What Credit Score Is Needed to Buy a Car?

Written by Meagan DrewUpdated: 15th Apr 2022
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If you are looking to buy a car and know that you will be financing all or a portion of the cost, you might be worried about your credit score.

Experts say that 660 is the “cut-off” score to buy a car as 660+ or higher scores will receive the best interest rates.

However, scores below 660 won’t condemn you to a life of duct-taping on your passenger door- lower credit scores just won’t guarantee prime interest rates, and you might need to come to the table with a little extra down payment.

The lower your credit score, the higher the risk to the lender. The lender will make up their risk by offering you a higher interest rate. A good credit score will put you in a better position to negotiate your loan terms like interest rate, borrowed loan amount, and repayment timeframe.

The type of car you are buying and whether it is new or used will contribute to your ability to get a loan, as well. New car loans are less likely than used car loans for people with lower credit scores.

Car Loan Rates by Credit Score

Credit scores range from Excellent to Bad credit, with Excellent being the top tier. These score ranges are what are going to determine a borrower’s interest rates and loan terms.

Experian’s State of the Automotive Finance Market, Q2, 2020 provided Average Interest Rates for both new and used cars loans by credit score tier.

On average, people with bad credit can expect to pay nearly 10% more in interest rates than those with excellent credit.

Credit ScoreAvg. New Car RatesAvg. Used Car Rates
Excellent (720+)3.65%4.29%
Good (660-719)4.68%6.04%
Fair (620-659)7.65%11.26%
Poor (580-619)11.92%17.74%
Bad (520-)14.39%20.45%

As you can see, there tends to be a major jump in the rate at the 660 score.

While a nearly 3% increase does not sound that daunting, 3% over the life of a loan could mean thousands of extra dollars in interest payments.

>> More: See the Best Auto Loan Rates

Can I Get A Car Loan with a Credit Score Below 700?

Absolutely, you can! To take advantage of the best rates, you will want to have a score above 660.

Lenders will usually flag scores under 700 as higher risk and will have some questions for you about why your score is what it is. You will want to be familiar with your credit report before you try to enter into negotiations- especially if you teeter on the edge of a credit range.

Knowing why your credit score is a bit lower, and having a strategy for repairing your credit will show lenders you are serious.

>> More: How to Apply for an Auto Loan

Do Car Loans Build Credit?

Car loans ultimately offer people an opportunity over the life of a loan to make timely payments which will increase credit scores. On the flip side, not paying your auto loan on time could tank your credit score.

Your credit mix is also impacted by car loans. Car loans are fixed loans where the amount of the money owed is reduced every time you make your payment.

Having both credit cards and fixed loans in your credit report shows that you know how to manage several different types of debt.

You might be concerned about the initial “hard inquiry” that occurs when lenders check your credit, but it only affects your credit by a 5–10-point drop.

If you want to find out more about how getting a car loan affects your credit score, you can read about ithere.

Can I Get A Car Loan with a Credit Score of 600?

You won’t be walking off the car lot with the newest Porsche Cayenne, but you won’t have to ride your bike in a snowstorm uphill both ways, either.

Experian Credit Bureau reports that nearly 30% of car loans go to borrowers with a credit score below 600.

You can certainly get a car loan with a credit score of 600, but you will not get the best interest rates, and you will likely not be able to take out a huge loan.

The lower your credit score, the bigger the lender’s risk by loaning you the money. They are not going to want to loan you a huge amount, and even if they did, you would not want to agree to that because your loan interest rates will be high.

In these situations, the more money you borrow, the more interest you will pay over the life of the loan.

Can I Get A Car Loan with a Credit Score of 500?

Can you? Yes. Will, it cost you? Also, yes. Credit Scores of 500 or lower are major red flags to lenders, but 4.5% of car loans still went to those with scores that are 500 or less.

If they do end up lending you money, your interest rates will be much higher than someone with better credit, and you will likely only be able to borrow a small amount. Again, if you do not have a history of good credit, lenders are not going to be willing to offer you a lot of money in the event they do not get it back.

Tips Before You Apply for a Car Loan

Before you walk onto a car lot, you are going to need to know more than just which whip you will look best in rolling up to the grocery store.

At a minimum, you need to be familiar with your credit report and what monthly payments you can afford.

You can get your free credit score and report at any time from the 3 major credit bureaus: Experian, Equifax, and TransUnion. These are soft pulls, and they will not affect your credit score.

Once you decide on a payment you can afford, there are lots of loan payment calculators out there that are free, which will offer you an idea of the kind of monthly payments to expect.

You can use the average interest rates in this article for a new and used car to predict your payment or at least a range of payments. When inputting these data points, make sure you leave room for fees and account for taxes. The price on the sticker at a lot is negotiable, but Uncle Sam’s taxes are not.

Knowing what is in your credit report allows you to come to negotiations prepared. People with blips on their credit reports are buying cars every day.

If you know you missed a payment on your school loans in 2017, you can address why and what systems you have put in place to ensure that does not happen again. Lenders are looking at more than just your credit score when they consider your loan terms.

Finally, you should know what average interest rates your credit score qualifies you for to ensure you are getting the best deal. It’s ok to shop around even if you don’t have perfect credit.

Also, it is worth noting that car insurance rates are affected by credit scores, which might impact your allowance for your monthly payment.

Bottom Line: What Credit Score is Needed to Buy a Car?

660 is the target score if you want the best interest rates and loan terms. 660 or better should get you a car loan with an interest rate at or below 6%. Remember: car salesmen want to sell you a car. Just because they can get you a loan does not always mean that it is in your best interest to take the loan.

Meagan Drew
Meagan Drew

Meagan Drew is a Senior Personal Finance Writer & Product Analyst with 7 years experience in wealth management. As a former Series 7 and 63 certified advisor, Meagan specializes in making financial topics relatable and consumable, no matter the reader’s experience level. She attended the United States Military Academy at West Point where she studied Nuclear Engineering. Meagan is a veteran, military spouse, and mom of 4 currently living in Colorado Springs. Her areas of expertise are military personal finance, credit cards, personal loans, investing, and wealth management.