What Credit Score is Needed to Buy a Car?
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Thinking about buying a Toyota Camry, a Ford Mustang, or another dream car but worried about your budget or credit score? You’re not alone. According to recent stats, nearly 80% of car buyers use a loan or lease to finance their vehicle—but your credit score plays a major role in that approval.
In this guide, you’ll learn what credit score is needed to buy a car, how it impacts your loan options, and tips to improve your score. Whether you’re shopping for a new or used car, this article has the answers you need.
What Is the Minimum Credit Score to Buy a Car?
There isn’t a single score that guarantees approval, but auto lenders categorize credit scores into five main tiers:
| Category | Credit Score Range |
|---|---|
|
Super Prime |
781 – 850 |
|
Prime |
661 – 780 |
|
Non-Prime |
601 – 660
|
|
Subprime |
501 – 600
|
|
Deep Subprime |
300 – 500 |
How Does Credit Score Affect Auto Loans?
Your credit score influences more than just loan approval—it affects everything from the interest rate to the down payment.
1. Better Approval Odds
Lenders prefer borrowers with Prime or Super Prime scores because they are considered low risk.
2. Lower Interest Rates
For example, the average car loan interest rate for a 730 credit score is much lower than for a 600 score. That means less money paid over the life of your loan.
3. Smaller Down Payments
Higher credit scores often lead to lower down payment requirements or even zero-down offers from lenders.
Types of Credit Scores for Auto Loans
Before we get into the details of what credit score is needed to buy a car, let’s first discuss the different types of credit scores that auto loan providers consider:
FICO
Fair Isaac Corporation (FICO), or FICO, is an American data analytics company based in Bozeman, Montana, focused on credit scoring services.
Although the typical FICO score ranges from 300 to 850, the company offers a different FICO auto score model that helps lenders judge your creditworthiness when you apply for auto loans.
The FICO auto score ranges from 250 to 900 and takes into account factors such as credit utilization and payment history.
VantageScore
VantageScore is another company that assigns you a credit score based on your financial habits. Previously, the VantageScore range ranged from 501 to 900; however, it now gives credit scores from 300 to 850.
Unlike FICO, VantageScore weighs factors like payment history, credit utilization, length of credit history, inquiries, and more differently. That’s why your VantageScore credit number often differs from your FICO score.
Generally, auto lenders consider the FICO score, but others may require a different credit score. You should always consult the auto lender beforehand and ask them about their priority.
What Credit Score is Needed to Buy a Car?
There’s no magic number that can guarantee the right financing for your car. Each lender has different requirements or minimum criteria that you should meet to get approved.
However, based on the credit score, the auto finance market divides borrowers into different categories to give you an idea of what credit score is needed to buy a car.
Here’s an overview:
- Super Prime: 781 to 850
- Prime: 661 to 780
- Non Prime: 601 to 660
- Subprime: 501 to 660
- Deep Prime: 300 to 500
Lenders usually look for borrowers with credit scores in the prime or better range, which means that to get your dream car, you must have a credit score of 601. Statistics also show that most used vehicle loan borrowers have a credit score of 675, while for new car auto loans, the credit score is around 730.
How Does a Good Credit Score Impact Your Car Loan?
Now that you are aware of what credit score is needed to buy a car, you must be wondering why to maintain a good credit score and its impacts on your car loan. If so, let’s discuss it:
Increased Approval Chances: Most lenders check your credit score before giving an auto loan to determine if you are financially responsible. When you have a credit score falling in the prime or super prime range, it shows them that you make timely payments, from daily utility bills to loan repayments. This makes your application stand out among other people and maximizes your chances of getting the much-needed loan.
Better Interest Rates: On your auto loan, you have to give an additional amount to the lender, which is known as the interest rate. The average interest rate for new cars in 2024 was 6.61, while for used cars, it was 11.74 percent. However, the good news is that if you have a prime or better credit score, you can negotiate a lower interest rate, which can save you money in the long run.
Less Down Payment: Well, it’s wise to put as much money as possible in a down payment so you have quite less to return. But a good credit score can work in your favor if you don’t have much money saved upfront. How? Lenders may allow you to give a small or even zero down payment since a high score shows you are credible and can pay the loan responsibly.
How to Improve Credit Score to Buy a Car?
If you have a bad or poor credit score, you may end up paying high interest rates or a big sum of money as a down payment. To avoid this situation, here are some tips that help you improve your credit score:
Keep an Eye on Your Credit Score
The first thing you should do is to check your credit score to know where you currently stand. It gives you an idea of what areas need improvement so you can plan things accordingly. One of the popular platforms to check your score is PFScores, which offers a 360-degree view of your financial health.
Pay Your Bills in Time
Do you know payment history takes up 35% of your credit score report? Yes, it’s true!
So, one of the best tips you should follow to improve your score after knowing what credit score is needed to buy a car is to make all your payments on time. Whether it’s your internet bill or a loan repayment, make sure you don’t miss any due dates.
Know that if, unfortunately, you fail to make one payment on time, it’ll stay on your credit report for around 7 years, along with hurting your credit score.
Don’t Apply for New Credit Cards at Once
Applying for too many credit cards at once may seem exciting, but it can be a massive blow to your credit score. Trying to get new credit cards simultaneously gives off the impression that you lack financial stability, as if you don’t have enough funds yet. Therefore, you should limit the number of new credit cards and maintain a good payment history with your existing accounts.
Dispute Credit Score Errors Timely
Well, errors in a credit report aren’t something uncommon, but they greatly impact your score. If you find any mistake in your credit report, like missing payment or making a wrong hard inquiry, you must take action immediately. Contact the credit reporting agencies or bureaus online, and once they verify the error, they will rectify it, ensuring your credit score doesn’t get hurt.
How to Get a Car with a Low Credit Score?
After knowing what credit score is needed to buy a car, if you realize that you don’t fall in that range, don’t stress out. Here are some ways that you can get a car loan with a low credit score:
Shop Around
Well, instead of finalizing the first option you see, you should shop around. Get quotes from different auto loan lenders and compare their rates. Shortlist the ones that offer affordable interest rates and better repayment terms.
If you need suggestions, Capital One Auto Finance is a nice choice. It offers financing for new and used cars to those with less-than-stellar credit scores.
The rates are quite competitive, and you can check whether you qualify for the loan without worrying about any impact or inquiry on your credit report.
Pay High Interest Rate
If you have a poor credit score, lenders see you as a risk. Therefore, you have no choice but to agree to pay a higher interest rate to finance your car.
To help you understand it better, suppose you have a prime or super prime credit score and get an auto loan of $25,000 for five years at an interest of 5%; you’ll have to pay only $475 per month.
On the contrary, someone with a deep prime rate may have to pay an interest rate of 15% or even higher. This will increase their monthly payment from $475 to $595 or more, which can be pretty difficult to manage.
Get a Co-Signer
Getting a co-signer on board is a smart move if you don’t want to pay a high interest rate. A co-signer is someone who applies for a loan with the borrower. In case the primary borrower defaults, they are legally responsible for repaying the amount to the lender. They can be anyone, like your friend or family, but they should have a good credit score.
Note: Not all lenders accept co-signers, so you may need to shop around to find the one that aligns with your needs.
Where to Get Financing for a Car?
Once you have gained enough clarity about what credit score is needed to buy a car, you must be looking for the right financing options. Here’s the overview of a few:
Dealer Financing: To help people with low credit scores get their favorite car, companies like KIA, Ford, and Toyota offer their own financing options, including leasing or purchasing the vehicle. This direct financing may feel like a breeze. Still, it’s advisable to review all the terms and conditions carefully, as dealership financing comes at a higher interest rate than other sources.
Credit Unions: Credit unions are another financing option you can explore after knowing what credit score is needed to buy a car. Typically, a credit union is a cooperative owned and controlled by its members. These institutions offer financial services the same as banks, but they aren’t for profit and only work for the benefit of their members. You can get car loans at a competitive interest rate and flexible terms if you are a part of any such union.
Online Lenders: You can also rely on online auto lenders to get financing for your car. These lenders are popular for having the most lenient credit score requirements and are time-saving compared to traditional lending institutes. You can submit your application online during your free time without having to spare a whole day from your schedule. However, don’t forget to thoroughly research the online lender beforehand to ensure they are reputable and reliable.
Traditional Banks: In case your credit score isn’t that bad, you can try brick-and-mortar banks like the Bank of America to get the money for your car. They can offer you low interest rates and favorable terms. However, the eligibility criteria can be strict, so do your homework properly before applying.
FAQs
A credit score of at least 661 is typically needed to buy a car with favorable loan terms. This is considered “Prime” credit. While lower scores can still qualify, expect higher interest rates and stricter loan conditions if your score falls below 660.
With a 730 credit score, the average car loan interest rate in 2024 is around 5.64% for new cars and 7.66% for used cars. This score falls into the “Prime” or “Super Prime” range, qualifying you for some of the best auto loan rates available.
A car loan can start improving your credit score in as little as 3 to 6 months if you make on-time payments. Positive payment history and credit mix can boost your score, especially if you’re new to credit or rebuilding after past issues.
If your credit score dropped 100 points after buying a car, it’s likely due to a hard credit inquiry, a new loan account, and increased debt. This dip is usually temporary. Making consistent on-time payments can help your score recover within a few months.
Most rental companies don’t check credit if you pay with a credit card. If you use a debit card, they may require a minimum credit score of 600 or higher. Policies vary by company, so check ahead to avoid issues at pickup.
Conclusion
So, what credit score is needed to buy a car? Ideally, a score of 661 or higher gets you the best rates. If your score is lower, take steps to improve it before applying, or find alternative lenders willing to work with your situation.
Need a clear view of your financial standing? Use PFScores to track your progress and make smarter auto loan decisions.