What Credit Score is Needed to Buy a Car? | LendingTree (2024)

While there is no set credit score to get an auto loan, a majority of approved borrowers have scores above 660. Having a low credit score won’t necessarily keep you from getting an auto loan, but you will likely pay a higher interest rate.

Here is what you need to know about auto loan credit scores and how to increase your score to get a better rate.

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. Meanwhile, low-credit borrowers with scores of 600 or lower accounted for only 14% of auto loans.

Despite these car loan statistics, buying a car with poor credit is possible, especially if you can provide a generous down payment. However, having a good to an excellent score will increase your chances of approval and help you secure the most competitive rates and terms.

Understanding auto loan credit scores

Your credit score is how lenders measure your financial stability and determine your repayment reliability. In general, the higher your credit score, the better rate you can get. Experian gives the following credit score tiers and average interest rates for new and used car loans.

CategoryScore rangeAverage rate for a new carAverage rate for a used car
Super prime781 - 8505.61%7.43%
Prime661 - 7806.88%9.33%
Nonprime601 - 6609.29%13.53%
Subprime501 - 60011.86%18.39%
Deep subprime300 - 50014.17%21.80%

Source: Experian’s State of the Automotive Finance Market Q3 2023

Based on the data above, borrowers with scores in the high 600s could expect to receive rates around 9.33% when financing a used car, compared with 21.80% for borrowers with scores below 500.

Our auto loan calculator can help you compare monthly payments between credit score tiers. For example, if you have a credit score of 790 and want to finance a new car for $30,000 with a 60-month term and no down payment, your estimated payment would be $574.56 a month. However, this payment would increase to $626.98 a month if you have a credit score of 640.

When researching car loan options, keep in mind that advertised rates typically apply to high-credit borrowers. If you want to unlock the most attractive rates, consider boosting your credit score before applying.

What is a FICO Auto Score?

Many dealers use a FICO Auto Score instead of a traditional FICO Score or VantageScore when evaluating your car loan application. Your FICO Auto Score can range from 250 to 900, depending on your previous auto loans. Factors such as how much you borrowed and any delinquencies or auto loan bankruptcies can contribute toward this credit scoring model.

Your FICO Auto Score also looks at credit utilization rate, length of credit history, credit mix and new credit, while ensuring that certain factors don’t have such a significant impact. For example, unpaid medical bills won’t ding your score as much as other types of debt.

While checking and monitoring your credit scores and accessing your credit reports is free, you must pay for your FICO Auto Score at myFICO.com.

Checking your credit score before applying for an auto loan can help you know where you stand. If you can’t qualify for a car loan, here are some ways to improve your credit score:

  • Check your credit report for errors. Mistakes do happen, along with fraudulent activity. If you notice something amiss, contact the credit bureaus to dispute credit report errors.
  • Pay all bills on time. Payments more than 30 days late can drastically affect your credit score. Set regular reminders to stay on top of important monthly bills.
  • Reduce your credit card debt. Lenders may look at your credit utilization ratio and debt-to-income (DTI) ratio to assess whether you have enough income to cover your essential bills in addition to a car loan payment.
  • Increase your credit limits. Requesting a credit limit increase will alter your credit utilization ratio and could improve your credit score. However, avoiding a credit limit increase is best if you think you might rack up more charge than you can afford.
  • Keep your credit accounts open. Closing your current credit card accounts could hurt your score by reducing your overall credit limit and changing your credit utilization ratio. Unless you are paying high annual fees, keeping your credit card accounts open can help keep your credit profile in good shape.
  • Avoid applying for other types of credit. Opening new accounts can hurt your credit score by reducing your average age of accounts. If possible, avoid taking on new debts within six months of applying for a car loan.

What Credit Score is Needed to Buy a Car? | LendingTree (1) Learn more about how to buy a car.

How to get a car loan with bad credit

If you have a score of 660 or lower, you will likely need to look at bad-credit auto loans. While these loans can help you finance a car, note that you may get a higher interest rate.

Here are some tips to get approved for a car loan with bad credit:

1. Save for a down payment

Providing a significant down payment for a car can help offset a limited or damaged credit profile, reassuring the lender that you can handle this debt. The less risky you appear, the better rates and terms you could receive.

If you don’t have enough cash, you can consider bad-credit car loans with no money down — which can provide 100% car financing. Just be prepared to pay higher interest rates when getting an auto loan for bad credit.

2. Calculate your loan budget

Decide how much you can comfortably borrow without getting over your head in debt. Start by researching the cost of owning a car and finding an option that fits your budget. The 20/4/10 rule can help you determine the ideal amount to spend on a car:

  • Saving for a 20% down payment
  • Picking a repayment term of four years or less
  • Budgeting less than 10% of your monthly income on transportation costs

You can also weigh the pros and cons of financing a used car versus a new car. While new cars have lower financing and maintenance expenses, used cars have lower upfront costs, including reduced insurance and registration fees.

3. Add a cosigner

A car loan cosigner can improve the chances of loan approval and help you get a lower auto loan rate. Lenders typically view two people taking responsibility for the loan as a positive sign that they will receive payments each month.

Make sure your cosigner knows the legal responsibility involved with cosigning before proceeding. If you can’t repay the debt, it will be the cosigner’s responsibility to make payments. If the loan defaults, both applicants’ credit scores will suffer.

4. Shop around for auto loan preapprovals

Lenders will evaluate your credit history slightly differently when determining your auto loan interest rate. That’s why it’s best to shop around to find the best auto lender for your situation.

An auto loan prequalification requires a soft credit check and suggests rates and terms based on limited information. A preapproved car loan, on the other hand, involves a hard credit check but provides a more accurate offer and can help with the negotiation process.

You can generally apply for multiple preapproval car loan offers within a 14-day window without further impact on your credit score.

5. Compare offers and finalize loan details

If you receive offers from multiple lenders, read the fine print for additional expenses, such as origination fees and prepayment penalties. These hidden costs can make a loan cost more than expected, especially if you have to pay a hefty prepayment penalty for an auto loan refinance down the road.

In addition to loan costs, watch out for common dealer fees — some of which you can negotiate or pass on.

What Credit Score is Needed to Buy a Car? | LendingTree (3)

Buyer beware

Dealerships advertising “guaranteed financing” and “buy here, pay here” should be a last resort. These businesses tend to toe the line of predatory behavior. If you take a loan with one, make sure you pay a fair price for the car and get a competitive auto loan rate.

You have several options when it comes to applying for a car loan.

Dealer financing

Auto companies like Ford and Toyota offer their own car financing, allowing you to streamline the lending and purchasing process. However, dealerships tend to charge higher interest rates than other lenders.

Credit unions

Credit union auto loans can provide low rates, since the profits go to credit union members through reduced interest rates and higher returns on savings products. You must be a credit union member and meet their eligibility requirements.

Traditional banks

Brick-and-mortar banks generally provide competitive rates with flexible terms and limited fees. However, traditional lenders tend to impose stricter eligibility requirements, making them harder to get for low-credit borrowers.

Online lenders

Online auto lenders typically have the most flexible credit requirements, with many lenders catering to bad-credit borrowers. You can also save time by submitting your auto loan application online. However, these loans tend to have higher interest rates and more fees than credit unions and banks.

The higher your credit score, the better the rate you’ll get for any loan. A credit score above 660 will typically allow you to qualify for an auto loan without a hassle. A credit score of 781 and above will typically allow you to qualify for the most competitive rates, which could save you thousands of dollars in interest.

Financing a car with bad credit is more challenging, but it’s possible.

Buying a car with bad credit is possible with credit scores as low as 500. Having a high down payment, getting a good deal on the car and having a cosigner can all improve your likelihood of being approved.

People with prime credit scores of 661 or higher likely don’t need an auto loan cosigner.

Yes, you can buy a car with no credit history. One option is to pay for the car with your savings or to provide a significant down payment. Alternatively, you can show the lender proof of consistent income to reassure them you can handle the debt. However, not having adequate credit means you will likely end up with a higher interest rate.

Yes, a car loan will improve your credit score if you make the payments on time and in full until you trade in the car, sell it or pay off the loan.

What Credit Score is Needed to Buy a Car? | LendingTree (2024)

FAQs

What Credit Score is Needed to Buy a Car? | LendingTree? ›

There's no set minimum needed to apply for an auto loan, but a score of 660 or above will open the door to reasonable interest rates. There are several different types of credit scores, so you may see different numbers from different sources.

What is an acceptable credit score to buy a car? ›

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.

Is a 600 credit score enough to buy a car? ›

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.

What credit score is needed for a car? ›

What Is the Minimum Score Needed to Buy a Car? In general, lenders look for borrowers in the prime range or better, so you will need a score of 661 or higher to qualify for most conventional car loans.

What score do car dealerships use for credit? ›

The two big credit scoring models used by auto lenders are FICO® Auto Score and Vantage. We're going to take at look at FICO® since it has long been the auto industry standard.

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.

How much downpayment should I put on a car? ›

How much should you put down on a car? One rule of thumb for a down payment on a car is at least 20% of the car's price for new cars and 10% for used — and more if you can afford it. These common recommendations have to do with the car's depreciation and how car loans work.

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.

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.

What's a good credit score to buy a house? ›

It's recommended you have a credit score of 620 or higher when you apply for a conventional loan. If your score is below 620, lenders either won't be able to approve your loan or may be required to offer you a higher interest rate, which can result in higher monthly mortgage payments.

What credit score is needed for a house? ›

Each lender will have its own criteria for what credit score is needed to qualify for a mortgage and even what is considered a “good” score. However, as a general rule of thumb, you'll need at least a 680 credit score to qualify with a traditional lender, such as one of the Big Six Banks.

How much credit score to buy a house? ›

The minimum credit score needed for most mortgages is typically around 620. However, government-backed mortgages like Federal Housing Administration (FHA) loans typically have lower credit requirements than conventional fixed-rate loans and adjustable-rate mortgages (ARMs).

When's the best time to buy a car? ›

The best time to buy a car is usually around the end of the year since salespeople will be trying to meet their quotas and may offer steep discounts. However, you should also consider holidays — like Labor Day or Memorial Day — and the beginning of the week.

How to raise FICO score? ›

Reduce the amount of debt you owe

Pay off debt rather than moving it around: the most effective way to improve your credit scores in this area is by paying down your revolving (credit card) debt. In fact, owing the same amount but having fewer open accounts may lower your scores.

Should you tell a car dealer your credit score? ›

If you don't know your credit score, all dealerships have to do to rip you off is say you don't qualify for a better rate. Perhaps a bank would offer a 5% loan; the dealer might say 7% is the lowest for your credit score.

Can I get any car with a 700 credit score? ›

The “prime range” runs from 661 through 780. If your credit score is anywhere between 700 to 709, you are in the middle of this segment, and you can get competitive rates to finance your vehicle. However, these depend on your shopping habits, income, and debt-to-income ratio.

Can I get a good car with 700 credit score? ›

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.

Is 750 a good credit score to buy a car? ›

A 750 credit score is often considered very good — or even excellent. A very good or excellent credit score can mean you're more likely to be approved for good offers and rates when it comes to mortgages, auto loans and credit cards with rewards and other perks.

Is a 630 credit score good enough to get a car? ›

Can I get an auto loan with an 630 credit score? The short answer is yes, but you're likely to get a significantly higher-than-average interest rate. To put it into perspective, as of November 2022, the typical borrower with prime credit (720 or higher FICO score) got an APR of 5.34% on a 60-month new auto loan.

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