Is 648 a Good Credit Score to Buy a Car?

A credit score is a numerical representation of an individual’s creditworthiness, playing a significant role in various financial transactions. Lenders use these scores to assess the risk associated with extending credit, influencing approval decisions and the terms offered. When seeking an auto loan, your credit score directly impacts the interest rates and overall financing options available. This article will explore what a 648 credit score signifies in the context of car financing and provide insights into navigating the auto loan process with such a score.

Understanding Your 648 Credit Score for Auto Loans

A 648 credit score places an applicant in the “nonprime” or “subprime” tier within the auto lending industry, depending on the lender’s classification. While standard FICO scores range from 300 to 850, FICO Auto Scores typically range from 250 to 900, often weighing past car-loan payments more heavily.

Applicants with a 648 score are considered a higher risk than those with “prime” or “superprime” scores. While approval for an auto loan is possible, the terms offered will likely not be as favorable as those for borrowers with higher scores. Interest rates for nonprime borrowers are considerably higher than for prime or superprime individuals. For example, in early 2025, nonprime borrowers might see average used car rates around 13.74% compared to prime rates of 9.06%.

The implication of a 648 score is that borrowers might secure a loan, but they should anticipate higher Annual Percentage Rates (APRs). This higher interest rate translates to larger monthly payments, making budgeting an important step before committing to a loan. Despite the less ideal terms, many lenders do offer financing to individuals in the nonprime credit tier.

Beyond the Score: Other Factors Lenders Consider

While a credit score is an indicator, it is not the only factor lenders evaluate for an auto loan. Lenders examine several financial indicators to determine an applicant’s ability and willingness to repay. Your income and employment history are scrutinized to ensure a steady source of funds. Lenders prefer consistent income and stable employment, ideally at least two years at the same job or with minimal changes over five years, as this demonstrates reliability.

Another important metric is the debt-to-income (DTI) ratio, which compares your total monthly debt payments to your gross monthly income. A lower DTI ratio signals financial stability and increases the likelihood of loan approval, with many lenders preferring a DTI below 36%. Proof of income, such as recent pay stubs, W-2 forms, tax returns, or bank statements, will be required to verify your financial capacity.

A substantial down payment can improve loan prospects and terms. A larger down payment reduces the loan amount, lowering the lender’s risk and potentially leading to a lower interest rate. Experts recommend a down payment of at least 10% to 20% of the vehicle’s cost. Additionally, the vehicle itself plays a role; its age, mileage, and type impact loan eligibility and rates. Older vehicles with high mileage are considered higher risk and may result in shorter loan terms, higher interest rates, or larger down payment requirements.

For applicants with a 648 score, a co-signer can be a beneficial option. A co-signer, an individual with a stronger credit history, agrees to take responsibility for the loan if the primary borrower defaults. This arrangement can increase the chances of loan approval and may help secure more favorable terms, including a lower interest rate, as it reduces the perceived risk for the lender.

Preparing for Your Auto Loan Application

Thorough preparation before submitting an auto loan application can enhance your chances of approval and help secure better terms. Begin by checking your full credit report from all three major bureaus (Experian, Equifax, and TransUnion) for accuracy. Reviewing these reports allows you to identify and dispute any errors that might negatively impact your score before applying for new credit.

Gathering all necessary documentation is another preparatory step. Lenders require proof of identity, residency, and income (e.g., pay stubs, W-2s, or tax returns). Having these documents organized and readily available can streamline the application process and prevent delays. If you are self-employed, be prepared to provide additional documentation like business tax returns or bank statements showing consistent deposits.

Seeking pre-approval from multiple lenders is advisable. Pre-approval involves a thorough financial review, providing a concrete loan offer including the potential interest rate and loan term. This process involves a hard inquiry on your credit report, which may cause a temporary dip in your score. However, FICO offers a “rate shopping” period, usually around 14 to 45 days, during which multiple auto loan inquiries are counted as a single inquiry, minimizing the impact. Pre-approval empowers you with a clear budget and stronger negotiating power at the dealership.

Before shopping for a vehicle, determine a realistic budget based on your income and expenses. This helps you understand how much you can comfortably afford for a monthly car payment, insurance, and other associated costs. Lastly, saving for a down payment is a strategic move that can improve your loan prospects. Even a modest down payment demonstrates financial responsibility and reduces the loan amount, making you a more attractive borrower to lenders.

Strategies for Improving Your Credit Score

Improving your credit score can lead to more favorable loan terms. The important action you can take is consistently making all payments on time. Payment history accounts for a large portion of your FICO score (35%) and VantageScore (up to 40%). Even a single late payment (30 days or more overdue) can negatively affect your score and remain on your report for up to seven years.

Another effective strategy involves reducing your credit utilization ratio, the amount of revolving credit used compared to your total available credit. Keeping balances low on credit cards and other revolving accounts is recommended, with a target of keeping utilization below 30%. A lower utilization rate indicates responsible financial management and can positively impact your score. This factor is the second most important in credit scoring models after payment history.

It is also advisable to avoid opening too many new credit accounts in a short period. While new credit can eventually help diversify your credit mix, applying for multiple accounts can lead to multiple hard inquiries, which can temporarily lower your score. Lenders may view a rapid succession of new credit applications as a sign of increased financial risk. Maintaining older credit accounts, even if unused, can also benefit your score by contributing to a longer average age of accounts. Regularly monitoring your credit reports for errors remains important, as inaccuracies can drag down your score without your knowledge.