What Credit Score Is Needed to Buy a Car? - NerdWallet (2024)

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Buying a car is a huge financial step, and knowing your credit score can help you enter the buying process on strong footing. A fourth-quarter 2023 report by credit bureau Experian found that over 68% of cars financed were for borrowers with credit scores of 661 or higher.

The report also found that on average, the credit score for a used-car loan was 684, while the average score for a new-car loan was 743.

A lower credit score won’t necessarily keep you from securing a car loan, but it might spike your interest rate, leading to higher payments.

What minimum credit score is needed to buy a car?

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.

Borrowers with scores of 501 to 600 account for about 13% of cars financed, while people with scores of 500 or below account for less than 2%, according to Experian.

How credit scores affect auto loans

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.

Credit score

Average APR, new car

Average APR, used car

Superprime: 781-850.

5.64%.

7.66%.

Prime: 661-780.

7.01%.

9.73%.

Nonprime: 601-660.

9.60%.

14.12%.

Subprime: 501-600.

12.28%.

18.89%.

Deep subprime: 300-500.

14.78%.

21.55%.

Source: Experian Information Solutions.

Someone with a score in the low 700s might see rates on used cars of about 9.73%, compared with 18.89% or more for a buyer scoring in the mid-500s, according to the data from Experian. Using a car loan calculator illustrates the difference that can make.

For example, on a $20,000, five-year used-car loan with no down payment, that’s a monthly payment of about $422 for the buyer with a higher credit score versus about $518 for the buyer with a lower credit score. The buyer with better credit would pay about $5,337 in interest over the life of the loan, while the buyer with lesser credit would pay around $11,056. Plus, in most states, bad credit can mean higher car insurance rates, too.

The differences aren’t quite as steep for new-car loans: Borrowers with scores in the low 700s can expect an average rate of 7.01% compared with 12.28% for borrowers with credit in the mid-500s.

What is a FICO Auto Score?

It’s smart to have some idea what dealers will see when they check your credit profile by checking your credit score. Chances are, however, that your dealer might use a FICO automotive score instead of a traditional FICO score or VantageScore.

Your FICO Auto Score is a specialty score ranging from 250 to 900 that weighs past car-loan payments more heavily than the traditional FICO score does. It also gives more weight to any repossessions or auto-loan bankruptcies you might have previously filed. To check your automotive score, you can buy a full set of FICO scores at myFICO.com and then cancel the service rather than pay the fairly steep monthly fee.

Other factors can help you buy a car with bad credit

If you have a credit score below 700 and are concerned about approval, prepare by focusing on the positives in your financial life. Remember, people with major blemishes on their credit are routinely approved for car loans. If you have poor credit, here are some positive financial behaviors to highlight in the finance office.

Bring a bigger down payment to the table

A big down payment can help offset a bad credit score by lowering your monthly payments. It might even help you get a lower interest rate. For some lenders, a big down payment might make you appear less risky, despite a lower credit score.

Bring documents showing financial stability

If your credit score is low, potential lenders are less likely to see you as a risk if they can see you have stability in other areas of your financial life. Bringing documentation like your most recent pay stubs and proof of address to show lenders how long you have lived at your current address and worked at your employer could help you seem more reliable.

Consider bringing your own financing

While dealerships do provide financing, checking with your local bank or credit union is a good idea, too. You can even compare car loan rates online. Compare quotes from the top potential lenders and, once you’ve settled on your top choice, you can get preapproved to make the process run smoothly.

Keep in mind that getting financing requires a “hard pull” on your credit. It helps to cluster applications closely together when rate-shopping for a loan.

If you end up with a loan with a higher rate than you wanted, keep an eye on your scores. You may be able to refinance your auto loan at a lower rate after you’ve made on-time payments for six to 12 months.

How to 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:

  • Paying bills on time. A payment that goes 30 days past due can devastate your score, so pay at least the minimum on time.

  • Keeping credit card balances low compared with your credit limits. How much of your limits you're using is called your credit utilization, and it has a big effect on your score. You can try a number of tactics to lower your credit utilization in order to bump up your score.

  • Avoiding applications for other credit within six months of applying for a car loan.

  • Keeping 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.

How your car loan can help you build better credit

Once you've secured your car loan, it will help you build credit in two important ways: payment history and credit mix.

Payment history is your track record of paying bills on time. It accounts for more of your credit score than any other single factor. Traditional lenders report your payments to the three major credit bureaus, which provide the data to calculate your credit scores.

Credit mix means whether you have both installment loans (with equal payments over a set period) and revolving credit (variable payments and no set end date, as with credit cards). If you have mostly — or only — credit cards, adding a car loan may help your score a bit.

What Credit Score Is Needed to Buy a Car? - NerdWallet (2024)

FAQs

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.

Can I get a car with a 600 credit score? ›

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.

Is a 700 credit score good enough to buy a car? ›

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.

What interest rate can I get with a 700 credit score for a car? ›

What interest rate can I get with a 700 credit score for a car? Having a 700 credit score puts you in the “prime” category for borrowing. According to Experian, the average rates for this category are 6.44% for new-car loans and 9.06% for used-car loans.

What FICO score do car dealers use? ›

Your FICO score is a representation of your credit worthiness. FICO offers specific products and solutions for car dealers and auto loans. Their product is called Auto Score 8. As you can see here from FICO's promotional materials, Auto Score 8 is meant to help dealers, “Improve accuracy and speed of decision making.

What score do 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 is needed for a 30000 car? ›

What minimum credit score is needed to buy a car? 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.

Can I get a $40,000 car with a 600 credit score? ›

It's essential to be knowledgeable about how your auto loan process will be different than someone with a higher score. You might not have the same options, but you can still get an auto loan with a 600 credit score.

Can I get a 30k car with a 650 credit score? ›

If your credit score is above 620, you are likely to get a car loan with favorable terms. Most loans you can get with a 650 credit score require a down payment and come with terms of 48 months or longer. You can expect average interest rates because 650 is a middle-of-the-road credit score.

Is 72 month car loan bad? ›

Because of the high interest rates and risk of going upside down, most experts agree that a 72-month loan isn't an ideal choice. Experts recommend that borrowers take out a shorter loan. And for an optimal interest rate, a loan term fewer than 60 months is a better way to go. You can learn more about car loans here.

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 long does it take to go from 700 to 750 credit score? ›

Generally, it takes around 4-12 months to reach the point where you can apply for a loan. It will take a few months to get to 750 if your score is currently somewhere between 650 and 700. However, if you have a credit score of less than 650, it will take more time to improve the score.

How big of a loan can I get 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.

What is a bad APR for a car? ›

People with excellent credit qualified for rates around 5.64 percent, while people with bad credit had an average new car rate of 14.78 percent. Rates for used cars were higher — 11.93 percent across credit scores. And the average rate for bad credit was a sky-high 21.55 percent.

Can I get a $100,000 loan with a 700 credit score? ›

The highest personal loan amount you can usually find is $100,000. While you may qualify for a $100,000 personal loan with a 700 credit score, it's not guaranteed. If you have a lot of debt or an unfavorable debt-to-income ratio, some lenders may limit how much they are willing to loan.

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.

Can I get a car with a 580 credit score? ›

According to data from Experian, borrowers in the subprime category (a FICO score between 501 and 600) can expect an average rate of 12.28 percent for new cars and 18.89 percent for used cars.

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.

Will a 650 credit score get me a car? ›

Even though a 650 credit score isn't that great, it is enough for you to secure a car loan, albeit with a relatively high interest rate. Remember that you can improve your credit history and refinance with another bank at a lower interest rate down the line.

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