MORE LIKE THISPersonal Loan ReviewsAuto LoansLoans
No single number defines a bad credit score for a car loan. In general though, if your credit score is below the mid-600s, you can expect higher interest rates and more difficulty getting a loan.
Because lenders consider many factors when approving loans, people with bad credit scores do get auto loans every day. They may have to supply more information to lenders, make bigger down payments, choose a less expensive car or accept higher rates.
Know where your credit score stands
When buying and financing a car, a good first step is to know where your credit score stands. You can get your credit report and score for free through NerdWallet, or you can request a free weekly credit report from each credit bureau at annualcreditreport.com.
FICO and VantageScore are the two most commonly used credit scoring models, and each has scores ranging from 300 to 850. Some auto lenders also heavily use an industry-specific FICO model that weighs certain factors, such as past car-loan payments. Its range is 250 to 900. The cut-off number that places a person in a “bad credit” tier differs by credit scoring model, but it’s generally in the mid-600s or below.
While you can purchase your FICO automotive score, your basic free credit report and score should be enough to understand where you stand. You can compare your score to industry averages to measure how difficult it will be for you to get an auto loan — and at what interest rate.
» MORE:How to get a car loan with bad credit
Auto loan origination by credit score
People with all types of credit scores do get approved for car loans. Consumer credit reporting company Experian provides insight into the percentage of new and used auto loans financed by credit scoring tier.
The breakdown below uses the VantageScore model and reflects auto loans originated in the fourth quarter of 2023.
Credit score
New car loan distribution
Used car loan distribution
Superprime: 781-850.
33.91%.
14.69%.
Prime: 661-780.
47.82%.
43.03%.
Nonprime: 601-660.
12.47%.
20.75%.
Subprime: 501-600.
5.48%.
18.92%.
Deep subprime: 300-500.
0.32%.
2.61%.
Source: Experian Information Solutions.
» MORE:Auto lenders for bad credit
Auto loan interest rates by credit score
Car buyers with lower credit scores can usually find a lender willing to approve a loan, but they will typically pay more. Experian also provides a look at the average annual percentage rate for auto loans by credit score.
Based on Experian data, if you have a 500 credit score, you might see rates on a used car of about 21.55%, compared with 14.12% for a credit score of 650.
A borrower with a 650 credit score and a $20,000 five-year used-car loan would have monthly payments of about $467 and pay $7,997 in interest over the life of the loan. Someone with a 500 credit score and the same loan would have monthly payments of about $547 and pay $12,836 in interest.
Even if you can get an auto loan with a bad credit score, consider the savings if you can wait and build your credit first. If waiting isn’t possible, look into refinancing your auto loan to a lower rate after making six to 12 months of on-time loan payments.
Lenders look at more than a bad credit score
Even if your credit score falls into the bad range, it typically isn’t the only factor determining whether you can get an approved auto loan. Lenders will also take into account:
Your current income and expenses, including the debt-to-income ratio.
Lenders will also consider the reasons for your poor credit. For example, did you fall behind financially because of extended hospitalization, being laid off or another situation out of your control? If so, and your financial situation has improved, lenders will usually consider that when making approval decisions.
Approval criteria can vary from lender to lender, as can the credit scoring model they use. So, it’s a good idea to shop for different lenders, enabling you to compare and find the lowest interest rate.
Visit your My NerdWallet Settings page to see all the writers you're following. No single number defines a bad credit score for a car loan. In general though, if your credit score is below the mid-600s, you can expect higher interest rates and more difficulty getting a loan.
A new lender may consider your debt-to-income ratio. The credit union you bank with may consider how long you've been a member. When purchasing a car, the minimum credit score requirement may be around 500. Those with average credit scores lower than 500 can still get financing, but they may have higher rates.
Yes, it is possible to get a car loan with a credit score of 500, but it can be infinitely more challenging to find a lender willing to approve the loan. A credit score of 500 is considered poor credit, and lenders will likely see you as a higher risk borrower.
In general, you'll need a FICO credit score of at least 600 to qualify for a traditional auto loan, but the minimum credit score required with vary from lender to lender. As interest rates increase due to inflation, securing a subprime auto loan may be more difficult — but not impossible.
Though the options can feel limited at times, there is no specific score required to receive a car loan, so possibilities exist for any credit score. That said, there may be fewer options available, and the terms may be less appealing if your score is on the lower end.
It's essential to be knowledgeable about how your auto loan process will be different than someone with a higher score. You might not have the same options, but you can still get an auto loan with a 600 credit score.
You don't need some magic credit score to get a car loan. Most people and most credit scores — good or poor — can get one. The catch is that, as a rule, a lower score means paying a higher interest rate for the loan, and more of your monthly payment going toward paying for the loan rather than the car.
The score range for the Auto Score is 250-900 (instead of the traditional 300-850). FICO promotes that Auto Score will help dealerships and lending institutions in five distinct ways: Increase regulatory compliance.
After researching the car finance industry, we think that myAutoloan is best for those with bad credit. The company offers auto refinancing, lease buyouts and loans for new and used cars. Additionally, the marketplace only requires a credit score of 575 — making it easier for subprime borrowers to get a loan.
If your credit score is above 620, you are likely to get a car loan with favorable terms. Most loans you can get with a 650 credit score require a down payment and come with terms of 48 months or longer. You can expect average interest rates because 650 is a middle-of-the-road credit score.
While having a co-signer does not guarantee you will be approved, if they have a high credit score and good credit history, lenders are far more likely to trust you as a borrower.
As a result, using less of your credit limit will likely lead to a higher credit score. You can lower your utilization by paying off loans and credit card balances. You can also ask your credit card issuer to increase your credit limit.
It could take several years to build your credit from 400 to 700. The exact timing depends on which types of negative marks are dragging down your score and the steps you take to improve your credit going forward.
People with excellent credit qualified for rates around 5.64 percent, while people with bad credit had an average new car rate of 14.78 percent. Rates for used cars were higher — 11.93 percent across credit scores. And the average rate for bad credit was a sky-high 21.55 percent.
According to data from Experian, borrowers in the subprime category (a FICO score between 501 and 600) can expect an average rate of 12.28 percent for new cars and 18.89 percent for used cars.
The Bottom Line. If you have a 550 credit score, you may still be able to get approved for an auto loan. In addition to the right documents, a possible cosigner, and a larger down payment, you also need to work with the right lender.
What Is the Minimum Score Needed to Buy a Car? In general, lenders look for borrowers in the prime range or better, so you will need a score of 661 or higher to qualify for most conventional car loans.
Introduction: My name is Pres. Carey Rath, I am a faithful, funny, vast, joyous, lively, brave, glamorous person who loves writing and wants to share my knowledge and understanding with you.
We notice you're using an ad blocker
Without advertising income, we can't keep making this site awesome for you.
