can lower your score, so it's important to dispute any errors you find when assessing your report. You can go to AnnualCreditReport.com for a free annual credit report from each of the three credit reporting agencies: Equifax, Experian, and TransUnion.

Fix Your Credit Mix

Credit mix refers to the different types of credit you have. If your report isn't diverse enough, it can lower your score. Consider taking out different types of credit, like personal loans, to improve your credit mix.

Pay Your Bills on Time

Focus on paying all your bills on time to get a good credit score. Missed payments can lower your score, so one way you can help to improve your score is by making on-time payments. Consider creating a reminder system or setting your payments to automatically come out so you don't forget.

Increase Your Credit Limits

Consider calling your current lenders and asking them to increase your limits. The three major credit bureaus consider what percentage of credit you're using as part of your score calculation. This means increasing your credit limits can lower that percentage even if you don't pay your balances down, which can help to improve your credit score.

Lower Your Balances

Finally, one of the best things you can do to improve your credit is to pay down your balances. Having high balances on your credit accounts can lower your score. The goal is to have your total credit utilization down under 30 percent, as this can greatly help to improve credit scores. Consider taking out a personal loan to reduce your credit card utilization.

How to Purchase a Car with Bad Credit

Cars are essential for many people when it comes to getting to work, transporting kids, and getting basic life essentials. It's understandable that you may need a vehicle if your current vehicle stops working, even if your FICO credit score may increase the interest rates.

For example, leasing a used vehicle may be a better option, as it may give you more time to improve your low credit score. Raising your credit score or FICO auto score may help you lower your rates. According to an automotive finance market report from Experian, a car buyer with a credit score between 501 and 600 may receive an interest rate as high as 17.78 percent.

An average interest rate for an auto loan may be around 5 percent, and the difference between these two interest rates can mean thousands of dollars over the life of the loan. Here's how to buy a car with poor credit.

Save for a Down Payment

Having money for a down payment can make the financing process simpler, as the lender takes on less risk when they don't give you a loan for the full value of the vehicle. Some lenders may offer you lower rates if they see that you have the money for a down payment. If you have poor credit, some lenders may require that you have a down payment before they'll offer you an auto loan.

Consider Your Loan Details

Determine the conditions of the loan before agreeing to one to ensure you're protecting yourself financially. For example, some lenders may offer you car loans with long terms, but this can mean you spend far more in interest over the course of the loan. Make a list of the conditions for the auto loan you want, including its interest rate and duration.

Set a Loan Budget

Also consider what you can afford in a car, as it can be tempting to spend a little more to get something nicer. Set a budget for your car shopping and be sure not to take out a loan any higher than the price of the vehicle or a monthly payment amount more that you can afford. After determining the car loan rates you want, you can begin contacting financial institutions to learn more about how credit scores affect their car loans.

Where to Get an Auto Loan

One common mistake people make when getting an auto loan with poor credit is only contacting one lender to learn about their options. Speaking with multiple lenders can help you get the car loan that offers you the best car loan rates.

Car Dealerships

When you visit a car dealership to purchase a car, they can use their connections to many financing institutions to help you find a lender. Some dealerships even have experts who work with buyers with low credit.

Online Lenders

There are many online lenders who specialize in auto loans for those with low credit. You can apply for prequalification with these lenders to learn about the conditions for the car loans you can get.

Credit Unions or Banks

Consider making an appointment with the lending department at your current financial institution to learn more about the car loans they can offer you. Credit unions may consider your relationship with the organization and help you get a loan.

Pay-Here Dealerships

This kind of car dealership may be the last option for those wanting a car. Buy-here, pay-here dealerships often offer interest rates that are much higher and aren't usually the best option. However, if you need a car, have low or no credit history and have been declined by the other lending options, this might be your only choice.

Frequently Asked Car Loan Questions

Learning more about how credit scores affect car buying can help you navigate the process. These are the answers to some commonly asked questions about car buying.

What Factors Determine My Credit Score?

Major credit bureaus are companies that use popular credit scoring models to generate credit scores. These are some factors organizations may consider when determining your FICO score:

  • Length of credit history
  • Current revolving balances
  • Monthly payment history

What If I Have No Credit? Can I Buy a Car?

You can buy a car if you have no credit score. One way to purchase a car with no FICO score is to avoid financing the purchase, and instead, use money you have saved. Of course, this isn't always an option for buyers, and there are ways to get financing for a car if you don't have a credit history.

Lenders prefer buyers with a strong credit and payment history. This can make your options limited when it comes to the loans you can get. There are steps you can take to get a car loan if you have no credit. You can also bring evidence of a consistent income when speaking with the lender.

Do Lenders Change Interests Rates Based on the Car?

Lenders may change interest rates based on the car you buy. The biggest indicator of interest rates is the car's age. A new car loan may have higher interest rates than a car loan.

Lenders aren't likely to change the interest rate based on the make and model of the vehicle itself. Be sure to speak with the lending institution to learn more about lending options. Each bank and credit union can vary in how they form their loan details according to the car.

Will Using a Cosigner Improve My Loan?

Using a cosigner can improve your car loan. A cosigner is someone who takes some responsibility for your loan by signing their name to it. Asking someone you trust to cosign on your loan can help you improve the terms of your loan. Consider asking those with higher credit scores to help reduce your lending risk. Having a cosigner can lower your rates. A good cosigner can convince lenders to offer you a loan.

What Credit Score Is Going to Help You Get a Car Loan? (1)

Jim Slavik

Finance Editor

Jim Slavik is a financial services expert with 30 years of strategic and operational experience including leading underwriting, loan administration, customer service and collections. He has held C-suite credit operations roles for Fortune 100 and private equity companies for credit cards, personal loans, lease-to-own, auto loans, mortgages, and insurance for prime and sub-prime borrowers.

Currently Mr. Slavik is an independent financial services consultant for private equity firms and a contributor for expert networks such as GLG, Guidepoint, and Level company amongst others.

What Credit Score Is Going to Help You Get a Car Loan? (2024)


What Credit Score Is Going to Help You Get a Car Loan? ›

Minimum credit score to buy a car

What credit score helps you get a car? ›

A target credit score of 661 or above should get you a new-car loan with an annual percentage rate of around 7.01% or better, or a used-car loan around 9.73% or lower. Superprime: 781-850.

What credit score do you need to get 0% interest on a car? ›

Credit score: You might need a credit score of at least 740 to be considered for a 0% APR loan. The minimum credit score depends on the dealership and the car you're interested in purchasing.

Can a 500 credit score get me a car? ›

It's possible to get a car loan with a credit score of 500, but it'll cost you. People with credit scores of 500 or lower received an average rate of 14.08% for new-car loans and 21.32% for used-car loans in the first quarter of 2023, according to the Experian State of the Automotive Finance Market report.

Is a 700 credit score good to buy a car? ›

As you can see, a 700 credit score puts you in the “good” or “prime” category for financing, making 700 a good credit score to buy a car. While it's always a good idea to get your credit score in its best possible shape before buying a car, if you're already around the 700 range you will be good to go.

How much can you borrow with a 700 credit score? ›

You can borrow from $1,000 to $100,000 or more with a 700 credit score. The exact amount of money you will get depends on other factors besides your credit score, such as your income, your employment status, the type of loan you get, and even the lender.

Is it hard to get approved for a car loan? ›

Getting a car loan with bad credit may be challenging, but it's not impossible. Some lenders have more flexible credit requirements and offer bad credit car loans, though they often come with much higher interest rates. As you repay your auto loan responsibly each month, your credit score is likely to improve.

What is the lowest credit score to buy a car? ›

Most used auto loans go to borrowers with minimum credit scores of at least 675. For new auto loans, most borrowers have scores of around 730. The minimum credit score needed for a new car may be around 600, but those with excellent credit often get lower rates and lower monthly payments.

Does anyone do 0% finance on cars? ›

0% APR car finance is generally only available for new cars. Where it is available on used cars, this typically means you'll be paying an artificially high cash price, as dealers often inflate the price to cover what they lose by not charging interest.

What credit score does Toyota use? ›

Toyota Financial Services requires you to have a score of at least 610 to qualify for an auto loan. And to nab Toyota's 0.00% interest deal (if it's available), you must have a credit score of at least 690.

What is the easiest car company to get financing? ›

After researching the car finance industry, we think that myAutoloan is best for those with bad credit. The company offers auto refinancing, lease buyouts and loans for new and used cars. Additionally, the marketplace only requires a credit score of 575 — making it easier for subprime borrowers to get a loan.

What credit score is needed to buy a car without a cosigner? ›

What credit score is needed to buy a car without a cosigner? People with prime credit scores of 661 or higher likely don't need an auto loan cosigner.

What credit score is needed to buy a car at CarMax? ›

You can get the best auto finance options with a good to excellent credit score (670 and upwards) with CarMax. Some people with bad credit have also been approved for a loan from CarMax or one of their partner lenders. A good credit score is not the only factor CarMax looks at when deciding to approve a loan.

How long does it take to go from 700 to 750 credit score? ›

If your score is between 650 and 700, you have a consistent payment history and low credit utilisation, it may take only a few months to reach a score of 750.

What is a perfect credit score? ›

A perfect credit score of 850 is hard to get, but an excellent credit score is more achievable. If you want to get the best credit cards, mortgages and competitive loan rates — which can save you money over time — excellent credit can help you qualify. “Excellent” is the highest tier of credit scores you can have.

How much of a loan can I get with a 770 credit score? ›

If you're more interested in a personal loan, you could borrow up to $100,000. The best personal loans for a 770 credit score are from LightStream because they offer $5,000 - $100,000 in funding with APRs of 7.49% - 25.99% and repayment periods of 24 - 144 months.

Can I get a car with a 600 credit score? ›

Unless you have the cash, that means you need an auto loan. It's essential to be knowledgeable about how your auto loan process will be different than someone with a higher score. You might not have the same options, but you can still get an auto loan with a 600 credit score.

Can you get a car loan with a 550 credit score? ›

Though it may be more challenging to find a lender that's willing to work with you, it is indeed possible to obtain a loan with a credit score of 550. Most lenders require a minimum credit score of between 600 and 650, but some lenders specialize in personal loans for those with lower scores.

How to get a car with 700 credit score? ›

What interest rate can I get with a 700 credit score for a car? Having a 700 credit score puts you in the “prime” category for borrowing. According to Experian, the average rates for this category are 6.44% for new-car loans and 9.06% for used-car loans.

Can I lease a car with 650 credit score? ›

You can lease a car with a 650 credit score, but the terms may not be ideal for the situation, especially since you won't own a car after the lease ends.


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