What Credit Score is Needed for a Car Loan
Contrary to popular belief, there isn't a credit score minimum need for obtaining a car loan. Whether your credit is excellent, fair, or poor, you may still qualify for a car loan. However, your rate, down payment, loan amount, and terms will probably differ based on your credit score and history. Banks and local credit unions also weigh factors like income, existing debt, down payment amount, which vehicle you're tryijng to finance, and loan amount.
Credit Score Categories
| Credit Score | General Category | What to Expect |
|---|---|---|
| 781-850 | Super Prime | Strongest rates and financing option |
| 661-780 | Prime | Competitive rates and broad vehicle selection |
| 601-660 | Near Prime | Financing may be available at higher rate |
| 501-600 | Subprime | Higher rates or a large down payment may be required |
| 300-500 | Deep Subprime | Approval is challenging, but some options may exist |
Does Credit Score Affect My Montly Car Payment and Approval?
Interest Rate: Generally, the higher your credit score, the better your chances of car loan approval. According to Experian data, average APR changes significantly based upon which credit tier the buyer falls under. A higher interest rate with make your monthly payment higher.
Monthly Payment: Your down payment amount will effect both your monthly payment and approval odds.
Down Payment: If you have poor or zero credit, banks will often ask for a larger down payment.
Loan Approval and Amount: The amount a lender will finance may vary depending on your credit score.
Are There Other Factors Banks Considering for for Car Loan Approval?
Banks take several factors into account for approval, including, but not limited to:
- Monthly and annual income
- Employment and job history
- Debit-to-income ratio
- Housing expenses
- Down Payment
- Trade-in Equity
- Previous auto-loan history and if payments were on time
- Vehicle age, mileage, and value
- Requested loan term
- Co-Buyer credit score
Tips to Improve Your Chances of Getting Approved for Automotive Financing
- Review credit reports for inaccurate information.
- Make current payments on time. This may appear on your credit history.
- Reduce credit-card balances when possible. Research "credit utilization".
- Make a bidget and save for a down payment.
- Gather recent proof of income and residence.
- Choose a vehicle that comfortably fits the budget. We have hundreds to choose from!
- Consider a qualified co-borrower.
- Compare the APR, term and total loan cost.
What Documents Do I Need for Automotive Financing?
Be prepared for applying for a car loan by bringing a valid driver’s license, proof of income, proof of residence, proof of insurance, down payment information, trade-in title or payoff, and co-buyer information.
Frequently Asked Credit Score Questions About Credit Scores
Is my 600 credit score good enough to buy a car?
A 600 score does not automatically prevent someone from financing a vehicle. Typically, a bank will just ask a lender with a lower credit score to put more money down or get a co-buyer. They may also offer a higher APR.
Can I buy a car if I don't have credit?
All Speck Dealership locations offer first-time buyer programs for customers who have no credit.
Does it hurt my credit score when I apply for a car loan?
There is a difference between pre-approval and full credit applications. Shopping for a car loan generally has no long term effects on credit scores.