Your credit score matters when you’re buying a car (unless you pay upfront and in full), so you’re on the right track if you’re wondering how your credit will affect your chances of securing a good auto loan.
As a general rule, the better your credit score, the more loan options you’ll have. If you don’t have an ideal credit score, don’t worry—there are several ways to boost your chances of approval and secure better rates.
Table of Contents
Is there a minimum credit score needed to get a car loan?
No, there isn’t an industry standard minimum credit score you need to get a car loan, and you can still buy a car with bad credit. This is because credit requirements vary from lender to lender. Some companies offer auto financing specifically for people with bad credit scores, whereas others only deal with customers who have good credit scores.
That said, people with good credit are statistically much more likely to get approved for the loans they want. According to Experian, approved loan applicants had an average credit score of 675 for used car loans and 733 for new car loans in the third quarter of 2021. 1
The graph below reflects this. As you can see, most consumers who secured auto loans were rated as either “prime” or “superprime” borrowers. (Superprime borrowers make up a smaller slice of the graph because there are fewer of them, but presumably their approval rate is the highest.)
Auto Loans by Credit Score Classification
What credit scores do auto lenders use?
Many auto financing companies use special credit scores, known as FICO Auto Scores, to assess auto loan applications. These are different from standard FICO scores in that they specifically predict how likely you are to pay off your auto loan on time.
Unlike the standard FICO score range (300–850), the range for FICO Auto Scores is 250–900. 2 These scores are affected by similar factors as your regular FICO score, but they’re fine-tuned to predict your risk when getting an auto loan. 3
However, FICO Auto Scores aren’t the only credit scores auto lenders use. These other credit scores are also used in the auto financing industry:
This might seem complicated, but fortunately, all of these scores are strongly correlated with each other. While there are slight differences between FICO and VantageScore in how they use the information in your credit reports to calculate your credit scores, they essentially consider the same factors.
FICO and VantageScore models reward and penalize consumer behaviors in similar ways. For example, you’ll always lose points for negative credit actions like late payments toward your auto loan or car repossession.
In general, if you have good credit in whatever scoring model you typically check when you monitor your credit, you’ll probably have a good score in the scoring model that your auto lender will check—whatever it happens to be.
Other requirements for getting an auto loan
Your credit score isn’t the only factor influencing your eligibility for a car loan. In addition to your credit scores, lenders usually review other aspects of your finances.
All of the following factors can influence your car loan application:
- Employment status
- Debt-to-income ratio
- Other debt obligations
- The payment history on your credit report
Essentially, lenders want to see that you’ve responsibly managed your debts in the past so that they can be sure you’ll pay off your car loan on time.
How to find out what car loans you can get with your credit score
While it’s impossible to predict exactly what car loans and interest rates you’ll qualify for with your credit score, you can get a good idea from looking at what loan terms other people with your credit score tend to get.
The tables below show the average interest rates, monthly payments, and loan amounts people got in 2021 for car loans depending on their scores.
The first table shows new car loans:
New Cars: Average Loan Terms by Credit Score Tier
| Credit Score Tier | Average Loan Amount | Average Interest Rate | Average Monthly Payments |
|---|---|---|---|
| Super prime (781–850) | $33,915 | 2.58% | $579 |
| Prime (661–780) | $38,896 | 3.64% | $616 |
| Nonprime (601–660) | $39,310 | 6.32% | $642 |
| Subprime (501–600) | $35,092 | 9.92% | $631 |
| Deep subprime (300–500) | $29,952 | 12.99% | $587 |
The following table shows loans for used cars:
Used Cars: Average Loan Terms by Credit Score Tier
| Credit Score Tier | Average Loan Amount | Average Interest Rate | Average Monthly Payments |
|---|---|---|---|
| Super prime (781–850) | $25,965 | 4.08% | $439 |
| Prime (661–780) | $27,428 | 6.05% | $457 |
| Nonprime (601–660) | $26,095 | 11.41% | $483 |
| Subprime (501–600) | $21,779 | 17.78% | $486 |
| Deep subprime (300–500) | $18,319 | 20.67% | $476 |
The data in these tables was taken from the Experian 2021 State of the Auto Finance Market Report.
Bear in mind that these are average loan terms—they’re not the only terms you’ll be able to qualify for. To find out the exact rates and loan amounts you can get, shop around with different auto lenders.
How to get the best auto loan terms with preapproval
Many people lose hundreds or even thousands of dollars when buying a car by skipping one important step: getting loan preapproval.
Getting preapproved for a car loan will allow you to compare different options and give you more negotiating power once you’ve found a car you want to buy.
Note that preapproval isn’t the same as prequalification. Here’s what you can expect from loan preapproval vs prequalification:
- Car loan prequalification: This means taking a quick glance at your credit profile and a general idea of what loan terms you can get, although these terms may differ from the final offer you’ll get. Loan prequalification doesn’t hurt your credit (because it only triggers a type of credit check known as a soft inquiry).
- Car loan preapproval: A deeper review of your credit history and a more accurate representation of what loan terms you’re eligible for. Loan preapproval triggers a hard credit inquiry, which will take a few points off your credit score.
After you’ve been preapproved for a car loan, your lender will tell you how much you can borrow. In some cases, they may also give you a check that you can use to negotiate with car dealerships.
Can I finance a car with a bad credit score?
Yes, you can finance a car with a bad credit score. Below are the best bad-credit auto loans currently on the market.
You may have to take extra steps to reassure your lender that you have the ability to repay the car loan. The following things might make the application process go more smoothly:
- A larger down payment: By making a larger down payment, you won’t need to borrow as much money to buy a car. This will make you seem less risky to lenders, improve your chances of loan approval, and benefit your finances by translating into lower monthly payments and maybe even a lower interest rate.
- Documents proving your financial stability: Lenders will see you as a lower-risk borrower if you can show them that you’re financially stable despite your less-than-perfect credit score. Documents such as recent pay stubs and proof of residence are helpful.
- A cosigner: Getting someone with good credit to a cosign your auto loan application can greatly improve your chances of approval and get you better interest rates. However, since your cosigner will be responsible for paying off your loan if you stop making payments, they shouldn’t make the decision lightly.
How to improve your credit score before buying a car
If you have poor credit and aren’t in a hurry to buy a car, consider spending some time to improve your credit score beforehand.
Try the following strategies to increase your chances of getting an auto loan and maximize your borrowing power:
- Check your credit report for errors: If you spot any inaccurate information on your credit report, make sure to dispute the item immediately to stop it from dragging down your score.
- Pay off any past-due debts: Bringing any past-due accounts current and paying off your collections or charge-offs can significantly improve your credit score.
- Use less of your available credit: Keeping your balances low on revolving credit accounts (like credit cards) will boost your credit score by improving your credit utilization ratio (the amount of your credit that you’re using).
- Pay your bills on time: The largest factor that makes up your credit score is your payment history, so making timely payments on your current debt obligations will make a big difference to your credit score and your eligibility for new loans.
- Ask for a credit limit increase: Increasing your credit limit on one or more of your credit cards will lower your credit utilization rate, boosting your score.
- Become an authorized user: If you can get a trusted family member or friend to add you as an authorized user to one of their credit cards, their credit history on that card will be added to your own. If they’ve managed the credit account responsibly, being an authorized user could boost your credit.
