November 02, 2023
When you have bad credit – say, a credit score around 550 – getting approved for a car loan can be difficult. While you should try for a pre-approval with your bank or credit union, you more than likely are going to need a subprime lender. These lenders work exclusively with bad credit car buyers and are able to offer financing to many of them. We can help you get connected to one, but first, we want to explain just what you need to do to get a bad credit auto loan.
4 Things to Keep Track of When Financing a Car
Subprime lenders work through special finance dealerships and offer car loans to borrowers struggling with credit issues. These lenders run credit checks but consider outside factors to determine approval. You need to have the proper documentation ready before you head to the dealer, such as proof of income, proof of residence, and proof of a working phone.
Also, you need to keep track of these four things before you start the financing process:
Credit scores and reports – Know where your credit score stands, and what’s on your credit reports. You’re entitled to a free copy of your credit report every week from the three major credit bureaus by visiting www.annualcreditreport.com. As for your credit score, most lenders look at your FICO score, and if your bank or credit card company doesn’t offer a free FICO check, you can see yours for a fee through a number of websites and services.- Finances – Know what your budget is, and how much you’re willing and able to spend on a vehicle. You need to consider additional expenses of car ownership, such as fuel, insurance, and maintenance.
- Interest rates – Look up the current interest rate trends, and see what people with your credit score range are getting. You should, if possible, also rate shop to see what different lenders are willing to approve you for so you can pick the best offer.
- Down payment – A down payment is usually required with a bad credit auto loan. The minimum amount needed varies, but most subprime lenders ask for a down payment of at least $1,000 or 10% of the vehicle’s selling price, whichever is less.
How to Increase Your Approval Odds
As long as you meet the lender’s minimum requirements, you shouldn’t have an issue getting approved for a loan. However, if possible, you should try to increase your approval odds. Two common ways to do this include:
- Adding a cosigner – Not all subprime lenders require a cosigner, but having one on hand doesn’t hurt. Adding a cosigner to a car loan could get you a better interest rate and make the overall cost of the loan cheaper. Your potential cosigner must have good credit and a qualifying income.
- Making a larger down payment – We recommend that you make the largest down payment you can comfortably afford if you have bad credit. The reason is that you end up saving money, and this can really make a difference considering borrowers with bad credit typically qualify for higher interest rates. You can use cash, trade-in equity, or a combination of both to come up with a down payment.
Dealerships That Offer Car Loan 550 Credit Score
When you have a credit score as low as 550 and are on a tight budget, where do you go to find the right auto financing? You could try to get pre-approved for a bad credit car loan with your bank or credit union, but these lenders place a heavy emphasis on your credit score to determine approval.
Instead, you likely need to find a local special finance dealership that’s signed up with subprime lenders. Subprime lenders specialize in financing credit-challenged car buyers, but they have additional requirements you need to meet in order to get approved.
Subprime lenders have rules as to the least amount they can extend for financing, with the minimum typically set at $5,000. In addition, subprime lenders typically require a down payment. You can expect to be asked for the lower amount between $1,000 or 10% of the vehicle's selling price, although this varies by lender.
This means that if you want to finance a car worth $5,000, you would only need $500 to meet the down payment requirement. While it's okay to settle for the minimum down payment, a larger down payment makes your auto loan more affordable.
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.
Here at The Car Connection, we help bad credit car buyers by connecting them to local special finance dealerships that are signed up with subprime lenders. That’s not all we can do, though. With our new and used car sections, you can see what vehicles are for sale near you, and compare different cars to narrow down exactly what you need.
We work with a nationwide network of dealerships that have the lending resources available for people struggling with credit. Get started today for free by filling out our car loan request form.
FAQs
While you technically can get approved for a loan with a 550 credit score, you'll likely face more challenges and pay significantly more for the loan than if your score was higher. Most lenders won't consider borrowers with scores less than 580 – but you may still be able to find one if you know where to look.
Can I get approved for a car with a 550 credit score? ›
Buying a car with a 550 credit score may seem daunting, but with the right approach, it's entirely possible. By assessing your financial situation, improving your credit score, researching lenders, and shopping smart, you can drive off the lot in a car you love without breaking the bank.
How much of a loan can I get with a 550 credit score? ›
You can borrow anywhere from a few thousand dollars to $100,000+ with a 550 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.
What is the lowest credit score for a car loan? ›
A new lender may consider your debt-to-income ratio. The credit union you bank with may consider how long you've been a member. When purchasing a car, the minimum credit score requirement may be around 500. Those with average credit scores lower than 500 can still get financing, but they may have higher rates.
Can I buy a car with a 560 credit score? ›
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.
What FICO score do car dealers use? ›
The base FICO score is also called FICO Score 8 or 9. It's not designed specifically for auto loans, but many lenders use it. It's a number between 300 and 850, and a higher score means that a person is more likely to make loan payments on time.
What is the easiest car company to get financing? ›
The best car loans for bad credit
- Best for shopping around: myAutoloan.
- Best for buying a car online: Carvana.
- Best from a big bank: Capital One Auto Finance.
- Best for used vehicle selection: CarMax Auto Finance.
- Best for refinancing: Autopay.
For instance, going from a poor credit score of around 500 to a fair credit score (in the 580-669 range) takes around 12 to 18 months of responsible credit use. Once you've made it to the good credit zone (670-739), don't expect your credit to continue rising as steadily.
What can I do with a 550 credit score? ›
Credit Rating: 550 is considered a bad credit score. Borrowing Options: Most borrowing options are available, but the terms are unlikely to be attractive. For example, you could borrow a small amount with certain unsecured credit cards or a personal loan with no credit check, but the interest rate is likely to be high.
What is the easiest loan to get approved for? ›
What is the easiest loan to get approved for? The easiest types of loans to get approved for don't require a credit check and include payday loans, car title loans and pawnshop loans — but they're also highly predatory due to outrageously high interest rates and fees.
There isn't one specific score that's required to buy a car because lenders have different standards. However, the vast majority of borrowers have scores of 661 or higher.
What credit score is needed to buy a car without a cosigner? ›
What credit score is needed to buy a car without a cosigner? People with prime credit scores of 661 or higher likely don't need an auto loan cosigner.
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.
Will Navy Federal give me a loan with a 550 credit score? ›
Navy Federal says its loans are available to borrowers across the credit spectrum, including borrowers with bad credit or thin credit histories, and there's no minimum credit score requirement. You must be a member of Navy Federal to apply. Here's what you need for your application: Desired loan amount and term.
What credit score do I need for a $35000 car? ›
There is no set minimum FICO® Score to get a car loan. However, a good score at 720 or better will get you the best rate. Consider spending some time improving your credit score before shopping for your next car. Even moving up a few points can make a big difference if you have a low score.
What credit score do I need to buy a $15000 car? ›
What Credit Score Do I Need to Get a Good Deal on a Car? To get an auto loan without a high interest rate, our research shows you'll want a credit score of 700 or above on the 300- to 850-point scale. That's considered prime credit, and lenders don't have to price much risk into their rates.
Is 550 a big car payment? ›
An affordable car payment would be one that doesn't exceed $600 a month, based on the rule of thumb that your car payment shouldn't be more than 15% of your take-home pay. If you take out a 60-month car loan at 8% APR, you should aim to take out a car loan of less than $30,000.
Is 500 a good 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.
What's a decent credit score to get a car? ›
Your credit score is a major factor in whether you'll be approved for a car loan. Some lenders use specialized credit scores, such as a FICO Auto Score. In general, you'll need at least prime credit, meaning a credit score of 661 or up, to get a loan at a good interest rate.
How fast can you raise a 550 credit score? ›
How long does it take for your credit score to go up?
| Event | Average credit score recovery time |
|---|
| Missed/defaulted payment | 18 months |
| Late mortgage payment (30 to 90 days) | 9 months |
| Closing credit card account | 3 months |
| Maxed credit card account | 3 months |
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Credit scores and reports – 