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What Credit Score Is Needed to Buy a Car?

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There is no set credit score you need to get an auto loan. If you have a credit score above 660, you will likely qualify for an auto loan at a rate below 10% APR. If you have bad credit or no credit, you could still qualify for a car loan, but you should expect to pay more.

Understanding auto loan credit scores

Your credit score is how lenders measure your financial stability and determine how well you can pay back debt. Credit scores are broken into tiers. Experian gives the following tiers and score ranges for auto loans.

Source: Experian State of the Automotive Finance Market Q3 2021

Your FICO Auto Score, which most lenders use to evaluate car loan applications, may be lower or higher than your regular credit score depending on your previous auto loans —- how much you borrowed and how well you made the payments.

Your exact FICO Auto Score can even vary from lender to lender. Each lender reviews your credit report information and weighs it according to what they think is the most important.

For example, one auto lender may think that the fact you paid off your last car loan a year ago is fantastic and decide that you have a high auto credit score in their eyes. Another lender may think that since you don’t currently have an auto loan, adding one to your budget is risky and they may mark your auto credit score down.

How to get a bad credit car loan

If you have a score of 660 or lower, you will likely face a high car loan APR. But don’t despair! There are ways to mitigate this. Setting your budget first thing will help you get approved for a car loan and you’ll set yourself up for success.

1. Budget for a higher interest rate

Experts recommend that you keep your total transportation costs to less than 10% of your budget. If you have a low credit score, you will pay more in interest, so you should aim for a less expensive car and/or have a high down payment. 

Experian reports that successful auto loan applicants with subprime credit scores financed lower average amounts — approximately $29,000 to $35,000 — compared to those with higher credit scores who had larger loans — roughly $34,000 to $39,000.

For example, if you can afford a $450 payment for a 72-month term, here’s how much you should finance, based on the average auto loan APR for your credit score. Note that the credit bands are different based on the data source.

Prime (680+) Midprime (620-679) Subprime (619-)
APR 4.56% 6.55% 11.08%
Monthly Payment $450 $450 $450
Loan Amount $32,300 $30,200 $26,200

Source: LendingTree data Q1 through Q3 2021

2. Have a cosigner

A car loan cosigner can help out tremendously. Even if the other person doesn’t have the best credit, lenders typically view two people taking responsibility for the loan as a positive sign that they will receive the payments each month. A cosigner can greatly improve your chances of getting approved and lower your auto loan APR.

The con to this is that both people on an auto loan are fully responsible for paying the loan. So if one person doesn’t make the payments, the other person needs to step in.  Otherwise both applicants’ credit scores will tank.

3. Shop around for a preapproval

Each lender can look at your credit history in slightly different ways and offer you a different loan APR. That’s why it’s best to shop around for any type of loan you want. Don’t rely on a dealership to do this for you. As the middleman, car dealers can raise your APR up to two percentage points. Instead, look at the best auto loans for bad credit and especially consider applying at your local credit union.

LenderTermsAmountsBest For
Capital One36-72 months$4,000 and upAuto purchase
Carvana Auto Loan36-72 months$1,000-$85,000Online car buying
New Roads48 - 72 months$6,000 - $38,000Preapprovals
iLending36-84 months$7,500 or moreRefinance loans

It does not hurt your credit to apply to multiple lenders — the major credit bureaus allow consumers a two-week window to rate-shop. If you do all loan applications within 14 days, your credit isn’t harmed any more than it is when you apply for one loan.

Borrower Beware: Dealerships that advertise “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 absolutely sure that you pay a fair price for the car and that you get a competitive auto loan rate.

Other factors that can help you qualify for a car loan

We’ve already gone over some factors: purchasing a less expensive car, having a large down payment, getting a preapproval and having a cosigner. Here are other things that you could provide a lender to show that you’re financially stable and able to repay a car loan.

  • Proof of income (POI): Pay stubs are typically an easy way to prove your income. If your employer(s) don’t provide them or you have income from other sources, such as child support, alimony or a pension, you could provide three to six months of bank statements.
  • Proof of residence (POR): Paperwork showing your name and your address can satisfactorily prove where you live: utility bills, cell phone bills, mortgage or lease agreement.
  • References: By providing references, you’re giving the lender a list of people they can contact if you stop making payments. This can be seen as useful if you move frequently.

Above all, talk to the lender. Talk to a customer representative and ask what you can do to get approved or to get a better interest rate. They may be able to provide a clear answer, such as saying that you need $300 more on your down payment.

How to build your car credit

It’s important to check your credit score before you start shopping, so you know your baseline. The best way to improve your credit in preparation for an auto loan is to pay your current car loan on time, every month. But here are other ways to improve your credit score in addition to or instead of that if you don’t currently have a car loan:

  • Pay all bills on time
  • Reduce your credit card debt
  • Keep your credit accounts open
  • Don’t apply for other types of credit for six months before applying for a car loan

There are two main credit score models that can produce your credit score:

FICO Score. Your FICO Score, developed by Fair Isaac Corporation, is the most commonly used credit score method by far. It heavily weighs your payment history and how much debt you have compared to your credit limits. It takes about six months of credit history to develop a FICO Score.

VantageScore. The three major credit bureaus (Equifax, Experian and TransUnion) developed the VantageScore with the aim to more accurately reflect consumer behavior and risk. Your total credit usage and credit mix are the most important factors in your VantageScore. It takes only about a month of credit history to develop this credit score. Here’s specific guidance on how to get a car loan with no credit.

Car loan credit score FAQs

Can I get a car with a 500 credit score?

You could be able to get a bad credit car loan with a 500 credit score. Having a high down payment, getting a good deal on the car and having a cosigner can all improve your likelihood of being approved.

What is a good credit score to buy a car?

Experian reports that nearly 56% of auto loans go to people with a credit score of 661 and above.

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

People with prime credit scores (661+) likely don’t need an auto loan cosigner.

What is a good credit score for an auto loan?

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 760 and above will typically allow you to qualify for auto maker special financing that can offer low-APR loans and rebates.

Will a car loan improve my credit score?

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.

 

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