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Buying your own car can unlock a sense of freedom that’s hard to get anywhere else. But before you sign on the dotted line, you’ll need to meet minimum credit score requirements to qualify for an auto loan.
It can be tough to know whether you have the right credit score needed to buy a car. There are lots of different credit scores, after all, and each lender has its own set of requirements. Even if you’re not able to qualify on your own, you can often qualify for an auto loan if you have a co-signer with good credit. Here’s what you need to know.
What Credit Scores Do Auto Lenders Use?
FICO Score is the most common credit score that lenders use, with 90% of top lenders using it, according to FICO. It’s a general-purpose credit score with multiple versions (FICO Score 10 is the newest version, for example). There are also industry-specific scores, including one for the auto lending industry. Industry-specific scores also have different versions, such as the FICO Auto Score 10.
Each lender makes its own decision when it comes to the credit score model it uses. Unless you ask potential lenders which credit score they check, you won’t know. That’s why it’s usually best to check your general-purpose FICO score if you’d like to check your credit score before applying for a loan, which we recommend.
What Credit Score Is Needed to Buy a Car?
There is no official one-size-fits-all credit score needed to buy a car. Instead, each lender sets its own criteria, so there may be different cutoff points for different lenders.
That said, it’s definitely easier to get approved for a car loan if you have a good credit score. The lower your credit score, the harder it may be to find a lender, and if you do, you’ll usually pay a lot more for financing. That’s why most people who end up taking out an auto loan have a good or excellent credit score.
According to Experian’s State of the Automotive Finance report from the second quarter of 2021, here’s how many people got car loans within the different credit score ranges:
| Credit score range | Percent of all auto loans |
|---|
| Super prime (720 and above) | 20.61% |
| Prime (660 to 719) | 44.26% |
| Near prime (620 to 659) | 17.95% |
| Subprime (580 to 619) | 15.20% |
| Deep subprime (579 or less) | 1.98% |
The lower your credit score, the lower your chances of you being able to buy a car. If your credit score needs a lot of work, it may be hard to find a lender who will approve you for a car loan.
When to Use a Co-signer
If you’re not able to qualify for an auto loan on your own, you may need to find a co-signer with better credit.
However, it’s usually best to not use this option if you can help it because it’s a big deal to ask someone to co-sign on your loan. You’re basically asking them to repay your auto loan for you if you’re not able to do it for whatever reason. If that happens, you could end up burning your relationship, and no one wants that.
But if you have a loved one who trusts you, is in a better financial spot themselves, and is able and willing to help, it can make the difference between you getting a car or not.
How Does Your Credit Score Impact Your Loan Costs?
Your auto loan credit score has a big impact on how much you pay for a loan. Take a look at this chart of the average car loan interest rate by credit score for the second quarter of 2022, according to Experian:
| Average APR for new cars | Average APR for used cars |
|---|
| Super prime (781 and above) | 2.34% | 3.66% |
| Prime (661 to 780) | 3.48% | 5.49% |
| Near prime (601 to 660) | 6.61% | 10.49% |
| Subprime (501 to 600) | 11.03% | 17.11% |
| Deep subprime (500 or less) | 14.59% | 20.58% |
The difference between 20.58% and 3.66% might not seem that huge at first, but let’s look at how that affects how much interest you pay over the life of the loan. If you buy a car for $25,000, make a $5,000 down payment and pay it off over five years, you’ll pay $1,916 in interest by the time that car is paid off with good credit.
However, with bad credit, you’ll end up paying a staggering $12,181 in interest by the time you paid it off—over half as much as the car itself costs.
How to Improve Your Credit Score Before Buying a Car
If you don’t have a perfect credit score just yet, don’t worry—you’re not alone. There are plenty of steps you can take to improve your credit score before applying for an auto loan. Here are some things you can do that will increase your score relatively quickly:
- Catch up on paying off any past-due debts.
- Check your credit report and dispute any inaccurate marks on your file.
- Pay down as much revolving debt (credit cards and other lines of credit) as possible.
- Avoid any hard credit checks, such as those from applying for new credit or services.
- Avoid closing old credit cards you don’t use, as long as they don’t carry an annual fee.
- Request credit limit increases on your credit cards (and don’t use that extra credit if it’s not needed.
Here are some things you can do to improve your credit score in the long run:
- Always pay your bills on time—set up autopay so you’re worried you might forget.
- Open new types of loans and credit as you need them, such as student loans or credit cards, to diversify the types of credit you have.
Building your credit score to a level that qualifies you for an affordable car loan can take a long time in some cases. But it’s well worth it because you’ll be able to get the best car possible at a price that won’t drain your bank account.
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FAQs
The credit score required and other eligibility factors for buying a car vary by lender and loan terms. Still, you typically need a good credit score of 661 or higher to qualify for an auto loan. About 69% of retail vehicle financing is for borrowers with credit scores of 661 or higher, according to Experian.
What credit score do I need to get 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.
Is a 600 credit score enough to buy a car? ›
This means that the higher your credit score, the more favorable your interest rate and terms will be. In general, you'll need a FICO credit score of at least 600 to qualify for a traditional auto loan, but the minimum credit score required with vary from lender to lender.
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 enough 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.
What FICO score do car dealers use? ›
Your FICO score is a representation of your credit worthiness. FICO offers specific products and solutions for car dealers and auto loans. Their product is called Auto Score 8. As you can see here from FICO's promotional materials, Auto Score 8 is meant to help dealers, “Improve accuracy and speed of decision making.
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 I get a $40,000 car with a 600 credit score? ›
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.
How big of a loan can I get with a 600 credit score? ›
With FICO, fair or good credit scores fall within the ranges of 580 to 739, and with VantageScore, fair or good ranges between 601 to 780. Many personal loan lenders offer amounts starting around $3,000 to $5,000, but with Upgrade, you can apply for as little as $1,000 (and as much as $50,000).
How fast will a car loan raise my credit score? ›
How fast will a car loan raise my credit score? There's no set time frame for how long it takes a car loan to improve your credit score. After buying a car, you can expect to see your score improve after making monthly payments on time and paying down your loan balance.
People with excellent credit qualified for rates around 5.64 percent, while people with bad credit had an average new car rate of 14.78 percent. Rates for used cars were higher — 11.93 percent across credit scores. And the average rate for bad credit was a sky-high 21.55 percent.
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 is the minimum credit score for car finance? ›
There is no minimum credit score required to be approved for car finance for a number of reasons: – Different finance providers will use different third-party credit reference agencies to retrieve your credit score. A person's credit score will be different across providers as their scoring systems are unique.
Is a 900 credit score possible? ›
Highlights: While older models of credit scores used to go as high as 900, you can no longer achieve a 900 credit score. The highest score you can receive today is 850. Anything above 800 is considered an excellent credit score.
Is 72 month car loan bad? ›
Because of the high interest rates and risk of going upside down, most experts agree that a 72-month loan isn't an ideal choice. Experts recommend that borrowers take out a shorter loan. And for an optimal interest rate, a loan term fewer than 60 months is a better way to go. You can learn more about car loans here.
How much downpayment should I put on a car? ›
In general, you should strive to make a down payment of at least 20% of a new car's purchase price. For used cars, try for at least 10% down. If you can't afford the recommended amount, put down as much as you can without draining your savings or emergency funds.
Can I get a car with a 580 credit score? ›
With a bad credit score, you'll likely be offered some of the highest advertised rates. According to data from Experian, borrowers in the subprime category (a FICO score between 501 and 600) can expect an average rate of 12.28 percent for new cars and 18.89 percent for used cars.
Is 550 a good credit score to buy a car? ›
The Bottom Line. If you have a 550 credit score, you may still be able to get approved for an auto loan. In addition to the right documents, a possible cosigner, and a larger down payment, you also need to work with the right lender. The Car Connection is here to help you find financing.
How much can I 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.
Can I lease a car with a 650 credit score? ›
Higher Payments at Signing
Just because your credit score is below 680 doesn't mean you won't be approved for a lease. However, you may have to pay more at the time of signing. You may also have to make higher monthly payments ranging from an extra $10 to an extra $125.
