What Credit Score is Best for Buying a Car
There's no minimum credit score you must meet to qualify for a car loan. Whether your credit is excellent, fair, poor, or limited, you could still be approved, though your rate, down payment, loan amount, and terms will likely vary depending on your credit profile. Your credit score is just one factor lenders look at. Banks and credit unions also take into account things like your income, current debt, down payment size, and the vehicle you're financing.
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 Getting a Approved for Financing?
Interest Rate: Generally speaking, the stronger your credit score, the more likely you are to lock in a lower APR when financing. Experian's latest data reveals that average auto-loan APRs shift considerably depending on which credit tier a borrower lands in.
Monthly Payment: Besides credit, your down payment amount can affect your car payment and approval amount.
Down Payment: For a shopper with limited or no credit, lenders tend to ask fora large down payment.
Loan Approval and Amount: This is highly influenced by credit score.
Are Other Factors Considered for Car Loan Approval?
Lenders take several factors into account for approval, including:
- 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
How to Improve Your Chances of Getting Approved for a Car Loan
- Review credit reports for inaccurate information.
- Make current payments on time.
- Reduce credit-card balances when possible.
- Save for a down payment.
- Gather recent proof of income and residence.
- Choose a vehicle that comfortably fits the budget.
- Consider a qualified co-borrower.
- Compare the APR, term and total loan cost.
Which Documents Are Needed for a Car Loan?
To be ready for financing, have these on hand: a valid driver's license, proof of income, proof of residence, proof of insurance, details on your down payment, your trade-in's title or payoff information, and co-buyer details if applicable.
Frequently Asked Questions About Credit Scores
Is a 600 credit score good enough for automotive financing?
A 600 credit score won't necessarily stop you from financing a vehicle. As a general rule, the lower your score, the higher the APR you'll likely face and the more you may need to put down.
Can I buy a car if I don't have any credit?
Speck CDJR offers programs designed for first-time buyers. Keep in mind, having no credit history isn't the same as having bad credit. In these cases, banks may focus more heavily on your monthly income, job history, and whether you have a co-buyer.
Does it hurt my credit score when I apply for financing?
Pre-approval and a full credit application aren't the same thing. Shopping around for a car loan typically has little to no lasting effect on your credit score.