Can I Buy a Car With a 650 Credit Score?

It is often possible to secure a car loan with a 650 credit score, though understanding the factors involved is important. A 650 credit score typically falls into the “fair” category according to FICO and VantageScore models, which range from 300 to 850. While this score indicates some trustworthiness, it is below the national average and may result in less favorable loan terms compared to those with higher scores.

Understanding How Lenders Evaluate a 650 Credit Score

A 650 credit score places a borrower in the “fair” or “nonprime” credit range, suggesting a moderate risk to lenders that influences interest rates and loan terms. For instance, in early 2025, average used car loan rates for this credit range were around 13.74%. Lenders evaluate more than just the credit score when assessing an application for an auto loan.

Lenders consider an applicant’s income stability and employment history. A steady job reassures lenders of a reliable income source for consistent monthly payments. Lenders assess income sufficiency and may ask for proof like pay stubs or tax returns to determine affordability.

Another important factor is the debt-to-income (DTI) ratio, which compares monthly debt payments to gross monthly income. A lower DTI ratio, ideally below 36%, indicates sufficient income to manage additional debt, while a higher ratio can signal financial strain. The amount of a down payment also significantly impacts a lender’s decision.

A larger down payment reduces the amount borrowed and lowers the lender’s risk, often leading to more favorable interest rates and terms. The desired loan term is another consideration; shorter terms generally represent less long-term risk for lenders. Lenders also conduct a comprehensive review of the borrower’s overall credit history, including payment history and credit utilization, for additional insight into financial habits.

Preparing for Your Car Loan Application

Before applying for a car loan, establish a realistic budget for the car and its associated expenses. This budget should encompass the potential monthly loan payment and ongoing costs such as auto insurance, fuel, and maintenance. Financial experts often suggest total car expenses not exceed 15-20% of monthly take-home pay. This helps determine an affordable vehicle price range.

Review personal credit reports from the major credit bureaus to check accuracy and understand the detailed credit history lenders will examine. Identifying and disputing any inaccuracies can potentially improve your credit profile.

Gather necessary financial documents beforehand to streamline the application process. Lenders typically require proof of identity (e.g., driver’s license), proof of income (e.g., pay stubs), and proof of residence (e.g., utility bills).

Considering a down payment is a strategic step, especially with a 650 credit score. Lenders view a down payment, particularly one in the range of 10% to 20% of the vehicle’s price, as a positive indicator of financial commitment and reduced risk. A substantial down payment can result in lower monthly payments and more favorable loan terms. Exploring pre-approval for a car loan is also beneficial.

Pre-approval provides clarity on the maximum loan amount and interest rate a lender will offer, helping set a realistic budget. This process strengthens a borrower’s negotiating position at a dealership by indicating established financing. Understanding potential loan terms upfront offers significant advantages.

The Car Loan Application Process

The car loan application can commence through various avenues. Borrowers can apply directly with banks, credit unions, or online lenders, or opt for financing arranged through a dealership. Each option presents different benefits, such as competitive rates from direct lenders or convenience from dealerships.

The application involves submitting gathered financial documents and personal information. This includes contact details, housing information, employment and income specifics, and the desired loan amount and term.

Lenders will evaluate the application and extend loan offers. Compare these offers carefully, focusing on the Annual Percentage Rate (APR), which reflects the total cost of borrowing, including interest and fees. Understanding the loan term and total cost helps in making an informed decision.

Negotiating loan terms, such as the interest rate, loan length, and potential fees, can lead to significant savings. Borrowers can leverage competitive offers from different lenders to negotiate with a dealership or financial institution.

Finalizing the loan involves signing the loan documents, which legally bind the borrower to the terms. Lenders require borrowers to maintain full coverage auto insurance to protect their investment. Proof of insurance is necessary before taking possession. After approval, funds are disbursed, and payment schedules established.