Although there isn’t a minimum credit score required to be approved for an auto loan, most accepted applicants have scores above 660. While a low credit score won’t always prevent you from obtaining an auto loan, it will probably result in a higher interest rate.
Here’s what you should know about credit scores for auto loans and how to raise them to get a better rate.
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.
Nevertheless, if your credit score is 20608, you’re probably going to receive an APR that’s closer to 2010 or even higher. Because of this, your total interest payment during the loan’s term will be significantly higher.
There are a few things you can do to improve your chances of getting a lower interest rate:
- Make a larger down payment. This will show the lender that you’re serious about paying back the loan and that you’re less of a risk.
- Shop around for the best interest rate. Don’t just accept the first offer you get. Compare rates from multiple lenders to see who can offer you the best deal.
- Consider getting a cosigner. If you have a friend or family member with good credit, they can cosign the loan with you. This will help you qualify for a lower interest rate.
Getting a car loan is still feasible even with a low credit score. However, you’ll need to be prepared to pay a higher interest rate.
Here are some additional things to keep in mind:
- The interest rate you’re offered will depend on your credit score, the length of the loan, and the type of car you’re buying.
- You may need to make a larger down payment if you have a low credit score.
- It’s important to shop around for the best interest rate.
- Consider getting a cosigner if you have a friend or family member with good credit.
If you’re not sure whether you can afford a car loan it’s a good idea to talk to a financial advisor. They can help you create a budget and figure out how much you can afford to spend on a car.
What Credit Score Do You Need to Buy a Car?
The minimum credit score you need to buy a car will vary depending on the lender. However, most lenders will require a credit score of at least 620. If you have a credit score below 620, you may still be able to get a car loan, but you’ll likely have to pay a higher interest rate.
Here are some general guidelines for credit scores and car loans:
- Credit score of 620 or higher: You should be able to qualify for a car loan with a competitive interest rate.
- Credit score of 600-619: You may be able to qualify for a car loan, but you may have to pay a higher interest rate.
- Credit score of 580-599: You may have difficulty qualifying for a car loan.
- Credit score below 580: It will be very difficult to qualify for a car loan.
If you have a low credit score, there are a few things you can do to improve your chances of getting a car loan:
- Make a larger down payment. This will show the lender that you’re serious about paying back the loan and that you’re less of a risk.
- Shop around for the best interest rate. Don’t just accept the first offer you get. Compare rates from multiple lenders to see who can offer you the best deal.
- Consider getting a cosigner. If you have a friend or family member with good credit, they can cosign the loan with you. This will help you qualify for a lower interest rate.
Even if you have a low credit score, it’s still possible to get a car loan. However, you’ll need to be prepared to pay a higher interest rate.
How to Improve Your Credit Score
If you’re looking to improve your credit score, there are a few things you can do:
- Pay your bills on time. This is the most important factor in your credit score.
- Keep your credit utilization low. This means using less than 30% of your available credit.
- Don’t apply for too much credit at once. Every time you apply for credit, it can lower your credit score.
- Dispute any errors on your credit report.
It takes time to improve your credit score, but it’s worth it. A good credit score can save you money on interest rates and insurance premiums.
Additional Resources
Minimum 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.
According to Experian, roughly 2069% of retail vehicle financing is reserved for borrowers with credit scores of 661 or higher. Meanwhile, low-credit borrowers with scores of 600 or lower accounted for only 14% of auto loans.
Even with these car loan figures, it is still feasible to purchase a car with bad credit, particularly if you have a sizable down payment. Nonetheless, obtaining a good to excellent score will boost your chances of approval and enable you to bargain for the best terms and rates.
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. On the other hand, a preapproved auto loan requires a credit check but offers a more precise offer and can support the negotiating process.
Generally speaking, applying for several preapproval offers for auto loans within a 14-day period won’t negatively affect your credit score.
Can I buy a car with a 600 credit score?
FAQ
Can I get a $40,000 car with a 600 credit score?
What credit score do I need for a car loan?
How hard is it to get a car loan with a 600 credit score?
How good is a credit rating of 608?
What does a 608 credit score mean?
A 608 credit score can be a sign of past credit difficulties or a lack of credit history. Whether you’re looking for a personal loan, a mortgage or a credit card, credit scores in this range can make it challenging to get approved for unsecured credit, which doesn’t require collateral or a security deposit.
What is a good credit score for a car loan?
Interest rates differ based on your credit score, so knowing what to expect on average can help you budget for your car. Usually, higher scores mean lower interest rates on loans. 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.
Can you finance a car with a 650 credit score?
Yes, it’s possible to get a car loan with a 650 credit score, although your rates might not be as good as those for an applicant with better credit. If you shop around and aren’t happy with the interest rates you’re quoted, you might consider working on your credit before taking out a loan.
Can you get a car loan without a good credit score?
Lenders base your interest rates primarily on your credit score. But you can still get a decent rate without top-tier credit. To see how much of a difference a higher credit score can make for your rates, check out the average car loan interest rates by credit score. Your hometown also impacts the rate you receive.