What’s the Minimum Credit Score Needed for a Car Loan?

If you’re thinking about buying a car, it’s important to know your credit score. A good credit score can help you get a better loan and enter the buying process on strong footing. The report also found:

  • The average credit score for a used car loan or lease is 669, while the average score for a new car loan or lease is 736.

  • Nearly two-thirds of cars were financed for borrowers with credit scores of 661 or higher, while about 15% went to borrowers with scores between 501 and 600. Only about 2% of cars were financed for borrowers with scores below 500.

  • Making a large down payment, looking for the best financing terms, and providing documentation of responsible credit behavior with other large purchases may help to make up for bad credit.

  • If you have a low credit score, you can still get a car loan, but the interest rate will be higher, which means your payments will be higher.

Car loan rates by credit score

A few extra percentage points on your car loan can mean you end up paying hundreds, if not thousands, of dollars more over the life of the loan.

Let’s say there are two borrowers who want to finance $10,000 for a used car. One borrower is considered prime, while the other is considered subprime. The subprime borrower is offered an average interest rate of 17.78%, while the prime borrower is offered an average interest rate of 6.05%.

The difference in interest paid between a subprime and prime borrower is $3,550, which is all due to credit scores.

Better credit means lower costs

The average interest rate for a car loan is different depending on your credit score. Having a target credit score of 661 or above should get you a new-car loan with an annual percentage rate of around 3.56% or better, or a used-car loan around 5.58% or lower. This can help you budget for your car.

According to Experian, someone with a credit score of low 700s might see rates on used cars of about 5.58%. This is compared with 17.29% or more for a buyer scoring in the mid-500s.

If you’re looking at a $20,000, five-year loan for a used car with no down payment, the monthly payment for someone with a higher credit score would be about $383, while someone with a lower credit score would be looking at a $500 payment. The person with the higher credit score would end up paying about $2,921 in interest over the course of the loan, while the other person would be paying around $10,017. Plus, in most states, having bad credit means you’ll end up paying more for car insurance.

The interest rates for new-car loans differ depending on credit score. Borrowers with scores in the low 700s can expect an average interest rate of 3.56%. Borrowers with credit in the mid-500s can expect an average interest rate of 10.87%.

What is a FICO auto score?

It is beneficial to know what is on your credit profile before going to a dealer, as they will most likely check your credit score. However, it is important to note that dealers usually use a FICO automotive score, which is different from a traditional FICO score or VantageScore.

The FICO Automotive Score is a score that ranges from 250-900 that focuses more on past car loan payments than the standard FICO Score. It also puts more emphasis on any repossessions or bankruptcies that have been filed with auto-loans. You can check your automotive score by buying a full set of FICO scores and then cancelling the service, although there is a monthly fee.

Other factors beyond credit score can help you buy

The following text is about what to do if you have poor credit and are worried about being approved for a car loan. If you have poor credit and are worried about being approved for a loan, focus on the positive aspects of your financial life. Remember, people with poor credit are routinely approved for car loans. If you have poor credit, there are some positive financial behaviors you can highlight to the finance office.

Bring a bigger down payment to the table

If you have a bad credit score, making a large down payment on your loan can help reduce your monthly payments. In some cases, it may also help you get a lower interest rate. For some lenders, a large down payment may make you appear to be a less risky borrower, even if your credit score is lower.

Bring documents showing financial stability

If potential lenders see that your credit score is low, but you have stability in other areas of your financial life, they may be more willing to work with you. Having documentation like your most recent pay stubs and proof of address could help show lenders that you are reliable.

Consider bringing your own financing

start to finish. While dealerships do provide financing, checking with your local bank or credit union might provide a better interest rate. You can compare car loan rates online from different lenders to get an idea of what you might qualify for.

It is beneficial to apply for loans close together when trying to get financing because it only results in one hard pull on your credit.

If you don’t get the loan rate you wanted, pay attention to your credit score. You may be able to refinance your auto loan at a lower rate after making timely payments for six to twelve months.

Build your credit before car shopping

If you still aren’t getting car loan rates that work for you, it might be time to delay your car purchase and work on building your credit. That means:

  • You can severely hurt your credit score if you don’t pay your bills on time, so make sure to at least pay the minimum by the due date.

  • If you have a high credit utilization, it will have a negative effect on your credit score. You can lower your credit utilization by trying a number of different tactics.

  • You should avoid applying for other forms of credit within six months of applying for a car loan. This can negatively impact your credit score and make it harder to get approved for the loan.

  • It’s generally best to keep your credit card accounts open unless there’s a compelling reason to close them. Closing cards reduces your overall credit limit, which can hurt your credit utilization.

Ways to increase your odds of approval and a better interest rate

There are a few things you can do to increase your chances of getting approved for a loan or qualifying for a lower interest rate and more favorable terms when you are in the market for a new car now or in the near future.

Work on your credit scores

Working to improve your credit scores could lead to lower interest rates and approval from more lenders. Your credit score is largely determined by whether you pay your bills on time and how much debt you have. Improving these two factors could have a large impact on your credit.

Save for a down payment

If you put more money down as a down payment on a car loan, it may help you get approved for the loan and get a lower interest rate. Also, the less money you need to borrow, the less interest you will have to pay in total.

Consider a co-signer

If you have a co-signer with good credit, it may help you get approved for a loan or get a lower interest rate.

Keep shopping

If you don’t like the rates or loan terms you’ve found, keep looking. Credit Karma can help by showing you estimated loan terms, interest rates, and monthly payment amounts from different lenders.

How do my credit scores affect my car loan?

The better your credit scores are, the more likely you are to get a car loan and the better interest rate and terms you may be offered.

You should get an idea of your credit score before you go out and shop for a car loan. This will help you understand what terms you may get from lenders. Additionally, this is a good time to check your credit report for any errors which could lower your credit score.

Which credit score is used for car loans?

There are two main types of credit-scoring models that are most commonly used for auto loans–FICO and VantageScore. However, some lenders may also use a specific kind of FICO model that is designed for the auto industry.

FICO scores are used to help lenders determine whether or not someone is likely to make their auto loan payments on time. The scores range from 250 to 900 points.

What are the factors that make up my credit scores?

There are some key things you can do to have a higher credit score, no matter what kind of scoring model is being used. The charts below show what factors make up two popular credit-scoring models, the FICO® 8 credit score and the VantageScore® 3.0 model.

Payment history

Banks expect you to repay what you borrow. That’s why your payment history is such an important factor in your credit scores. If you have a history of making late payments, your credit scores will suffer.

Credit utilization

Credit utilization is a way of calculating how much of your total available credit you’re using. Generally, it’s best to keep your total utilization as low as possible. Most experts suggest keeping your credit utilization under 30%.

Age of accounts

How long you’ve had credit cards and loans open is called your age of credit history. Having a long average account age can help your credit scores. Having lots of newly opened accounts may not help your credit scores because it lowers your average account age.

Account mix

Your credit score may be determined by the types of credit accounts you have. Lenders generally prefer to see that you have a history of making on-time payments on a variety of credit accounts, rather than just one type. So a mix of credit cards, plus other loans like auto loans, student loans or mortgages, may help you build your credit score.


When you apply for credit, a hard inquiry is made which stays on your credit reports for two years. If you have multiple hard inquiries in a short period of time, it could lower your credit score as lenders may view you as a high-risk borrower.

Next steps

Your credit score can affect your ability to get a car loan. Check your credit score and credit report periodically to make sure you are in good standing. You can get a free credit report from the three major credit bureaus once a year. You can also check your Equifax and TransUnion credit reports on Credit Karma.

If you can wait to buy a new car, you should work on improving your credit score. If you need a car sooner, shop around for the best loan rate and terms. After you buy a car, continue working on your credit score so you can refinance your loan in the future.


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