Credit Score to Buy a Car: Your credit score can change how easy it is to get auto financing. It can also change the rate you are offered. A higher score can make a lender think you are safer to lend to. A lower score can make the loan look riskier. People with stronger credit usually get the lowest financing rates. The CFPB says your credit score, credit history, income, debts, and down payment can all affect the rate a lender offers.
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The Two Score Types Lenders may look at
Two main credit scoring models can show up when you apply for a car loan:
FICO Score: It goes from 300 to 850, and 850 is the “perfect” score. FICO says this score uses things like payment history, credit use, how long you have had credit, the kinds of credit you use, and credit inquiries.
VantageScore: It also runs from 300 to 850, but it weighs the parts of your credit file a bit differently. It still looks at payment history and credit use, just in its own way.
Average auto financing rates by credit score
Credit scores can directly influence the rates you pay. The higher your credit score, typically the lower your rate.
Credit score range | Average APR: New cars | Average APR: Used cars |
|---|---|---|
Superprime 781-850 | 4.77% | 7.67% |
Prime 661-780 | 6.40% | 9.95% |
Nonprime 601-660 | 9.59% | 14.46% |
Subprime 501-600 | 13.08% | 19.38% |
Deep subprime 300-500 | 15.75% | 21.81% |
Buying or Leasing with Bad Credit
There is no single minimum credit score that every lender uses to buy a car. Some lenders set their own rules, but there is no universal cutoff. The same is true for leasing a car. A good score can still help a lot because it usually means better monthly payments and a better overall deal. Experian and the CFPB both note that borrowers with lower scores often see worse terms, while shoppers with stronger credit usually get better offers.
Easy ways to Improve your Chances
If your credit is not great, the loan can still happen. It may just cost more. A bigger down payment can help because you borrow less money. A cosigner can also help since the lender can look at both credit profiles.
Preapproval is another smart step. It gives you a rough idea of what terms you might qualify for, even though it does not lock in one exact rate. The CFPB also says shopping for auto loan rates usually has little to no effect on your score, especially when rate checks are grouped in a short window.
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Proof for Payments
Lenders often want proof that you can keep up with payments.
- W-2s
- Monthly pay stubs
- Profit and loss statement(s) if you’re self-employed or run a business
- Investment income statements
It also helps to compare financing from more than one place instead of taking the first offer at the dealership. Ally also says shoppers should compare rates from other lenders and can often get dealer financing through partner dealers. Building your credit before shopping for a car can make approval easier and may help you get a better rate.
How to Improve Your Credit Score Before Buying a Car
Steady Credit
If you want to buy a car later, the best thing to do is make your credit look calm and steady. Lenders use credit scores to guess how likely you are to pay back a loan on time, and those scores can affect both approval and interest rate.
The FICO® Score looks at five main parts:
- Payment history
- Amounts owed
- Length of credit history
- New credit
- Credit mix
Payment history is the biggest part at about 35%, while amounts owed is about 30%, and new credit is about 10%.
Pay Every Bill on Time
Lower Your Credit Card Balances
Try to bring down your credit card balances. When you use too much of your available credit, your score can drop. CFPB says experts often suggest keeping credit use at no more than 30% of your total limit. Paying off the full balance each month is even better when you can do it.
Avoid Applying for New Credit
It also helps not to apply for too much new credit at once. Opening several accounts in a short time can make you look riskier to lenders. Another smart move is to check your credit reports for mistakes. If something is wrong, fixing it can stop a bad error from hurting your score.
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Closing an old credit card is not always a good idea. In some cases, it can raise your credit use ratio and make your score worse instead of better.
Use a Secured Credit Card
A secured credit card can help if your credit is thin or weak. You usually put down a cash deposit first, and that deposit helps support the card. CFPB says secured cards are often used to build credit history. A credit-builder loan can also help because it is designed to build credit while you make small on-time payments.
Sign Up for Experian Boost
You can also try Experian Boost. It may let you get credit for eligible on-time payments like cellphone bills, utilities, rent, insurance, internet, cable, satellite, and some streaming services. That can help some people build a better credit file faster.
If you are buying a car soon, it is also wise to keep your old accounts in good shape, avoid fresh debt you do not need, and keep your paperwork ready in case the lender asks for income proof.
