Discover the Credit Score You Need to Buy a Car - 2023

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Updated: May 11, 2023
author photo Written by Louis BakerUpdated: May 11, 2023
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Are you in the market for a new or used car but need help determining what credit score you need to secure financing? Good credit may save you several hundred dollars monthly on a car loan, so learning the connections between your credit score and the auto loan interest rate before your car purchase is vital.

In this article, we'll explore the credit score ranges commonly used by lenders, discuss the impact of credit scores on interest rates, and provide tips for improving your credit before. So, whether you have excellent or bad credit, keep reading to discover the credit score you need to buy a car.

Which Credit Scores Are the Lenders Using?

When applying for an auto loan, lenders use several credit scores to determine your creditworthiness. The two most commonly used scoring models are FICO and VantageScore.

FICO Score

The FICO credit score model, with scores ranging from 300-850, is one of the most popular models with auto lenders. It considers several factors, including payment history, credit mix, the amount owed, average credit history, and available credit.


VantageScore is a newer competitor to FICO, ranging from 300 to 850. However, the proportion of each factor in this model will be different from FICO. Additionally, it considers various factors to construct a new set of metrics, including payment history, depth of credit, utilization, balances, recent credit, and available credit.


  • Each lender may have its requirements for credit scores for auto loans.
  • Additionally, some lenders may consider you for a loan even if your credit score falls below their advertised minimum if you demonstrate that you are a low-risk borrower.
  • You have multiple credit scores, not just one. Lenders use the same basic information from your credit report to evaluate. Still, the data is applied in various models with different factor weights, resulting in credit scores.
  • Before submitting the loan application, you can increase your approval rate and reduce the interest rate by implementing strategies to build your credit.

What Is the Minimum Credit Score Needed to Buy a Car?

Minimum Credit Score

A credit score of at least 600 is typically required when getting a car loan, although this can vary depending on the lender.

If you have a score of 661 or above can have an average of 5.82% APR or better for buying a new car, according to Experian. However, people with a score of low 700s may have rates of about 7.83% for a used car. Conversely, a buyer scoring in the mid-500s could face rates of 17.46% or higher.

The Impact of Credit Scores on Auto Loan Interest Rates

While no official minimum credit score is required, a better score usually leads to a lower interest rate. Lenders may consider you with a lower credit score if you are a current customer. Factors such as income, employment history, and Debt-to-income (DTI) ratio may also be considered along with credit score.

The first step to estimating your interest rate is to check your latest credit score. Unlike the lenders, car dealers don't use the traditional FICO Score or VantageScore to score your credit but use the FICO Auto Score, designed explicitly for car loans.

What Is a FICO Auto Score Exactly?

A FICO auto score ranges from 250 to 900, a credit score specifically designed for car loans. It's calculated using the same factors as a traditional FICO score, such as payment history, credit utilization, and length of credit history. Other factors are specific to FICO auto scores, such as the vehicle type, the loan amount, and any repossessions or auto-loan bankruptcies.

How Different FICO Auto Scores Affect Interest Rates?

FICO credit score of 500 or less: deep subprime credit

A FICO credit score below 500 will likely be labeled a deep subprime credit with little chance of getting loan approval. If you do, you'll likely face the highest interest rates, with an average auto loan interest rate for the deep subprime category of 12.93 percent.

FICO credit score 501 to 600: subprime range

Those with FICO credit scores above 500 but below 600 falls into the subprime range. While you may have more borrowing options, you'll still likely face steep interest rates, with rates for this range averaging 10.11 percent.

FICO credit score 601 to 660: fair credit and nonprime

Credit scores in the range of 601 to 660 are considered acceptable and are categorized as nonprime. Interest rates for this range are more likely to be favorable, with the average sitting at 7.25 percent.

FICO credit score 661 to 780: prime

The FICO credit score range of 661 to 780 is considered prime, with an average interest rate of 4.9 percent. Depending on how much you borrow, this rate could save you hundreds of dollars.

FICO credit score 781 to 850: super prime

Those with credit scores in the FICO range of 781 to 850 are considered super prime. Borrowers with solid credit in this range will likely be offered the best rates. Some car manufacturers might even offer 0% financing offers or rebates to them.

How Good Credit Scores Benefit You When You're Buying a Car?

Your credit score is a numerical representation of how likely you are to repay a loan, and the higher your score, the less risk you pose to lenders. This means you are more likely to receive better terms, including a favorable interest rate on your loan.

Here's a quick look:

  • Higher chance of approval:

    A good credit score improves your chance of getting approved for a loan in the first place.

  • Lower interest rates:

    A credit score of 680 or higher can help you secure a low-interest rate from the dealer, and taking your score from 600 to 780 could even halve your rate.

  • Lower monthly payments:

    A lower interest rate can result in a more down monthly car payment, which may leave room in your budget for other financial priorities.

  • Lower down payment:

    You may qualify for a lower down payment with good credit, though a large down payment comes with less interest cost. Also, a shorter repayment period can be an available choice.

Other Factors Beyond Credit Scores Can Help You Buy a Car

You may worry about getting approved for a car loan if you have a bad credit score. However, there are several ways to increase your chances of approval, including:

Offer A Larger Down Payment

Offering a larger down payment for car purchase can be a strategic move, especially if you have a poor credit score. It can help release your monthly payment stress and increase the chance of getting a lower interest rate. Also, if you can put in more upfront investment, you show the lender greater financial capability and repayment ability.

Seek Other Finance Solutions

It's recommended to seek other finance solutions from banks or alternative lenders instead of solely depending on the car dealers. Shopping around different loan offers online can be beneficial to your final decision. After comparing quotes, you can select the best option and get pre-approved to streamline car-buying.

Provide Proof of Financial Stability

Lenders prefer to finance your car purchase if you have good credit. However, providing documentation that shows your financial stability in areas like income and residency can boost your chances of getting approved for a loan.

This documentation can include pay stubs, bank statements, and proof of address. Lenders may be more willing to work with you by demonstrating your reliability despite your poor credit score.

How to Build Your Credit Before Car Shopping

Building your credit before car shopping can help you get better interest rates and loan terms. Here are some steps you can take to improve your credit score:

Pay bills on time

Late payments can harm your credit score. Ensure you pay all your bills on time, including credit card bills.

Lower your credit card balances

High credit card balances can increase your credit utilization ratio, negatively impacting your credit score. Aim to keep your credit card balances low compared to your credit limit.

Monitor your credit report

Check your credit report regularly to ensure that all the information is accurate. If you notice any errors, dispute them immediately.

Increase your line of credit

A higher credit limit can decrease your credit utilization ratio and improve your credit score. However, this only works if you keep your spending the same.

Keep old credit accounts open

Your old credit accounts can show a more extended credit history as solid proof of your credit. So, remember to keep your old tabs open even if you don't use them anymore.

How to Get a Car Loan With Bad Credit?

Getting approved for a car loan may seem challenging if you have bad credit. However, there are some solutions you can consider, which include:

1. Be willing to pay a higher interest rate

When taking out a car loan, you can choose to endure a higher interest rate with poor credit. Lenders may consider borrowers with lower credit scores riskier, charging them a higher interest rate to compensate for the increased risk.

This option may incur higher monthly payments, but it's still a viable choice for borrowers with poor credit who are needy for a car but struggling to get a lower interest rate. Remember to shop around and compare rates from different lenders to find the best option for your financial situation.

2. Apply for a loan with a co-signer

Having a co-signer can significantly improve your chances of getting approved for a car loan, even if they don't have the best credit. Lenders tend to believe that two people responsible for a loan are less likely to default on the loan payments. Be mindful of finding a trusted co-signer to share the liability, as each borrower takes the loan with full responsibility.

3. Go to buy-here-pay-here dealerships

"Buy here, pay here" dealerships offer more accessible access to financing for credit-challenged car buyers. "Buy here, pay here" means buying a car from the dealer and receiving in-house financing from the dealership without another lender. These dealerships typically don't require a credit check but usually have higher interest rates and larger down payments with limited vehicle options, such as old and high mileage cars. If you miss a payment, you may risk having your car repossessed by the dealer.

4. Get a subprime loan

Some lenders offer subprime loans for people with low credit scores, but these loans typically come with higher interest rates and fees.

5. Build your credit

If you have the time and resources, improve your credit score before applying for a car loan. This may involve paying off small debts, avoiding new credit accounts, or increasing your available credit.

6. Dispute errors on your credit report

Make sure your credit report is accurate and up-to-date. Errors can impact your credit score and your ability to get a car loan, so catching and correcting them early is essential.

7. Make one-time payment

You can avoid auto financing altogether if you have enough cash to cover the entire vehicle cost.

What Will You Get Once You've Secured Your Car Loan?

Securing a car loan can help improve your credit score in two ways: payment history and credit mix.

Payment history

Payment history is a significant indicator of your credit, so paying your car loan on time is crucial to keeping good credit records.

Traditional lenders report payment information to the three major credit bureaus, which can be used to calculate credit scores. However, it's important to note that buy-here, pay-here lenders may not report payments to credit bureaus, which can prevent credit score improvement.

Credit mix

Credit mix is another important factor in your credit score. It refers to the types of credit accounts you have, such as installment loans and revolving credit. Obtaining a car mortgage can diversify your credit mix and demonstrate your ability to manage multiple types of debt, particularly when you already possess credit cards.

FAQs About What Credit Score Do You Need to Buy a Car?

Can I get the same rate as my co-signer if I use one?

No, when you use a co-signer, the lender will consider both your credit scores, and you won't get the same rate as your co-signer would if they applied alone. However, having a co-signer can increase your chances of being approved and receiving a more favorable interest rate.

Are interest rates the same for new and used cars?

No. Loans on used cars usually have higher interest rates than on new cars. In the second quarter of 2022, the average interest rate for a new car loan was 4.33%, while the average interest rate for a used car loan was 8.62%.

Can I get a car loan with a 500 credit score?

Yes, getting a car loan with a 500 credit score is possible. However, it may be more challenging to find a lender who is willing to work with you. Proposing a larger down payment, a better car deal, and a co-signer can all increase your approval rate.

What credit score is needed to buy a car?

According to Experian, nearly 56% of auto loans are given to people with a credit score of 661 or higher. While getting a car loan with a lower credit score is possible, having a higher score will likely result in a more favorable interest rate and better loan terms.

Is it possible to buy a car with no credit?

Yes. Buying a car without the credit is possible but can be challenging. Lenders regard no credit and bad credit as similar situations. To increase your approval rate, you may have to find a co-signer or go to buy-here-pay-here dealerships.

What credit score is needed to buy a car without a co-signer?

If you have a credit score of 661 or higher, you likely won't need a co-signer to buy a car. However, it's always a good idea to shop around and compare rates from different lenders to get the best deal.


In conclusion, your credit score significantly affects your ability to buy a car and the interest rate you'll receive. The higher your credit score, the better your chances of getting approved for a car loan with favorable terms.

Even with imperfect credit, there are ways to get a car loan, such as subprime loans, loans offered by BHPH dealerships, or loans with a co-signer. To reduce financing costs in the long term, you should pay attention to building your credit step by step, which leads to higher approval rates and lower interest rates. Hopefully, you can finance your favorite vehicle at lower costs. Thanks for reading!

author photo

Written by

Louis Baker


Louis Baker started his career in 2017 by contracting with Experian. He also became a part-time content creator in various fields such as insurance, personal finance & investment, etc.

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