What Credit Score Do You Need To Buy A Car?

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In general, you’ll need a FICO credit score of at least 661 to qualify for a traditional auto loan, although there are lenders that offer bad credit auto loans. Because interest rates remain high, securing a subprime auto loan may be more difficult — and while it is possible, expect to pay a premium.

What credit score is needed to buy a car?

The average credit score for a new car loan was 754 and 691 for a used car, according to data from Experian. This table shows the percentage of auto loans approved for borrowers in each credit score range.

There is no official minimum credit score required to buy a car, but most lenders have minimum standards for financing. Your credit score demonstrates your likelihood of repaying a loan, which is why it is one of the main tools lenders use when determining if you qualify for a car loan. Generally speaking, the higher your credit score, the more likely you are to be approved for an auto loan and receive a competitive interest rate.

According to third quarter data from Experian, you are much more likely to be approved for an auto loan with a score of 600 or above because lenders have low risk tolerance for borrowers.

Do auto loans use FICO or VantageScore?

Lenders may use both your FICO score and VantageScore to determine your eligibility for an auto loan. Some lenders may also use your FICO Auto Score, which is focused specifically on your ability to pay back debts, and these scores range from 250 to 900.

Auto loan interest rates by credit score

When you apply for a car loan, the average auto loan rate you receive will primarily be based on your credit score.

Borrowers in the super prime range are more likely to qualify for auto loans with below-average rates. While bad credit auto loans are available, the cost of financing a vehicle is typically much higher for borrowers with lower credit scores. Lenders use your credit score, along with other factors like your income and debt, to assess how likely you are to repay an auto loan. In general, the higher your score, the less risk you represent. 

A strong credit profile, typically in the prime or super prime range, can translate into more competitive auto loan rates and better loan terms. It may also improve your chances of approval, since most auto loans are issued to borrowers with credit scores above 661. While good credit can sometimes reduce the need for a large down payment, putting down as much as you comfortably can may help lower your overall financing costs even more.

How to build your credit before financing a car

Whether you’re planning ahead for your next vehicle or suddenly need to replace a car after an accident, keeping your credit in good shape can make the financing process much smoother. If your current loan offer feels too expensive and you need to improve your score in a relatively short period of time, here are some of the fastest ways to start building credit:

• Make all payments on time (and catch up on late accounts). Payment history is the most important scoring factor. Bringing delinquent accounts current and staying consistent going forward can steadily raise your score.
• Dispute credit report errors. Review your credit reports at AnnualCreditReport.com and challenge any inaccuracies. Correcting errors can sometimes boost your score within a reporting cycle.
• Pay down credit card balances. Lowering your credit utilization, especially on cards that are near their limit, can quickly improve your score. Aim to use less than 30% of your available credit.
• Ask for a credit limit increase. If your account is in good standing, a higher credit limit can reduce your utilization ratio without requiring you to pay off the entire balance.
• Consider becoming an authorized user or opening a secured card. Being added to someone’s well-managed account or responsibly using a secured credit card can help establish a positive payment history and build your credit score. 

How to get a car with bad credit

It might be harder to secure a low interest rate, but there are still ways to get a car loan with bad credit, even if it means potentially higher rates.

1. Work to improve your credit. If patience is on your side, using credit-building strategies can mean money saved in the future. Pay down your debts and check for errors on your credit report that may be lowering your score. 
2. Focus on your down payment. When you apply for a car loan with bad credit, a down payment offers multiple benefits. It may make you appear less risky to your lender, and you’ll need to borrow less, which will also help improve your chances of being approved.
3. Look for subprime auto loans. Subprime auto loans are viewed as a risk to lenders, but they are designed for people with bad credit. Expect high interest rates and less favorable terms, but you do have options.
4. Apply for preapproval. If possible, apply for preapproval before you head to the dealership. This will help you compare rates and determine how much you can afford when you’re not in a high-pressure sales environment. 

If you have enough cash to cover the transaction, you can avoid the entire financing process, but for many, this is nearly impossible. The average cost of a new car was $48,699 in April, according to a report from KBB, and the average cost for a used car was 25,547.

Bottom line

Your credit score serves as an important indicator for lenders, but there is no set minimum requirement to buy a car. If you are on the lower end of the credit spectrum, you can find a second-chance auto loan. You can also refinance to a lower rate in the future once your credit score improves.