Wondering what credit score is needed to buy a car? The average credit score to finance a vehicle is 660, with most car loan borrowers having credit scores of 661 or higher. However, you don’t necessarily need perfect credit to drive off the lot in a new vehicle.
Generally, a good credit score for car financing falls between 670 and 739, but most lenders consider applications with scores as low as 500 to 600 as a starting point for approval. Whether you’re seeking a new or used vehicle, your credit score significantly impacts your interest rates and loan terms. Most importantly, if you’re planning to finance a $30,000 car, lenders typically prefer to see a credit score of at least 660 to 700.
In this comprehensive guide, we’ll break down exactly what credit score you need to buy a car, explain what constitutes a good credit score for auto loans, and provide practical strategies to improve your chances of approval—even with less-than-perfect credit. Let’s get you on the road to your new car with the financial knowledge you need!
Understanding Credit Scores for Car Buying
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Your credit score serves as a financial snapshot for car lenders, determining everything from approval odds to interest rates. Knowing how credit impacts your car buying journey can potentially save you thousands of dollars over the life of your loan.
What is a good credit score to buy a car?
Most lenders prefer borrowers with a FICO score of at least 661 for the best terms and rates. The average credit score for new car loans is 748, while used car loans average 687. Although there’s no universal minimum requirement, the credit score tiers for auto financing typically break down as:
- Excellent (740+): Qualifies for the lowest rates, averaging 5.18% for new cars
- Good (670-739): Competitive offers with rates around 6.70%
- Fair (580-669): Higher rates, averaging 9.83% for new cars
- Poor (Below 580): Limited options with rates potentially exceeding 15%
How lenders use your credit score
When evaluating your application, lenders typically pull your credit report from major bureaus—Experian, TransUnion, or Equifax. Many use industry-specific FICO Auto Scores (ranging from 250-900) rather than standard FICO scores. These specialized scores weigh past auto loan payments more heavily.
Lenders also consider:
- Your debt-to-income ratio
- Payment history (especially on-time payments)
- Monthly income
- Employment stability
Why credit matters more than you think
The difference between excellent and poor credit can dramatically impact your finances. On a $30,000 five-year loan, someone with excellent credit could pay around $150 less monthly than someone with poor credit—saving over $11,000 in interest over the loan’s lifetime.
Additionally, your score affects:
- Down payment requirements: Lower scores often require larger down payments
- Loan approval odds: Approximately 66% of car loans go to borrowers with scores above 661
- Vehicle selection: Better credit gives you more flexibility in choosing higher-priced or newer models
Even reducing your interest rate by a fraction of a percentage point through credit improvement could save hundreds of dollars. Consequently, taking steps to boost your score before car shopping is often worth the effort.
Credit Score Ranges and What They Mean
Image Source: Experian
Credit score ranges directly determine what you’ll pay for your next vehicle. Each tier represents a different level of risk to lenders, translating into specific interest rates and terms that can dramatically affect your total cost.
Excellent (740+): Best rates and terms
With a credit score above 740, you stand in the “super prime” category, placing you among the most desirable borrowers. Lenders typically offer new car interest rates averaging 5.18% and used car rates around 6.82%. In real terms, this means significantly lower monthly payments—averaging $727 for new vehicles. Furthermore, excellent credit often unlocks special dealer financing promotions, longer loan terms, and minimal down payment requirements.
Good (670–739): Competitive offers
The “prime” credit category (670-739) still qualifies you for favorable financing. Expect new car interest rates around 6.70% and used car rates of approximately 9.06%. Monthly payments in this range average $753 for new vehicles. Notably, most lenders consider this range their standard approval tier, as evidenced by the fact that roughly 66% of financed vehicles go to borrowers with scores of 661 or higher.
Fair (580–669): Higher rates, more conditions
Falling into the “near prime” (601-660) or upper subprime categories means facing steeper costs. Interest rates jump considerably—averaging 9.83% for new cars and 13.74% for used vehicles. Monthly payments increase accordingly to about $784 for new cars. Lenders often require larger down payments in this range and may impose stricter income verification requirements or shorter loan terms.
Poor (Below 580): Limited options, higher risk
With scores below 580, you enter “deep subprime” territory where financing becomes challenging yet remains possible. Interest rates climb dramatically—averaging 15.81% for new cars and 21.58% for used vehicles. Despite these high rates, monthly payments might be slightly lower ($736 for new cars) because loan amounts are typically smaller. Lenders primarily consider you high-risk, often requiring substantial down payments (20% or more), cosigners, or limiting you to specific dealerships that specialize in subprime financing.
Financing Options for Low Credit Scores
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Even with less-than-perfect credit, securing auto financing remains possible. Understanding your options can help you navigate the path to vehicle ownership regardless of your credit situation.
Minimum credit score for a car loan
Most dealerships set their starting point for loan approval around 500-600, though there’s no universal minimum requirement. In fact, some specialized lenders offer financing with no official minimum score. Nevertheless, borrowers with scores below 580 account for just 2.39% of all auto loans, indicating that while possible, approval becomes increasingly challenging as scores decrease.
What credit score is needed to buy a used car?
Used car loans typically accept lower credit profiles. The average credit score for used car financing is 684, compared to 748 for new vehicles. Importantly, nearly 24% of used car loans go to borrowers with scores below 600.
How to get approved with a 600 credit score
With a 600 credit score, you fall in the “fair” category, meaning you’ll likely qualify for financing albeit with higher interest rates—approximately 18.89% for used cars. Demonstrating stable income and choosing a realistically priced vehicle can improve your approval odds.
Using a cosigner or larger down payment
Adding a cosigner with good credit significantly enhances approval chances and potentially lowers interest rates. Alternatively, increasing your down payment reduces the lender’s risk, with some lenders requiring at least 10% down or $1,000 for lower-credit applicants.
Tips to Improve Your Approval Chances
Preparing properly before applying for auto financing can dramatically improve your approval odds and interest rates. Taking specific actions to strengthen your application may even help overcome credit challenges.
Check your credit report for errors
Initially, obtain your free credit report from the major bureaus—Equifax, Experian, and TransUnion. Review carefully for inaccuracies such as mistaken late payments, outdated information, or accounts that aren’t yours. If you find errors, file a dispute promptly with the relevant credit bureau. Since payment history accounts for 35% of your FICO score, correcting wrongly reported late payments can significantly boost your rating.
Show proof of stable income
Lenders typically request income verification documents including:
- Recent pay stubs
- Bank statements showing consistent deposits
- W-2 forms or tax returns (for self-employed applicants)
- Benefit statements for retirement or government income
A strong income relative to your requested loan amount increases approval chances plus may help you qualify for lower interest rates. Most auto lenders prefer borrowers with a debt-to-income ratio of 50% or less.
Choose a realistic loan amount
Select a vehicle that fits your financial situation. If your credit isn’t perfect, consider a more modest car instead of stretching for luxury models. Essentially, keeping your loan amount reasonably low demonstrates financial responsibility plus improves your debt-to-service ratio.
Consider shorter loan terms
Opting for shorter loan periods typically results in lower interest rates. Furthermore, paying off your vehicle faster builds positive credit history more quickly. For optimal results, aim for terms of 60 months or less on new cars and 36 months or less on used vehicles.
Build credit before applying
Pay down credit card balances to reduce your utilization ratio below 30%. Subsequently, make all payments on time across all accounts. Moreover, maintaining a mix of credit types (cards, installment loans) can positively impact your score.
Conclusion
Purchasing a car represents a significant financial decision where your credit score plays a crucial role. Although most lenders prefer scores of 661 or higher, you can still find financing options with lower scores, albeit at higher interest rates. The difference between excellent and poor credit can mean thousands of dollars throughout your loan term.
Therefore, taking steps to improve your credit before car shopping makes financial sense. Checking your credit report for errors, demonstrating stable income, and choosing a realistic loan amount all enhance your approval chances. Additionally, considering shorter loan terms might help you secure better interest rates while building positive credit history more quickly.
Remember that each credit tier offers different opportunities. With excellent credit (740+), you’ll enjoy the lowest interest rates and best terms. However, even with fair credit (580-669), you still have options, especially when looking at used vehicles or bringing a cosigner.
Most importantly, understanding your credit position before visiting dealerships empowers you to make informed decisions. Whether you choose to improve your score first or pursue financing with your current credit standing, knowledge about how lenders evaluate your application gives you a stronger position as a buyer.
Your credit score may determine your interest rate, but it doesn’t have to determine whether you can buy a car. Armed with the right information and realistic expectations, you can navigate the car-buying process confidently regardless of where your credit stands today.
Key Takeaways
Understanding credit requirements for car financing can save you thousands of dollars and help you secure better loan terms, even with less-than-perfect credit.
• Credit score 661+ gets best rates: Most lenders prefer scores above 661, with excellent credit (740+) qualifying for rates as low as 5.18% versus 15%+ for poor credit.
• Used cars accept lower credit scores: Used car financing averages 684 credit score requirement compared to 748 for new cars, with 24% of loans going to sub-600 scores.
• Improve approval odds strategically: Check credit reports for errors, show stable income proof, choose realistic loan amounts, and consider shorter terms or cosigners.
• Credit differences cost significantly: The gap between excellent and poor credit can mean $150+ higher monthly payments and over $11,000 more in total interest costs.
• Financing possible with any score: While challenging, lenders offer options starting around 500-600 credit scores, though rates increase substantially for higher-risk borrowers.
Taking time to understand your credit position and improve it before car shopping puts you in control of the financing process, potentially saving substantial money over your loan’s lifetime.
FAQs
Q1. What credit score do I need to buy a car?
While there’s no universal minimum, most lenders prefer a credit score of 661 or higher for the best rates and terms. However, you may still qualify for financing with scores as low as 500-600, though interest rates will be higher.
Q2. Can I buy a car with a credit score of 600?
Yes, you can buy a car with a 600 credit score, but you’ll likely face higher interest rates. For used cars, you might see rates around 18.89%. To improve your chances, consider a larger down payment, choosing a less expensive vehicle, or using a cosigner.
Q3. Is it easier to finance a used car with lower credit?
Generally, yes. The average credit score for used car loans is 684, compared to 748 for new cars. Nearly 24% of used car loans go to borrowers with scores below 600, making it a more accessible option for those with fair or poor credit.
Q4. How can I improve my chances of getting approved for a car loan?
To boost your approval odds, check your credit report for errors, provide proof of stable income, choose a realistic loan amount, consider shorter loan terms, and work on building your credit before applying. These steps can help demonstrate financial responsibility to lenders.
Q5. How much difference does credit score make in car loan costs?
The impact can be significant. For example, on a $30,000 five-year loan, someone with excellent credit could pay around $150 less per month than someone with poor credit. This difference can add up to over $11,000 in interest savings over the life of the loan.
